Siah v Wong
[2021] WASC 19
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SIAH -v- WONG [2021] WASC 19
CORAM: SMITH J
HEARD: 15 ‑ 16, 18 ‑ 19, 22 ‑ 23, 25 JUNE, 1 JULY 2020
DELIVERED : 29 JANUARY 2021
FILE NO/S: CIV 1739 of 2018
BETWEEN: TECK HIN SIAH
Plaintiff
AND
LEON WONG
First Defendant
FIRSTLAND INVESTMENTS PTY LTD
Second Defendant
FIRSTLAND PTY LTD
Third Defendant
FIRSTLAND UNLIMITED PTY LTD
Fourth Defendant
Catchwords:
Corporations law - Section 232 and s 233 Corporations Act 2001 (Cth) - Plaintiff brings oppression proceedings as minority shareholder seeking majority shareholders buy out his shares of fourth defendant - Fourth defendant quasi‑partnership between plaintiff and first defendant - Oppression found - Dilution of shareholding of plaintiff unlawful - Invalid appointment of additional directors - Other general acts of oppression found - Turns on own facts - Buy out of plaintiff's shares ordered
Contract - Plaintiff's claim for project management fees - Tort - First defendant and fourth defendant claim plaintiff breached duties of care owed to fourth defendant pursuant to s 180(1) Corporations Act, alternatively at common law or as an independent contractor - Breach of duty found in respect of three items of work only which in the scheme of works found to be minor breaches of duty
Misleading conduct - Section 18 Australian Consumer Law - Claim that plaintiff did not have reasonable grounds for representing that he had relevant skills and experience - Claim fails - Turns on own facts
Set off - Fourth defendant claims set off, of loss and damage incurred in rectifying defective work - Legal set off - Analogous set off - Classical equitable set off - Principles considered - Nature of claims maxim - He who seeks equity must do equity applied - Set off claim fails
Expert evidence - Admissibility - Relevant principles considered
Legislation:
Australian Consumer Law, s 4(2), s 18
Building Services (Registration) Act 2011 (WA), s 18
Competition and Consumer Act 2010 (Cth), sch 2
Corporations Act 2001 (Cth), s 180, s 232, s 233, s 1322
Fair Trading Act 2010 (WA)
Result:
Plaintiff's oppression claim made out
Declaration made that appointment of directors invalid
Declaration made that a resolution purporting to increase the share capital of the fourth defendant invalid
Order made that fourth defendant pay the plaintiff project management fees
Order that the second defendant and third defendant purchase the plaintiff's shares in the fourth defendant
Order for an account and appointment of expert to investigate the accounts for the purpose of valuing the shares in the fourth defendant
Counterclaims dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr A P Hershowitz |
| First Defendant | : | Mr N D C Dillon |
| Second Defendant | : | Mr N D C Dillon |
| Third Defendant | : | Mr N D C Dillon |
| Fourth Defendant | : | Mr N D C Dillon |
Solicitors:
| Plaintiff | : | Robertson Hayles Lawyers |
| First Defendant | : | Susanna Ho Legal Services |
| Second Defendant | : | Susanna Ho Legal Services |
| Third Defendant | : | Susanna Ho Legal Services |
| Fourth Defendant | : | Susanna Ho Legal Services |
Case(s) referred to in decision(s):
Anglo Australian Resources NL v Bloom Financial Advice Pty Ltd [2019] WASC 470
Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Ltd (No 3) [2015] NSWSC 1639; (2015) 109 ACSR 369
Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373
Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229
AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705
Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200
Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52; (2020) 376 ALR 261
CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1
Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52; (2009) 77 ATR 242
Clark v Cort (1840) Cr & Ph 154; (1840) 41 ER 449
Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 55 ACSR 185
D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10
Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588
Evans v Braddock [2015] NSWSC 249
Exton v Extons Pty Ltd [2017] VSC 14; (2017) 53 VR 520
Fazio v Fazio [2010] WASC 263
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672
FGT Custodians Pty Ltd v Fagenblat [2003] VSCA 33
Fuller v Happy Shopper Markets Ltd [2001] 1 WLR 1681
Ghabrial v Romolly Pty Ltd (1991) 5 ACSR 611
Government of Newfoundland v Newfoundland Railway Co (1888) 13 App Cas 199
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62
James v Commonwealth Bank of Australia (1992) 37 FCR 445
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
London Borough of Merton v Lowe (1981) 18 BLR 130
Lucy v Lomas [2002] NSWSC 448
Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
McKay v Commissioner of Main Roads [No 3] [2010] WASC 232
Mopeke Pty Ltd v Airport Fine Foods Pty Ltd (2007) 61 ACSR 395; [2007] NSWSC 153
Myer Queenstown Garden Plaza Pty Ltd v Port Adelaide City Corp (1975) 11 SASR 504
PN Corporation Pty Ltd v Oxford Uniforms Pty Ltd [2012] WADC 149; (2012) 81 SR (WA) 347
Pollock v Wellington (1996) 15 WAR 1
Rawson v Samuel (1841) Cr & Ph 161; (1841) 41 ER 451
Re Quest Exploration Pty Ltd (1992) 6 ACSR 659
Re Scientific Management Associates Pty Ltd [2019] NSWSC 1643
Rhoden v Wingate [2002] NSWCA 165
Russell v Lee Holdings Pty Ltd [No 3] [2020] WASC 346
Swick Nominees Pty Ltd v Norncott Pty Ltd [No 3] [2013] WASC 173
Sydney South West Area Service v Stamoulis [2009] NSWCA 153
Victorian Workcover Authority v Esso Australia Ltd [2001] HCA 53; (2001) 207 CLR 520
William Buck (WA) Pty Ltd v Faulkner [No 6] [2013] WASC 342
Table of Contents
1.0 Introduction ‑ the parties and a summary of the pleaded cases
2.0 The witnesses
3.0 Reliability and assessment of evidence
3.1 Legal principles ‑ lay witnesses
3.2 Credibility and reliability of the non‑expert witnesses
4.0 The plaintiff's oppression claim
4.1 Principles
4.2 Formation of the Company and the partnership agreement to purchase and develop the Bentley Project land
4.3 The Cloverdale Project
4.4 The Ocean Reef Project
4.5 The relationship between Mr Siah and Mr Wong breaks down resulting in the removal of Mr Siah as project manager and site supervisor of the Bentley Project and the Cloverdale Project
4.6 Mr Wong purports to hold a meeting of directors to appoint additional directors to the Company
4.7 Mr Wong makes a 'call for capital' for $50,000
4.8 Whether payments of 'capital' were in fact made by Mr Wong following 5 December 2016 into one of the Company's bank accounts on behalf of Firstland Investments and Firstland and whether any unauthorised withdrawals were made by Mr Wong from the accounts
4.8.1 The contracted arrangements for the payment of construction work for the Bentley Project and the Cloverdale Project
4.8.2 Can it be established that by 5 December 2016 the Company required capital for the completion of works for the Cloverdale Project, and were there any unauthorised withdrawals by Mr Wong?
4.8.3 The transfers by Mr Wong from Firstland Construct & Management Business Everyday Acc to the Han Jie Firstland partnership account..................................................................................
4.9 Mr Siah is removed as a director of the Company
4.10 The claims for project management fees
4.11 The Company's contract with Mr Wong's sister-in-law
4.12 Have the oppression provisions in s 232 of the Corporations Act been engaged, and, if so, what relief should be ordered?
4.12.1 Purported appointment of Ms Ooi and Mr Tan as directors of the Company...............
4.12.2 Dilution of Mr Siah's shareholding
4.12.3 Unauthorised withdrawals
4.12.4 The removal of Mr Siah as a director, and project manager and site supervisor of the Company
4.12.4.1 Removal of Mr Siah as project manager and site supervisor
4.12.4.2 Removal of Mr Siah as a director
4.12.5 Diverting the profit from the Ocean Reef Project.........................................................
4.12.6 Mr Wong preferred the interests of his sister-in-law to the interests of Mr Siah and the Company
4.12.7 Withholding from inspection documents from Mr Siah when he was a director of the Company
5.0 The Company's counterclaim that Mr Siah breached his duties to the Company to exercise reasonable skill, care and diligence in the performance of his duties as project manager and site supervisor
5 .1 The witness evidence relevant to the Company's counterclaim for loss and damage arising out of rectification work and the alleged defects claimed to be causative of loss and damage
5.2 A summary of my findings in respect of the Company's counterclaim against Mr Siah for loss and damage for work that is claimed to be rectification work
5.3 Relevant principles ‑ expert evidence
5.4 The qualifications of each of the experts
5.5 Does Mr Liptrot's report meet the criteria of admissibility for expert evidence?
5.6 Qualifications and/or experience required, and duties of a competent project manager and site supervisor of construction housing works
5.7 The standard of care expected of a competent project manager and site supervisor to discover and cause to have remedied defective work
5.8 The evidence of Mr Tan and Mr Singh relevant to the alleged defective work claimed to cause the Company loss and damage
5.9 The evidence of Mr Siah about the Items identified by Mr Tan and Mr Singh and the expert opinions of Mr Machell and Mr Liptrot
5.9.1 The Bentley Project ‑ Items 1, 3, 8, and 9
5.9.1.1 Item 1 ‑ ducts and flumes
5.9.1.2 Item 3 ‑ staircase height rectification
5.9.1.3 Item 8 ‑ power outlets relocation
5.9.1.4 Item 9 - benchtop replacement
5.9.2 The Cloverdale Project ‑ Items 5, 6, 7, 8, 9, 10 and 11
5.9.2.1 Item 5 ‑ boundary wall rectification
5.9.2.2 Item 6 - non-compliant common walls fireproofing
5.9.2.3 Item 7 - exhaust systems rectification
5.9.2.4 Item 8 ‑ relocation of a soakwell
5.9.2.5 Item 9 ‑ downpipes rectification
5.9.2.6 Item 10 ‑ power outlet relocation of power points
5.9.2.7 Item 11 - window lintel retrospective installation
5.10 The defendants' evidence of other alleged defective work claimed to have caused loss and damage ‑ the other items considered in Mr Liptrot's report
5.10.1 The Bentley Project ‑ Items 10 (including 12, 16 and 18), 15, 20 and 22
5.10.1.1 Items 10, 12, 16 and 18 ‑ reinstallation of wrongly installed doors and windows
5.10.1.2 Item 15 ‑ water stain in bathroom ceiling
5.10.1.3 Item 20 ‑ various rectification works
5.10.1.4 Item 22 ‑ shower tiling rectification
5.10.2 The Cloverdale Project - Items 1, 4, 14, 16, 17 and 18
5.10.2.1 Item 1 ‑ clean site
5.10.2.2 Items 4 and 14 ‑ vandalism clean to upper floor and fence
5.10.2.3 Item 16 ‑ fill brick columns with concrete
5.10.2.4 Item 17 ‑ water meters relocation
5.10.2.5 Item 18 - door openings rectification
5.11 Other items relied upon by the Company that Mr Siah breached his duty to the Company to exercise reasonable care, and diligence in the performance of his duties
5.11.1 The Bentley Project
5.11.1.1 Item 2 ‑ site not secured
5.11.1.2 Item 5 ‑ external walls waterproofing
5.11.1.3 Item 7 ‑ shower screen redesign
5.11.1.4 Item 14 ‑ concrete slab grinding
5.11.1.5 Item 17 ‑ construction of missing porticos
5.11.1.6 Item 19 ‑ burst sewer main rectification
5.11.2 The Cloverdale Project
5.11.2.1 Item 2 - secure site
5.11.2.2 Item 3 ‑ secure upper floor with rails
5.11.2.3 Item 12 and Item 13 ‑ water leaks rectification at balcony and balcony floor waste clearance
6.0 The first defendant's and the Company's misrepresentation claim against the plaintiff
7.0 In what capacity did Mr Siah act as project manager and site supervisor?
8.0 Is the Company entitled to set off the loss and damage it has suffered against the project management fees payable to Mr Siah?
8.1 Legal set off
8.2 Analogous equitable set off
8.3 Classical equitable set off
8.4 The nature of the claims ‑ The project management fees and the Company's claim against Mr Siah for defective performance
9.0 Disposition of plaintiff's oppression claim and defendants' counterclaims
9.1 The plaintiff's oppression claim
9.2 The defendants' counterclaims...........................................................................................
9.3 Further orders
SMITH J:
1.0 Introduction ‑ the parties and a summary of the pleaded cases
The plaintiff, Teck Hin Siah, is a minority shareholder of the fourth defendant, Firstland Unlimited Pty Ltd (the Company), and was from 6 June 2013 until 23 January 2018, a director of the Company.
The Company was incorporated on 6 June 2013. The Company is a registered building service contractor under the Building Services (Registration) Act 2011 (WA), and trades as a construction project management business under the name Firstland Construct and Management.
Mr Siah is a structural engineer, and is registered as a building service practitioner under the Building Services (Registration) Act. He was, from 27 November 2014 until 26 October 2016,[1] the nominated supervisor for the Company (as required by the Building Services (Registration) Act).
[1] Exhibit A, Tab 61.
The first defendant Mr Leon Wong is the beneficial owner (together with his family members) of 100% of the issued share capital of the second defendant, Firstland Investments Pty Ltd (Firstland Investments), and the third defendant, Firstland Pty Ltd (Firstland), who together hold the majority of shares in the Company.
Mr Wong is, in effect (together with his wife, Ms Guat See Ooi, also known as Nancy Wong), the controlling majority shareholders of the Company.
Firstland Investments carries on business as a real estate business, and Firstland carries on business in the nature of a broker and provides business advice.
As at 5 May 2014, the shareholding in the Company was held as follows:
(a)Mr Siah 45%;
(b)Firstland Investments 10%; and
(c)Firstland 45%.
On 9 January 2017, as a result of what Mr Siah claims was a purported increase in the share capital of the Company, Mr Siah's shares in the Company were reduced. As a consequence, from 9 January 2017, the shareholding in the Company is held as follows:
(a)Mr Siah 12%;
(b)Firstland Investments 16%; and
(c)Firstland 72%.
Pursuant to s 232 and s 233 of the Corporations Act 2001 (Cth), Mr Siah has instituted oppression proceedings, principally seeking orders that Firstland Investments, and Firstland, purchase his shares in the Company.
Mr Siah pleads the following acts of oppression:
(1)The structure of the Company was that of a quasi-partnership between Mr Siah and Mr Wong. By late August 2016, or early September 2016, Mr Wong made a decision to unilaterally remove Mr Siah as project manager of the Company and in effect from any management role, which was inconsistent with the arrangements and understandings between Mr Siah and Mr Wong (as the representative of Firstland Investments and Firstland) as shareholders.
(2)On or about 24 October 2016, Mr Wong caused a fictitious minutes of meeting of directors purporting to appoint Ms Ooi and Mr Cheng Kee Tan (also known as Thomas Tan) as additional directors of the Company without giving notice to Mr Siah of the intention to appoint two new directors, and did not give him notice of the appointments, after the event.
(3)On or about 9 January 2017, (following an invalid resolution at a meeting of directors on 5 December 2016 to increase the shares in the Company by purportedly making a call for capital) Mr Siah's shareholding in the Company was reduced from 45% of the issued share capital to 12% without his consent or approval.
(4)Mr Siah was purportedly removed as a director of the Company on 23 January 2018, in circumstances where if a meeting was convened as a directors' meeting, there was no quorum. Alternatively, if the meeting held was a shareholders' meeting, the minutes of the meeting do not make it clear that there was a properly constituted quorum for the holding of a shareholders' meeting.
(5)Mr Wong misappropriated and misused company funds and assets by making unauthorised withdrawals from the Company's bank accounts.
(6)In 2016, Mr Wong secured a contract for the Company for construction of a granny flat in Ocean Reef which was to be project managed by him and took most of the profit for himself, leaving the remaining profit to be divided equally between Firstland Investments and the Company, in circumstances where Firstland Investments who trades as Firstland Real Estate, was an act by Mr Wong to prefer his family interests in Firstland Investments, and reducing profit for the Company.
Mr Siah also asserts that Mr Wong, on behalf of Firstland Investments and Firstland, has engaged in general acts of oppression, including:
(a)for a period of time he unreasonably withheld information from Mr Siah while he was still a director of the Company;
(b)undertaking a construction project by the Company for his sister-in-law which was to earn the Company 8% of $900,000 ($72,000), which at the time of trial only $21,000 is estimated to be earned (as profit);
(c)treating the Company accounts as his own account with monies coming in and going out unrelated to Company business; and
(d)draining the income of the Company by incurring significant expenses.
The primary relief sought by Mr Siah in the oppression action is for the purchase of his shares by the defendants, the majority shareholders. Part of the relief sought is for an order that there be an account and/or an expert be appointed to investigate and value the shares in the Company, to assess the value of the shares as if the oppression had not taken place, including:
(a)to investigate the accounts of the Company; and
(b)to assess whether particular transactions were made at arm's length.
Mr Siah also claims, against the Company, repayment of project management fees found to be due and owing to him, and any damages due on the taking of any account by reason of arrangements between him and Mr Wong relating to the project management fees of the development of a property at 72 Ashburton Street Bentley (Bentley Project) and the development of a property at 280 Keymer Street, Cloverdale (Cloverdale Project).
By way of counterclaim:
(a)Mr Wong and the Company claim damages against Mr Siah for breach of s 18 of the Australian Consumer Law of sch 2 of the Competition and Consumer Act 2010 (Cth) incorporated into the Fair Trading Act 2010 (WA) on grounds that he made misleading representations as to his technical skill and expertise to undertake duties of project manager and site supervisor for the Company;
(b)the Company claims damages against Mr Siah on the basis that he, as the project manager and site supervisor of the Bentley Project and the Cloverdale Project, in his capacity:
(i)as director of the Company, failed to exercise reasonable care and diligence, or, pursuant to s 180(1) of the Corporations Act 2001 (Cth), failed to exercise care and diligence; or
(ii)as an independent contractor, failed to exercise reasonable care, skill and diligence;
in the performance of his duties, causing the Company to suffer loss and damage.
The loss and damage sought to be recovered by the Company against Mr Siah are claimed to be costs incurred in rectifying the failures by Mr Siah to comply with design specifications and/or building compliance requirements in respect of the Bentley Project, and the Cloverdale Project. Loss and damage is also claimed for additional project management fees and/or supervisory costs for rectification works,[2] including the costs incurred by Mr Wong in having to manage the two projects, together with the cost of engaging an alternate project manager and a site supervisor, and incidental costs.
[2] Re‑amended substituted defence and counterclaim filed 16 June 2020 [19] ‑ [22].
Mr Wong and the Company also plead that if any amount is found to be payable to Mr Siah (which claims are denied) they are each entitled to set off the loss and damage against the loss and damage incurred by each of them (by reason of the matters pleaded in the counterclaim).
2.0 The witnesses
Both Mr Siah and Mr Wong gave their evidence‑in‑chief viva voce and were cross‑examined. Each of the lay witnesses for the parties gave their evidence‑in‑chief in writing in witness statements.
Mr Siah called two witnesses in support of his case, one of which was a lay witness and the other an expert building consultant.
The lay witness, called on behalf of Mr Siah, was Mr Garth Small. Mr Small worked as a handyman for Firstland and Firstland Investments property management business from the end of 2014 until about the end of 2016. In 2015 and 2016, he worked as a handyman on the Bentley Project and the Cloverdale Project.
The expert witness, called on behalf of Mr Siah, was Mr Richard Machell. Mr Machell is a chartered building professional and a contract, management and construction consulting specialist, who among other qualifications is registered, pursuant to the provisions of the Building Services (Registration) Act, as a building service practitioner.
Mr Wong was the principal witness called on behalf of the defendants. In support of the defendants' case, the defendants called three lay witnesses, and tendered into evidence (without calling each of them to give evidence) witness statements made by church pastors, Richard Lynn and Leroy Max Randall, who had attended meetings between Mr Wong and Mr Siah.
The first lay witness called on behalf of the defendants was Mr Cheng Kee Tan (Thomas Tan), a registered building service practitioner engaged by Mr Wong in early September 2016 to take over the role of nominated supervisor for the Company (as required by the Building Services (Registration) Act).
The second lay witness called on behalf the defendants was Mr Jaginder Singh, a qualified architect (who is not registered as such in Australia) who is a housing designer and project manager. Mr Singh was engaged by Mr Wong in early September 2016 to take over the project management functions performed by Mr Siah on the Bentley Project and the Cloverdale Project.
The third lay witness was Ms Kiap Eng Jane Ng, who is one of the directors of Seed Ventures Pty Ltd, which was a company formed to develop the Cloverdale Project and engaged by the Company to carry out the works.
The defendants called two expert witnesses. The first expert witness was Mr Phil Liptrot, who is a building and civil engineering inspector. Mr Liptrot prepared an expert report as to whether the supervisory services provided by Mr Siah at the Bentley Project and the Cloverdale Project met the standard that would be expected of a reasonably competent building supervisor and to identify defects in the works as a result of the lack of supervision.
The second expert called on behalf of the defendants was Mr Niall McAree who is a quantity surveyor and is one of the directors of a quantity surveying company, Rawlinsons (WA). Mr McAree is one of the authors of a report of cost estimates of work the defendants claim to be rectification work required and performed for the Bentley Project and the Cloverdale Project to rectify defective work carried out during the period Mr Siah project managed and supervised these projects. In these reasons, the report is referred to as the Rawlinsons report.
Mr Machell was instructed, on behalf of Mr Siah, to prepare an independent expert opinion that was in a large part responsive to Mr Liptrot's report and the Rawlinsons report, and included:
(a)an assessment of the type of experience required by a person to competently carry out the duties of a project manager and/or site supervisor;
(b)an opinion regarding alleged defects set out in Mr Liptrot's report, which report identified defects in the work carried out in the Bentley Project and the Cloverdale Project which were claimed to be caused by the lack of competent supervision; and
(c)an opinion as to details of, and the identity of, the scope of works estimated in the Rawlinsons report (cost estimates of rectification works) prepared on behalf of the defendants.
An objection was made to the report of Mr Liptrot on grounds that his report failed to provide any basis for his opinions, failed to identify facts or assumptions in respect of many items claimed to be defects caused by poor supervision by Mr Siah, and failed to reveal the reasoning for his opinions based on his expertise.
No objection was made to the admissibility of Mr Machell's report or the Rawlinsons report.
The weight to be given to Mr Machell's report and his evidence is considered in 5.1 ‑ 5.11 of these reasons.
The weight to be given to the Rawlinsons report and Mr McAree is considered in 5.0 ‑ 5.11 of these reasons.
Whether Mr Liptrot's report is admissible, and if so, what weight should be given to his evidence is considered in 5.1 ‑ 5.11 of these reasons.
3.0 Reliability and assessment of evidence
3.1 Legal principles ‑ lay witnesses
The most reliable indication of people's knowledge of transactions and events is not their recollection of what was said by them and others several years ago, it is what they did and how they conducted themselves at the relevant time.
Contemporaneous, or near contemporaneous, documents provide more valuable and revealing information than what may be flawed attempts at recollection of those facts by witnesses, in particular, those with an interest in the outcome of the litigation.[3]
[3] Evans v Braddock [2015] NSWSC 249 [74] (Hallen J); Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 [1247] (Jagot J).
In assessing evidence which relies upon the recollection of events which occurred up to seven years ago, I have applied the approach of Martin CJ in Fazio v Fazio.[4] That is, I have placed significant weight upon contemporaneous documents and upon inferences that can be properly drawn from that evidence. Where it is possible to establish objective facts from their evidence, I have assessed the written and oral testimony of each witness in light of the inherent probabilities of particular versions of events, in the context of established facts.
[4] Fazio v Fazio [2010] WASC 263 [51].
In determining the oppression claim, it is necessary to assess the credibility and reliability of the evidence given by Mr Siah and Mr Wong, particularly by regard to contemporaneous documents.
In making an assessment of Mr Wong's credibility it is necessary to pay particular attention to the contemporaneous documentary records created by him to determine whether he:
(a)falsely created records of Company meetings; and
(b)misappropriated or made unauthorised deductions of funds of the Company, or used funds of the Company to pay capital contributions to the Han Jie Firstland partnership.
In particular, in the assessment of Mr Wong's credibility, it is necessary to review transactions recorded in the bank records of the Company and the partnership and the financial returns of the Company and consider the transactions recorded in those documents, and consider that material in the context of what was said by Mr Siah and Mr Wong in transcribed meetings between them, and in contemporaneous correspondence between them.
3.2 Credibility and reliability of the non‑expert witnesses
I generally did not find Mr Wong to be a truthful, credible or reliable witness. In respect of many material issues, his evidence was not supported by reliable contemporaneous documentary evidence. I have found that he created false records of more than one Company meeting.
It also appears that during the course of these proceedings Mr Wong through his legal representative made an unsubstantiated and unwarranted claim that Mr Siah had tampered with and had falsified documents and claimed that Mr Siah's conduct amounted to an attempt to pervert the course of justice and contempt of court and a threat was made to report the matter to the police. It appears that this threat had no foundation. The documents referred to in this correspondence were subsequently tendered into evidence by consent as part of exhibit A[5] and none of the allegations made on behalf of Mr Wong in the correspondence were put to Mr Siah in the hearing of these proceedings.
[5] Exhibit 7; exhibit A, Tab 18, Tab 20, Tab 22, page 132, Tab 62 and Tab 50.
I have also found that Mr Wong diluted Mr Siah's shareholding in the Company by claiming to make a call for capital for the Company by all shareholders and by falsely claiming that Firstland and Firstland Investments had answered the call by making the payments called for, when in fact no such payments were made.
I have also found Mr Wong's evidence to be unreliable because Mr Wong's keeping of the accounts of the Company is poor. This is evidenced by the fact that the authors of the Rawlinsons report were unable to prepare cost estimates of work of claimed rectification work based on the invoices provided to them by Mr Wong, as the invoices were incomplete.[6]
[6] Exhibit 13, pages 13.25 ‑ 13.26.
Mr Wong also caused some records to be created that were misleading. For example, Bodnar Group Pty Ltd invoiced Firstland for an amount of $21,500 on 19 November 2013 for the demolition of the house and outbuildings on the Bentley Project land.[7] Of this amount Mr Siah paid to the Bodnar Group Pty Ltd $5,000 from his personal account on 28 January 2014,[8] and Mr Wong paid the balance. However, in about March 2019, Mr Wong contacted Mr Bodnar (a principal of Bodnar Group Pty Ltd) and requested that he send an email in the following terms:[9]
To whom it may concern,
The amount of $21,500 was paid in full and monies received early 2014 out of Leon's personal account.
[7] Exhibit A, Tab 174, page 1701.
[8] Exhibit A, Tab 174, page 1702, ts 628 ‑ 629.
[9] Exhibit A, Tab 174, page 1704.
The content of this email is in part false, and is, in any event, misleading.
It also appears that during the trial of the proceedings Mr Wong had a hand in crafting the evidence of Mr Tan. It emerged during the course of the proceedings that Mr Wong had created many of the supporting descriptions of work documents tendered into evidence on behalf of the defendants as descriptions of work referred to in invoices generated by Mr Tan's company, Goldwest Development Pty Ltd (Goldwest).
It is also clear that Mr Wong engaged in misleading and disingenuous discussions with Mr Siah about resolving their differences in September and October 2016. During this period of time Mr Siah was attempting to reach agreement with Mr Wong and clarify their duties as directors of the Company and their respective roles in the business of construction management, including his role and duties as project manager and nominated site supervisor for the Company, when Mr Wong had by at least very early in September 2016 decided to oust Mr Siah from his duties as project manager and nominated site supervisor. This is because he had engaged Mr Singh and Mr Tan to take over the site supervision and management of the projects managed by Mr Siah by early September 2016 and both Mr Singh and Mr Tan commenced work in these roles in September 2016.
I found Mr Siah to generally be a truthful, credible and reliable witness. In general, there are no reliable contemporaneous records which contradict his evidence. I did, however, find some of his explanations about alleged defective work, and his evidence about the removal of rubbish from the worksites, to be unsatisfactory.
I did not otherwise find the evidence of Mr Siah to be unsatisfactory. Because I have found him to be an honest and generally reliable witness and I have not made the same finding in respect of the evidence of Mr Wong, where the evidence of Mr Siah conflicts with the evidence of Mr Wong, I have preferred the evidence of Mr Siah.
I found Mr Small to be a credible and reliable witness, who attempted to give his evidence as truthfully as possible and to the best of his recollection. However, his evidence did not add to any material issue in the proceedings.
I also found Ms Ng to be a credible and reliable witness, who attempted to give her evidence as truthfully as possible and to the best of her recollection.
Mr Singh was engaged as project manager for the Bentley Project and the Cloverdale Project. Whilst he cannot be regarded as an independent witness, as he is clearly a close friend of Mr Wong, I accept that he attempted to give his evidence as truthfully as possible to the best of his recollection.
I found Mr Tan to be a credible witness, who attempted to give his evidence as truthfully as possible and to the best of his recollection. Although, in general his evidence can be regarded to be reliable, in some respects his evidence is not supported by the documentary records of work which is claimed to be performed by him, or those engaged by him to perform work, for the Bentley Project and the Cloverdale Project. In particular, his evidence about what work he carried out in respect of particular invoices was vague, and some of the documents which were claimed to be records of work performed by him or those engaged by his building company were not records created by him but by Mr Wong.
I do not find it necessary to make any findings about the evidence of the two pastors. Each of their witness statements were tendered into evidence without being required for cross‑examination. However, the contents of each of the witness statements do not add anything to the evidence that is relevant in these proceedings. The best evidence of what was said at two meetings they attended is to be found in the transcripts of the meetings.
4.0 The plaintiff's oppression claim
4.1 Principles
Section 232 of the Corporations Act provides:
232 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 interests 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.
For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.
Note: For affairs, see section 53.
For s 232 to be engaged, findings of fact must be made that the conduct specified in s 232(a), (b) or (c) have occurred and that the conduct is of the kind specified in s 232(d) or (e). Mr Siah does not rely upon s 232(d).
The principles that apply to determine whether conduct is oppressive to, unfairly prejudicial to, or unfairly discriminatory are uncontroversial, but in each case whether the conduct in question can be characterised as such will turn upon an objective assessment of the relevant facts and circumstances of the particular case. As Sifris J in Exton v Extons Pty Ltd remarked:[10]
From a review of the more relevant authorities, the critical issue is commercial unfairness, judged objectively. It usually results in some harm or prejudice by such conduct that is not reasonably or commercially justifiable. Of course all of the facts and circumstances and context needs to be examined in order to determine whether such conduct alleged is oppressive. Further, upon such examination conduct that may appear unfair may be fully justified. It goes without saying that the authorities referred to below deal with a range of different factual considerations and relationships. Each case must depend on its own facts and circumstances.
[10] Exton v Extons Pty Ltd [2017] VSC 14; (2017) 53 VR 520 [48].
The principles that apply to the evaluation of conduct of those in control of a company were recently summarised by Kenneth Martin J in Russell v Lee Holdings Pty Ltd [No 3] as follows:[11]
[11] Russell v Lee Holdings Pty Ltd [No 3] [2020] WASC 346 [137]; see also William Buck (WA) Pty Ltd v Faulkner [No 6] [2013] WASC 342 [108] (Kenneth Martin J).
Oppressive to, unfairly prejudicial to, or unfairly discriminatory against
158This phrase is a compound expression concerned with conduct that involves commercial unfairness.
159Whether there has been conduct of unfairness is judged objectively. However, the court should have regard to the context in determining whether the conduct is unfair.
160The relevant context to be taken into account includes the course of conduct undertaken by the parties.
161This conduct includes the conduct of the plaintiff as it may render the conduct of the other side not unfair and may affect the relief which the Court thinks fit to grant.
162Commercial unfairness is to be judged having regard to facts known to the parties at the time of the conduct in question, and not by reference to what subsequently transpires.
163Fairness is to be determined with a consideration of factors including conflicting interests of different groups in the company, principles governing the duties of a director in the conduct of the affairs of a company, the rights and duties of a majority shareholder in relation to the minority, history and structure of the company, and reasonable expectations of the members.
164Therefore, the exercise of assessing commercial unfairness is one of balancing competing considerations.
165The conduct to be demonstrated must be unfairly prejudicial.
166It may be oppressive to require a party to fund contentious litigation against itself.
Where a company is formed as a quasi‑partnership that does not superimpose the law of partnership upon a corporation.[12] Irreconcilable differences between those who were in control of a company in a quasi‑partnership may establish a basis for winding up, but they do not of themselves constitute oppression or unfair prejudice.[13] However, wrongful exclusion from participation in the management of a company has been held to be a species of oppressive conduct.[14]
[12] William Buck (WA) Pty Ltd v Faulkner [No 6] [2013] WASC 342 [131] (Kenneth Martin J).
[13] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 [89] (Spigelman CJ).
[14] William Buck (WA) Pty Ltd v Faulkner [No 6] [2013] WASC 342 [128] (Kenneth Martin J).
In Re Scientific Management Associates Pty Ltd, Rees J observed:[15]
The case law also recognises that a closely-held company or quasi‑partnership has features that form a species of oppression claims. In Re a company (No 00709 of 1992); O'Neill v Phillips[1999] 2 All ER 961; [1999] UKHL 24, Lord Hoffman, with whom Lords Jauncey of Tullichettle, Clyde, Hutton and Hobhouse of Woodborough agreed, referred to, at 970:
'... the standard case in which shareholders have entered into association upon the understanding that each of them who has ventured his capital will also participate in the management of the company. In such a case it will usually be considered unjust, inequitable or unfair for a majority to use their voting power to exclude a member from participation in the management without giving him the opportunity to remove his capital upon reasonable terms. ...'
His Lordship's exposition has been described as 'substantially consistent' with how sections 232 and 233 have come to be understood and applied in Australia: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd(2001) 37 ACSR 672; [2001] NSWCA 97 per Priestley JA at [418]; Tomanovic v Global Mortgage Equity Corporation Pty Ltd at [186]; Mopeke Pty Ltd v Airport Fine Foods Pty Ltd (2007) 71 ACSR 395; [2007] NSWSC 153 at [55]; Campbell v Backoffice Investments Pty Ltd at [175] ‑ [176].
In Fexuto, Spigelman CJ considered that irreconcilable differences in a quasi-partnership company do not of themselves constitute oppression or unfair prejudice but 'the destruction of the personal relationship establishes a basis for granting relief in the usual case' unless the person excluded from participation in management as a consequence of the breakdown was also responsible for it: at [89] ‑ [90], [104]. In Tomanovic, Campbell JA took a similar approach, noting that the emergence of irreconcilable differences may be one of several factors that together lead to a conclusion that oppression is made out: at [199].
It is also noteworthy that an action validly taken may nevertheless constitute oppression in all the circumstances. As Brennan J put it succinctly in Wayde at 470:
'The remedies ... are available whether or not the resolution complained of is a valid resolution. To say that the resolution was adopted in good faith and for a purpose within the power conferred is relevant to but not conclusive of the question whether leave should be granted ...'
See also Wayde at 466‑7 (majority); Tomanovic at [176]‑[177].
[15] Re Scientific Management Associates Pty Ltd [2019] NSWSC 1643 [191] ‑ [193].
Courts will have regard to the circumstances as a whole and will assess the cumulative effect of the impugned conduct in that context and must demonstrate a course of conduct amounting to an unjust detriment to the person claiming oppression.[16]
[16] Lucy v Lomas [2002] NSWSC 448 [39] - [45].
It may be oppressive if directors or majority shareholders conduct the affairs of a company in a way that advances their own interests or the interests of others, to the detriment of a minority shareholder.[17]
[17] Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Ltd (No 3) [2015] NSWSC 1639; (2015) 109 ACSR 369 [108] (Sackar J).
An unlawful divestiture of shares is oppressive conduct under s 232 of the Corporations Act.[18]
4.2 Formation of the Company and the partnership agreement to purchase and develop the Bentley Project land
[18] Re Quest Exploration Pty Ltd (1992) 6 ACSR 659; Ghabrial v Romolly Pty Ltd (1991) 5 ACSR 611.
Mr Siah first met Mr Wong approximately 18 years ago. Not long after he came to live in Australia he engaged Mr Wong as an agent to lease (and manage) a property. Not long after Mr Siah met Mr Wong, Mr Wong introduced Mr Siah to Mr S H Wong, who had been a very successful architect in Malaysia and had retired to live in Perth. The three men became friends.
In early 2013, Mr Siah, Mr Wong, and Mr S H Wong discussed entering into a business venture to develop and sell townhouses and they agreed to incorporate a company to carry on a construction management business. At the time of the discussions, Mr Siah was employed full‑time as an engineer by Parsons Brinckerhoff. It is Mr Siah's evidence that he, Mr Wong, and Mr S H Wong agreed that:[19]
(a)Mr S H Wong would design the projects (as he was an architect);
(b)Mr Siah would obtain registration as a registered building service practitioner, and for each of the projects he would carry out the structural engineering work, and both he and Mr S H Wong would be engaged in project management; and
(c)Mr Wong would engage in marketing and sale of the developed properties.
[19] ts 169 ‑ 170 and 238 ‑ 241.
It was put to Mr Siah in cross‑examination that Mr S H Wong said to him that he (Mr Siah) could deal with the builders, but his role would not be to project manage. Mr Siah said in reply that was not discussed.[20] It was then put to Mr Siah that he would not be in a position to undertake a project management role at that time because he was employed by Parsons Brinckerhoff, and he agreed.[21]
[20] ts 238.
[21] ts 238.
However, what was put by counsel for the defendants did not entirely reflect the evidence‑in‑chief of Mr Wong.
Mr Wong's evidence is that in early 2013, Mr S H Wong said:
(a)they could come together and play (carry out) different roles. Mr S H Wong being an architect, would design the projects, Mr Siah being an engineer would look after the building site (work) and deal with the builders, and he (Mr Wong) would look after the general business of the Company, that is, administration, marketing, and banking;[22]
(b)that Mr Siah and Mr S H Wong said they would each be paid for the work that they did, but there was no discussion about sharing the profit from the projects;[23] and
(c)it was not until after a subsequent discussion with Mr S H Wong and Mr Siah in which they both said to him that 'if the business is profitable we can actually fund mission work',[24] that Mr Wong agreed to go into business together with Mr S H Wong and Mr Siah.
[22] ts 459 ‑ 460.
[23] ts 460 ‑ 461; it is noted that this evidence that there was no discussion about sharing the profit is contrary to the defendants' pleaded case in [9.1.3] of the re-amended substituted defence and counterclaim.
[24] ts 461.
In any event, in early 2013, an agreement was reached between Mr Siah, Mr S H Wong, and Mr Wong to go into business together and for that purpose to form a company. At that point in time, Mr Wong started to look for land to procure for development.
After looking for some time, Mr Wong identified the Bentley Project land as a site that was suitable for development. The land in Bentley was for sale for a purchase price of $1.3 million. Mr Wong formed the opinion that the land was suitable for the development of townhouses with anticipated building costs to be over $1 million, and (that after 'doing the numbers') the proposed project appeared to be very profitable.[25]
[25] ts 461 ‑ 462.
Because of the anticipated cost of development of the Bentley Project land, Mr Wong sought another investor to participate in the project. Mr Wong spoke to Mr Li Han Chang who informed Mr Wong that he was keen to participate in the Bentley Project by investing in the purchase and development of the land. However, Mr Li did not become a shareholder or involve himself in the management of the Company.
By this time it was agreed that the Company be incorporated for the purpose of construction and project management.[26]
[26] Further re-amended statement of claim [6.1]; re‑amended substituted defence and counterclaim [9.1.2].
On 22 May 2013, Mr Siah, Mr S H Wong, Han Jie Pty Ltd (a company associated with Mr Li), and Firstland purchased the Bentley Project land at 72 Ashburton Street Bentley, as tenants in common.
The Company was incorporated on 6 June 2013, with share capital of $1,000 divided into 1,000 shares.
Initially, Mr Siah held 325 shares, Mr S H Wong held 325 shares, Firstland Investments held 50 shares and Firstland held 300 shares in the Company. The directors were Mr Siah, Mr S H Wong and Mr Wong.
Mr Siah pleads, and it is admitted that it had been agreed the business would be a partnership with equal shares for him, Mr S H Wong and Mr Wong's associated entities.[27] This contention is not strictly correct as the companies associated with Mr Wong, Firstland Investments and Firstland, collectively held 25 shares more than Mr Siah and Mr S H Wong. Mr Siah explained (and his evidence on this point was not disputed by Mr Wong)[28] that it was agreed that the business of the Company would utilise the facilities of the business office of Firstland Investments and Firstland (the Firstland office), and that as compensation Firstland Investments and Firstland would hold additional shares in the Company.[29]
[27] Further re-amended statement of claim [6.1]; re‑amended substituted defence and counterclaim [9.1.1].
[28] ts 553 ‑ 554.
[29] ts 170 ‑ 172; 553 ‑ 554 and 645.
On 9 August 2013, Mr Siah was retrenched from his employment with Parsons Brinckerhoff.[30]
[30] ts 240.
On 11 September 2013, Mr Siah became registered as a registered building service practitioner.
It is agreed that, on or about 16 September 2013, the Company issued an additional 9,000 shares resulting in its paid-up share capital to be increased to $10,000 divided into 10,000 shares. Mr Siah, Mr S H Wong, Mr Wong and a company owned by Mr Wong's family, Jenas International Pty Ltd, each subscribed for the new shares.[31]
[31] Jenas International Pty Ltd owns 20% of Firstland Investments.
As a result, as at 16 September 2013, the shareholding of the Company was held as follows: Mr Siah 30%, Mr S H Wong 30%, Firstland Investments 10%, Firstland 25%, and Jenas International Pty Ltd 5%.
On 18 December 2013, the Company became a registered building service contractor, with Mr Siah as its nominated supervisor (as required by s 18 the Building Services (Registration) Act).[32]
[32] Section 18(1)(d) of the Building Services (Registration) Act2011 (WA) requires that on registration or renewal of registration of a building service contractor it is to have at least one nominated supervisor.
On 5 May 2014, Mr Siah, the company associated with Mr Li, Han Jie Pty Ltd, and Firstland entered into a partnership agreement under the name of Han Jie Firstland (Han Jie Firstland partnership) on the following terms:[33]
[33] Exhibit A, Tab 15, page 79.
1.Nature of Business. The partners listed above hereby agree that they shall be considered partners in business for the following purpose: development and sale of five (5) townhouses at 72 Ashburton Street, Bentley WA 6102.
2.'Name'. The partnership shall be conducted under the name of Han Jie Firstland and shall maintain the office at Unit 8/4 Hobsons Gate, Currambine WA 6028
3.Day‑To‑Day Operation. The partners shall provide their full‑time services and best efforts on behalf of the partnership. No partner shall receive a salary for services rendered to the partnership. Each partner shall have equal rights to manage and control the partnership and its business. Should there be differences between the partners concerning ordinary business matters, a decision shall be made by unanimous vote. It is understood that the partners may elect one of the partners to conduct the day‑to‑day business of the partnership; however, no partner shall be able to bind the partnership by act or contract to any liability exceeding $5,000.00 without the prior written consent of each partner.
4.Capital Contribution. The capital contribution of each partner to the partnership shall consist of the following property, services, or cash which each partner agrees to contribute:
Name of Partner
Capital Contribution
Agreed-Upon Cash
%
Share
Han Jie Pty Ltd
$1,500,000
$1,500,000
60.0
Firstland Pty Ltd
$587,500
$587,500
23.5
Teck Hin Siah
$412,500
$412,500
16.5
The partnership shall maintain a capital account record for each partner; should any partner's capital account fall below the agreed to amount, then that partner shall (1) have his share of partnership profits then due and payable applied instead to his capital account; and (2) pay any deficiency to the partnership if his share of partnership profits is not yet due and payable or, if it is, his share is insufficient to cancel the deficiency.
5.Profits and Losses. The profits and losses of the partnership shall be divided by the partners according to a mutually agreeable schedule and at the end of each calendar year according to the proportions listed above.
…
On the same day that the Han Jie Firstland partnership agreement was entered into, Mr S H Wong sold his shares in the Company to Mr Siah and Firstland, resigned as a director of the Company, and the shareholding of Mr S H Wong and Jenas International Pty Ltd was transferred to the other shareholders.[34]
[34] After the transfer the shareholders of the Company were as set out in [7] of these reasons.
On 11 June 2014, Mr S H Wong sold his interest in the Bentley land, to Han Jie Pty Ltd and Firstland, which resulted in the ownership of the Bentley Project land in shares of 16.5% by Mr Siah, 60% by Han Jie Pty Ltd and 23.5% by Firstland, as tenants-in-common, which reflected the agreed capital contributions of the Han Jie Firstland partnership agreement.[35]
[35] Exhibit A, Tab 16.
Mr Siah claims, and the defendants deny, that subsequent to Mr S H Wong ceasing involvement in the Company, he and Mr Wong agreed to continue the business of the Company on the common understanding that they would manage and run the business together, and that they would share in the profits of the business.[36]
[36] Further re‑amended statement of claim [12]; re‑amended substituted defence and counterclaim [15.14].
After Mr Siah had been retrenched from his full-time employment he reached an agreement with Mr Wong that he would carry out project management and site supervisor duties on behalf of the Company (and in this role he became the Company's nominated supervisor pursuant to its obligations as a registered building service contractor under the Building Services (Registration) Act).
It is common ground that the Han Jie Firstland partnership would own the Bentley property and the Company would construct the units and associated infrastructure for a fee. The terms of the contract made between the Han Jie Firstland partnership and the Company are expressly set out in two written agreements.
The first agreement was made on 3 October 2014, and the second agreement was made on 1 December 2014.
On 3 October 2014, Mr Siah, Han Jie Pty Ltd and Firstland as, 'The Owners' (of the Bentley Project land) entered into a contract with the Company as, 'The Builder' to construct five units of grouped housing and supporting infrastructure (defined as the Works) in accordance with the drawings and specifications approved by the 'Board' and in accordance with the General Information at Section 2 and the General Conditions of Contract at Section 3, on the following terms:[37]
[37] Exhibit A, Tab 17; although it is the defendants' case that the contract entered into on 3 October 2014 does not reflect the agreed terms of the agreement to construct the five units of grouped housing and supporting infrastructure, for the reasons given below this contention is rejected, and a finding is made that the terms of this agreement together with the subsequent, Cost Plus Lump Sum Contract executed on 1 December 2014 and the entire terms are to be found in exhibit A, Tab 18 constituted the terms of the contract between the Company and the Han Jie Firstland partnership for the construction of the Bentley Project.
(1)For the consideration hereinafter mentioned, the Builder shall complete and maintain the Works subjected to the said Conditions of Contract and in accordance with the approved Drawings and General specifications.
(2)The Owners will pay the Builder the sum of ($) 1 Million in Australian Currency and payment to be made upon progressive completion of the Works.
or; such other sum as shall become payable in accordance with the said Conditions of Contract for the construction, completion, and maintenance of the Works.
…
SECTION 3
STANDARD CONDITIONS OF CONTRACT
3.1Commencement of the works
3.1.1Date of signing of the contract: 3rd October 2014.
3.1.2Date of expected occupying the site by the Builder: 15th December 2014
3.2Date of expected completion of the Works: 15th December 2015
3.3Variations and alterations
3.3.1The Owner has the right to request the Builder to carry out all variations and alterations from the plans and specifications provided that such alterations and variations have been approved by the relevant Governmental Authority / Council in accordance with the controlling legislation.
3.3.2The Builder shall price such variations and alterations within a reasonable amount of time of the receipt of the requests by the Owner to do so. Work shall not be carried out on the alterations and variations until the Owner and the Builder have agreed to the prices charged by the Builder for such work.
3.3.3The Builder shall state whether the alterations or variations requested will lead to an extension of time for the completion of the Works and he/she shall give the Owner his/her best estimate of the extra time required.
3.4Extension of time
3.4.1As soon as the Builder recognises that the work will not be finished in the time agreed upon, he/she shall inform the Owner of the need for more time to complete the Works and the reason for the request for the increased time.
3.4.2It is the duty of the Owner to consider the request for an extension of the contract time taking into account the reasons given by the Builder for such extension, and to grant the request if considered reasonable in the circumstances of the construction of the Works.
3.5Maintenance period
The Builder is expected to make right any defects found in the Works for a period of up to six months after the completion of the Works and the granting of a Certificate of Occupancy by the relevant Authority.
3.6Relations between the Builder and the Owner
3.6.1The Builder shall carry out the Works in accordance with the drawings and specifications and in accordance with any reasonable instructions by the Owner or his/her representative.
…
3.7Payment schedule.
The Owner shall pay to the Builder the following percentages of the total cost of the contract for the Works as agreed upon between the Builder and the Owner:
3.7.1On the signing of the contract a sum sufficient to bring the payments up to not more than 5 percent depending on the agreed arrangements between the owner and the Builder
3.7.2On the completion of the foundations a sum sufficient to bring the payments up to not more than a total of 15 percent
3.7.3On completion of the walls up to and including the ring beams a sum sufficient to bring the payments up to not more than 30 percent
3.7.4On completion of the roofs including the roof timber truss; colourbond metal sheeting; gutters and down‑pipes; a sum sufficient to bring the payments up to not more than 70 percent
…
On 1 December 2014, Firstland, Han Jie Pty Ltd and Mr Siah, as the owner, and the Company (referred to by its trading name Firstland Construct & Management) as the contractor, entered into a Cost Plus Lump Sum Contract, on the following terms, which included a lump sum of $170,000, excluding GST, payable to the Company as its 'contractor's fee':[38]
[38] Exhibit A, Tab 18.
1.The contractor accepts the relationship of trust and confidence established between his company and the owner by this agreement. He covenants with the owner to furnish his best skill and judgment in furthering the interest of the owner. He agrees to furnish efficient business administration and supervision and to use his best efforts to furnish at all times an adequate supply of workers and materials, and to perform the work in a most expeditious, economical and workmanlike manner.
2.The work to be performed under this contract shall commence 1st January 2015.
The contractor shall use his best efforts to complete said work of improvement on or before 31st December 2015.
3.The owner agrees to reimburse the contractor for the direct 'cost of the work' as defined in paragraph 6 below. Such reimbursement shall be in addition to the contractor's fee stipulated in paragraph 4.
4.In consideration of the performance of the contract, the owner agrees to pay the contractor as compensation for his services a contractor's fee as follows:
A lump sum of $170,000.00 excluding GST for the total project length paid as per paragraph 11.
5.The scope of the work shall consist of the 'categories of work' described on the estimate attached hereto. The estimate is attached solely for the purpose of describing the category of work. The pricing on the estimate shall have no bearing on the cost of the work.
6.The term 'cost of work' shall mean costs necessarily and reasonably incurred in the performance of the Work, pertaining to the supervision of the site, excluding all costs incurred due to changes and extras not listed.
…
8.All portions of the work that contractor's employees cannot perform directly shall be performed under subcontracts. Unless owner has agreed in advance all subcontracts shall be on a fixed price basis. The contractor shall secure the owner's consent before entering into any subcontracts.
9.The contractor shall keep full and detailed accounts as may be necessary for proper financial management under this agreement. The owner shall be afforded access to all the contractor's records, books, correspondence, instructions, drawings, receipts, vouchers, memoranda and similar data relating to this contract, and the contractor shall preserve all such records for a period of three years after the final payment.
10.The owner agrees to pay all amounts pertaining to obtaining permits or expenses prior to starting of job.
11.The contractor shall, every end of the month during the course of work, deliver to the owner a statement showing:
In complete detail all costs incurred by his company in the execution of this contract for the preceding monthly period. Accompanying said statement shall be a copy of all back‑up documentation including material procurement invoices, payrolls for all the labour and all receipted bills for which payment is due. The owner shall review the statement and shall remit such amount within three days of the owner's receipt of the statement. The final payment, constituting the unpaid balance of the cost of the work and the final contractor's fee, shall be paid by the owner to the contractor when the work has been completed and the contract fully performed.
…
On 16 December 2014, Mr Siah and Mr Wong signed a memorandum setting out their agreement as to how the 'contractor's fee' (referred to in the memorandum as the 'Management Fee' of '$170,000 + GST') for the Bentley Project was to be shared.[39] The agreed terms were that Mr Siah was to be paid $65,000, Firstland Investments (referred to in the memorandum as Firstland Real Estate) $15,000 and the balance of $90,000 was to be invested in 'Modular Co'.
[39] Exhibit A, Tab 19.
Sometime later, Mr Siah and Mr Wong agreed to amend the term of the 16 December 2014 agreement that the balance of $90,000 was to be invested in 'Modular Co', to a term that the amount of $90,000 was to be, 'share[d] equally between agreed parties'. A note to this effect was handwritten by Mr Siah on the memorandum and both Mr Siah and Mr Wong initialled the handwritten amendment.[40] It is common ground that the amendment was made because a business venture which was to be known as Modular Co did not eventuate, which led to the amendment to this agreement. There is a dispute as to the meaning and effect of the amended term.
[40] Exhibit A, Tab 19.
Mr Siah argues that the meaning and effect of the amendment was that the $90,000 was to be equally shared between him and Mr Wong, whereas Mr Wong claims the meaning and effect of the amendment is that the $90,000 was to be shared equally between the shareholders of the Company. I return to this point below.
It appears that the demolition of existing structures on the Bentley Project land took place in December 2014, and in January 2015 construction work commenced to build the five townhouses.[41]
[41] ts 472; see also quote for the work exhibit A, Tab 174, page 1701.
In January 2015, the boundaries of the Bentley Project land were surveyed and the ground floor slab was poured.
4.3 The Cloverdale Project
In the middle of 2015, a group of four investors who had earlier formed a company, Seed Ventures Pty Ltd, to carry out a development project in Cloverdale were looking to obtain quotes to build the project.[42] One of the investors, Ms Kiap Eng Jane Ng (known as Jane Ng) was introduced to Mr Siah, who agreed to provide a quote on behalf of the Company.[43]
[42] Exhibit 11 [1] ‑ [5].
[43] Exhibit 11 [6] ‑ [7].
Mr Siah, together with Mr Wong, met Ms Ng and another investor in Seed Ventures Pty Ltd, Baby Mui Heng Tan (Baby Goh), at a café. Ms Ng negotiated the terms of the contract to construct the Cloverdale Project with Mr Siah and Mr Wong, on behalf of Seed Ventures Pty Ltd, and had the most involvement in the development of the project. Prior to the contract being awarded, Mr Siah prepared a quote for the works.[44]
[44] Exhibit A, Tab 150.
Before Ms Ng made a final decision that the contract for the Cloverdale Project should be awarded to the Company, she told Mr Siah and Mr Wong that:[45]
[45] Exhibit 11 [10] ‑ [12], ts 699.
10.Before I finally decided to award the contract to Leon and Danick, I told them both that:
•'This contract is awarded to you with the understanding that it is capped at the price quoted. You have to manage the costs. Don't come to me if you need to change materials, I will not accept any increases.'
•'I am also involved in this business, and I have the right to choose materials myself, and if there are savings from that, I want the savings to be passed back to us.' I do not remember the exact example I gave them but it would be along the lines of 'for example, if you budgeted $30.00 per m2 for floor tiles and I found floor tiles at $20.00 m2, then you have to pass that savings back to us' (and by that I meant Seed Ventures Pty Ltd). The savings could either be a reduction of the lump sum or be used for upgrades.
11.The reason I made the above conditions was that initially Danick estimated that the costs for the project at around $900,000, but when we came to sign the contract, it was around $1,300,000. While I do not remember the exact figures, I remember that that initial amount was below $1,000,000. The lump sum price will include everything up to handover.
12.I trusted them both as Christian men and awarded them the contract even though the price was higher than what I was told at first. I wanted to help them and help ourselves. If I can cut the costs to $1,200,000, then I want that money back. That part was a gentleman's agreement that was not written into the contract.
After negotiations were concluded with Ms Ng, it was agreed that the fixed price for the works to be undertaken by the Company would be $1,367,684, which included a management fee of $220,000.[46]
[46] Exhibit A, Tabs 20 and 150.
It is common ground that of the $220,000 management fee, inclusive of GST, $120,000 would be paid to Mr Siah. Mr Siah pleads that the remainder of the sum of $220,000 ($100,000) would be paid to Firstland Investments.[47] The defendants plead that of the sum of $100,000, $80,000 was to be paid to Firstland Investments and $20,000 to Firstland.[48]
[47] Further re‑amended statement of claim [13.2 (b)].
[48] Re‑amended substituted defence and counterclaim [16.1].
On 23 October 2015, Mr Siah and Mr Wong, as directors of the Company, and Seed Ventures Pty Ltd, executed a contract to construct eight multiple dwellings/apartments at 280 Keymer Street Cloverdale, for the fixed price of $1,367,684 (inclusive of GST) as adjusted in accordance with the contract, at the times, and in the manner, specified in the Conditions of Contract.[49]
[49] Exhibit A, Tab 21 and Tab 22, particularly page 116.
Part of the contracted works of the Cloverdale Project was the Specification of Works dated 23 October 2015, which was prepared by Mr Siah.[50]
[50] Exhibit A, Tab 21, pages 98 ‑ 111.
The Conditions of Contract of the Cloverdale Project were in the form of a Master Builders Association of WA Residential Building Works Contract 2014 for use in Works over $500,000 without an architect.[51] Annexed to the Conditions of Contract was a progress payment schedule, Appendix 'I', which provided for 17 progress payments upon the progress of the work in stages.[52]
4.4 The Ocean Reef Project
[51] Exhibit A, Tab 22, pages 113 ‑ 131.
[52] Exhibit A, Tab 22, page 132.
On 19 April 2016, Mr Wong entered into a contract, on behalf of the Company, to construct a granny flat for Leroy and Gayle Randall in Ocean Reef (Ocean Reef Project), for a lump sum price of $126,000 excluding GST.[53] Pastor Randall is a religious pastor, and a friend of Mr Wong.
[53] Exhibit A, Tab 23, page 133.
Prior to entering into the Ocean Reef Project contract, Mr Wong prepared a costing sheet setting out the items of the work to be carried out, and an estimation of the costs for the majority of the items of work.[54] Mr Wong presented the costing sheet to Mr Siah for his review and assessment. Mr Siah assessed the cost of each item and made handwritten notations on the costing sheet and discussed the estimated costs with Mr Wong.[55] Mr Siah calculated that on a fixed price of $126,000, the profit on the project would be $40,000.
[54] Exhibit A, Tab 23, page 134.
[55] ts 307 ‑ 308; 386.
There is an evidential dispute between Mr Siah and Mr Wong as to the length of time that Mr Siah spent reviewing the estimation of costs for each of the items prepared by Mr Wong. It is Mr Wong's evidence that Mr Siah spent approximately five minutes reviewing the costings. It is Mr Siah's evidence that it took him two to three weeks to assess each item, and to do so he had to review surveyor and earthwork quotations and discuss those quotes with the surveyor and earthworks contractor. He also had to assess the quantities and rates from the drawings. This point is not determinative. However, for the reasons that I have given in 3.2 of these reasons, I prefer the evidence given by Mr Siah on this point.
Mr Wong made a note on the costing sheet that there should be deducted from this sum of profit an amount of $10,000 for supervision.
Despite the fact that Mr Wong was not qualified to do so, it was agreed between Mr Wong and Mr Siah that Mr Wong would supervise the Ocean Reef Project. It appears that this is because at that time Mr Siah was project managing and supervising the Bentley Project and the Cloverdale Project Mr Siah had no capacity to undertake the project management or supervision of any additional works.[56]
[56] ts 599.
It also appears that Mr Wong may have undertaken this project under the umbrella of Firstland Investments and not the Company even though Firstland Investments was not registered as a building service contractor and Mr Wong was not registered as a building service practitioner under the Building Services (Registration) Act. This inference is open to be drawn from the contents of an email sent to Mr Siah's lawyers, on 20 December 2017, from the defendants' lawyers in which it is stated:[57]
[O]ur client says that, in his email of 13 September 2016, your client gave full discretion to the Company's director, Mr Leon Wong, to do what he wants with the project at 141 Venturi Drive, Ocean Reef. On that basis, this project was undertaken by another company, Firstland Investments Pty Ltd. Your client is not entitled to view the financials details of another company.
4.5 The relationship between Mr Siah and Mr Wong breaks down resulting in the removal of Mr Siah as project manager and site supervisor of the Bentley Project and the Cloverdale Project
[57] Exhibit 1, Tab 37.
In or about July 2016 or early August 2016, the relationship between Mr Siah and Mr Wong began to deteriorate.[58] It is Mr Siah's evidence that they argued about matters such as payment to him for amounts he had paid to suppliers using his credit card and the sharing of the project management fee for the Bentley Project.[59]
[58] ts 195 ‑ 196.
[59] ts 196.
The main point in the dispute appears to be that Mr Wong wanted a greater share of the $170,000 management fee for the Bentley Project, and this issue led to a complete breakdown in the relationship between the two men. It appears that for a short time in August 2016 Mr Wong may have made a genuine attempt to negotiate a resolution of their differences. However, by early September 2016, despite portraying an impression to Mr Siah, until at least 15 October 2016, that negotiations to settle their differences were ongoing, Mr Wong took steps to remove Mr Siah as the project manager for both the Bentley Project and the Cloverdale Project. He also took steps in October 2016 to oust Mr Siah's participation in the affairs of the Company as a director.
Shortly after the dispute first arose, Mr Siah drafted a letter dated 17 August 2016 to be signed by both of them, the contents of which was intended to clearly set out the tasks to be performed by them as directors of the Company in the business of construction management and the work and tasks undertaken by each of them to date.[60]
[60] Exhibit A, Tab 25, pages 143 ‑ 144.
The letter also sets out what Mr Siah claimed was the basis of their agreement to split the management fees for both the Bentley Project and the Cloverdale Project. Mr Siah sent the letter to Mr Wong by email on 31 August 2016.[61] In his email, Mr Siah suggested they meet the following day to sign the letter and to also prepare a copy of an agreement for the Ocean Reef Project to set a direction for each of the three projects.[62] The text of the letter was as follows:[63]
[61] Exhibit A, Tab 25, page 142.
[62] Exhibit A, Tab 25, page 142.
[63] Exhibit A, Tab 25, pages 143 ‑ 142.
We agreed with the basis of formation of this company Firstland Unlimited Pty Ltd in lieu of its trading names under it; the agreements are the business partners shall profit from the Projects or Business 'profits or fee' to each partner, based on the nature of work and the profession each partner has been doing or contributed to the project. Yours (Leon Wong) being sale and fee payable to you based on sale commission (2.5%) if the property is self‑invested and owned by Firstland Unlimited Pty Ltd and sold later (as in the case of Lot 888, 72 Ashburton St). And my (Danick Siah) being all project fees charged to projects plus saving profit, for execution all the work from design inception submission to project construction completion.
The amount of work performed by or contributed by each partner forms the nature of this partnership business; ie Leon Wong being sells / markets the properties; and Danick Siah being all projects design & construction management and all others area of project related executions to completion. This natures of scope as spelled out below:‑
•Danick Siah work contribution being:‑‑ design management; project management; prepare document submission to Council / approval; reviewing all submission requirements drawings; review and prepare technical specifications; prepare contract; interface; liaison with City and clients, suppliers / traders; estimation and pricing; resourcing materials, trader management; quotes; site supervision and construction.
•Leon Wong work contribution has been mainly invoicing and payment; credit application and insurance submission.
As for the current projects namely (1) and (2) below; as agreed:‑
(1)Lot 888, 72 Ashburton St, Bentley which Danick personally agreed to pay Leon on the following.
•Fee charged to project = $170,000 + GST
•Payable to Danick = $65,000
•Payable to Leon & Firstland Real Estate = $15,000
•Balance $90,000 (to be invested into Modular Co) and is later agreed to share equally with you; being $45,000 payable to Leon and $45,000 payable to Danick.
•Any fuel and phone reimbursement to be charged to the Balance $90,000 and remaining residue balance distributed equally between Leon and Danick) as spelled out above.
(2)280 Keymer St, Bentley, Danick agreed to pay Leon on the following:‑
•Fee charged to project = $220,000 (GST included)
•Payable to Leon and Firstland Real Estate = $100,000
•Payable to Danick = $120,000
•Any fuel and phone reimbursement to be charged to the foreseeable project saving profit.
•Based on the basis of work contribution which forms the company profit distribution agreed, Danick shall agree to pay Leon 10% of any residue project saving profit from Keymer St project referred to herein. And remaining 90% shall be payable to Danick for his work contribution.
The above spelled out clearly the directions of these two projects as agreed.
Please acknowledged our agreement of these two projects spelled out on these two pages by signing below:‑
Mr Wong and Mr Siah met on 1 September 2016 to discuss the contents of Mr Siah's letter. Mr Wong made handwritten amendments on a copy of Mr Siah's letter by:
(a)making a minor amendment to the first paragraph of the letter to reflect that it was the partnership, Firstland, Han Jie Pty Ltd and Mr Siah that own the Bentley Project land;
(b)making a minor amendment to the amount of sale commission for the Bentley Project to correct the amount of GST to 2% plus GST being 2.2%;
(c)by writing under the second dot point of the second paragraph of the letter, 'Do you want me to be involved in any of the above?'; and
(d)by deleting the reference to his name, 'Leon', against the amount of the management fee for the Bentley Project stated to be payable to 'Leon & Firstland Real Estate (Firstland Investments) = $15,000', and he added an additional amount of $15,000, to reflect a demand made by him that Firstland Investments be paid $30,000 of the $170,000 management fee.[64]
[64] Exhibit A, Tab 26.
Mr Wong made no other amendments to the letter. In particular, he made no amendments to the statements made by Mr Siah in the document to the effect that he, together with Mr Wong, were in a partnership of project design and construction management in selling and marketing of the properties developed.
It is common ground that when they met on 1 September 2016, Mr Siah made it very clear to Mr Wong that he would not agree to Firstland Investments increasing its share of the management fee of the Bentley Project.
Mr Siah and Mr Wong also discussed the Ocean Reef Project. It was Mr Siah's view that if Mr Wong carried out all of the work to complete that development on behalf of the Company, and Mr Siah contributed nothing, Mr Wong could retain all the profit from that project.[65]
[65] Exhibit A, Tab 24, page 135.
To reflect this, Mr Siah drafted a document, dated 2 September 2016, titled, 'Re Business partnership agreement and work contribution profit' to document the fee arrangements for the Ocean Reef Project, and sent this document to Mr Wong.[66] In the document he stated in respect of the Ocean Reef Project that he had agreed to, 'come along side if there is requirement of assistance requested from you' (Mr Wong) and any profit be paid to him (Mr Siah) based on his percentage work to the project.
[66] Exhibit A, Tab 27, page 149.
Mr Siah subsequently sent the draft agreement for the Ocean Reef Project with an email to Mr Wong on 13 September 2016, reiterating his view about the sharing of the management fee for the Bentley Project and also reiterated his position concerning the Ocean Reef Project.[67]
[67] Exhibit A, Tab 27, pages 147 and 149.
Later that day on 13 September 2016, Mr Wong sent an email to Mr Siah in which he stated that he had never agreed with Mr Siah's proposal, dated 17 August 2016, and went on to state in respect of the Ocean Reef Project:[68]
As for the granny flat I did not ask for 100% of the profit, it was you who proposed. My original proposal given to you on the granny flat right from the start (which you have left it to my discretion) still stand (50% Construct ‑ 50% Real Estate after supervisor expenses).
[68] Exhibit A, Tab 27, page 150.
Mr Wong also claimed in the email that all the previous allocations of remunerations were determined by Mr Siah, whether fair or unfair to him, and said that because Mr Siah had made additional petrol claims, he proposed to make claims for payment of petrol expenses. Mr Wong also made it clear that he rejected what he regarded as a proposal by Mr Siah, that Mr Siah retain '90% of the savings (profit) of Cloverdale Project'.[69]
[69] Exhibit A, Tab 27, page 150.
On 15 September 2016, Mr Siah replied by email to Mr Wong's email sent to him on 13 September 2016.[70] In the email Mr Siah claimed that he had contributed more than 90% of the work on the projects and that he was, 'doing more than 4 person's work loads'.[71] Mr Siah reiterated his position on the other points, and then stated:[72]
I maintain my stand and work shall not progress till this are resolved. (As I maintain my position on our agreement table our initial agreement on the profit shared based on each person work contribution we agreed on with yourself (and from the time of Wong[73]) till now; and your 35% and 45% now you have are more than fair and justifiable). If you maintain it is not fair please work out your scope of work and your time involved on the projects and send it through for an open discussion).
By early next week, I will initiate a meeting since we will not progress from here and cannot reach any agreement. And I will put forth this issues to our pastors then and request their present.
[70] Exhibit A, Tab 27, pages 151 ‑ 152.
[71] Exhibit A, Tab 27, page 151 [3.2].
[72] Exhibit A, Tab 27, page 152 [3.7].
[73] It is presumed that the reference to the time of Wong is a reference to the time when Mr S H Wong was involved in the business of the Company.
Mr Wong claims that from this date (15 September 2016), Mr Siah carried out no further work on the Bentley Project or the Cloverdale Project. However, this was not the case as there is clear evidence that Mr Siah continued to work on both projects.
The claim by Mr Siah that he was carrying out 90% of the work on the projects and was carrying out the work of four people, has some credibility as it appears that by at least sometime in September 2016 Mr Wong had put in place plans to replace Mr Siah as project manager and site supervisor for the Company and had engaged two people to carry out those roles. It is also Mr Wong's evidence that from September 2016 onwards, he worked full-time carrying out duties that had previously been carried out by Mr Siah. In particular, he took on the role of sourcing contractors and engaging them to carry out work on the Bentley Project and the Cloverdale Project.
The defendants' counterclaim of misleading and deceptive conduct fails.
First, both Mr Wong and the Company's claims fail because there is no evidence that Mr Siah made any false or misleading statement about his past skills and experience without a reasonable basis.
Second, Mr Wong's claim fails because it is Mr Wong's evidence that the representations were not made until after the Company was formed. Irrespective of the fact that his evidence does not accord with the defendants' pleaded case, Mr Wong is unable to make out a case that he relied upon the representations when he agreed to form the Company with Mr S H Wong and Mr Siah.
Third, although the Company's pleaded case is different to Mr Wong's pleaded case, in that it pleads that prior to the appointment of or, alternatively, the engagement of Mr Siah as the Company's project manager and/or nominated site supervisor for the Bentley Project and/or the Cloverdale Project, Mr Siah made the representation that he had the necessary skill and experience to carry out the duties, and that this representation was in contravention of s 18 of the Australian Consumer Law, other than to cross-examine Mr Siah at length about the various items claimed to be defects in each of the projects, it was not put to him that he did not have the necessary skills and experience to carry out the duties of project manager and nominated site supervisor.
Fourth, for the reasons that I have already given, I am not satisfied that the defendants have proved that Mr Siah did not competently project manage or supervise of the construction of the Bentley Project and the Cloverdale Project. This is because, except in respect of some items, I am not satisfied that the performance of his duties could be said to be substandard overall.
It is noted that Mr Siah pleads in his defence to the counterclaim that the representations were, in any event, not made in trade or commerce. Although this point was pressed in closing, no substantial submissions were made by either party on this point. Because Mr Wong and the Company are unable to make out their claims of misleading and deceptive conduct, I do not find it necessary to make any findings in respect of this point.
7.0 In what capacity did Mr Siah act as project manager and site supervisor?
The Company claims that Mr Siah was specifically tasked as a director with the role of project manager and site supervisor for its projects. In this capacity the Company claims that he breached his statutory duty under s 180(1) of the Corporations Act. Alternatively, the Company claims that Mr Siah was engaged as a contractor by the Company as its project manager and site supervisor for the Bentley Project and the Cloverdale Project, and in this capacity he breached his duty of care to the Company.
Section 180(1) requires a director or an officer of a corporation to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation's circumstances; and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
Section 180(1) does not itself identify the powers and duties to which it applies. The provision imposes an obligation to meet a statutory standard of care and diligence applicable to the exercise of all of the powers and the discharge of all of the duties of a director or officer, whatever the source.[472] Section 180(1) requires the individual circumstances of the director or officer to be articulated before discerning and applying an objective standard of care and diligence in the performance of that office to the facts of the case involving the alleged acts or omissions of that individual.[473]
[472] Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52; (2020) 376 ALR 261 [450] (ThawleyJ).
[473] Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52; (2020) 376 ALR 261 [254] (Rares J).
In determining whether a director has exercised reasonable care and diligence, the circumstances of the particular corporation concerned are relevant to the content of the duty:[474]
These circumstances include the type of company, the provisions of its constitution, the size and nature of the company's business, the composition of the board, the director's position and responsibilities within the company, the particular function the director is performing, the experience or skills of the particular director, the terms on which he or she has undertaken to act as a director, the manner in which responsibility for the business of the company is distributed between its directors and its employees, and the circumstances of the specific case.
[474] Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373 [100] (Brereton J).
It appears clear from the evidence that the only functions and duties Mr Siah had as a director of the Company were to manage and supervise each of the Company's project works so they were constructed in accordance with the design specifications and contractual requirements, building compliance requirements such as planning approval and building regulations and the Code. He was also required to: (a) supervise the work of the subcontractors, identify and require subcontractors to rectify any defective or shoddy work; and (b) efficiently manage the works.
For the reasons that I have given which are summarised in 5.2 of these reasons, I have found that, in respect of some items of work, Mr Siah has failed to meet the standard of care expected by an average supervisor and project manager in the supervision and project management of these items. By breaching this standard of care, Mr Siah has in turn contravened s 180(1) of the Corporations Act.
For this reason, I do not find it necessary to determine whether Mr Siah was engaged by the Company as an independent contractor.
The question to now be determined is whether Mr Siah should be ordered to pay monetary compensation to the Company for the loss and damage caused by the breaches, which for reasons I have summarised in 5.2 is the cost of rectification for items of work in the sum of $7,436.80. For the reasons that follow in 8.0, I am of the opinion that this amount should not be set off against Mr Siah's claim for project management fees.
8.0 Is the Company entitled to set off the loss and damage it has suffered against the project management fees payable to Mr Siah?
The issue is whether the Company's liability to Mr Siah (to pay his project management fees) can be set off against Mr Siah's liability to the Company, caused by the breaches of duty which resulted in loss and damage incurred to remedy defective work, being a failure of Mr Siah to competently project manage or supervise the following items of work by subcontractors:[475]
(a)Items 6, 8 and 18 of the Cloverdale Project; and
(b)Item 7 of the Bentley Project.
[475] 5.2, 5.9.2.2, 5.9.2.4, 5.10.2.5 and 5.11.1.3 of these reasons.
There are three kinds of set off:
(1)legal set off;
(2)analogous equitable set off; and
(3)classical equitable set off (also known as true equitable set off).
Set off may also arise, be modified, or be ousted by private agreement.
On the facts of this matter legal set off and analogous equitable set off do not arise.
Classical equitable set off could be available, to the Company, if Mr Siah's claim and the Company's claim are sufficiently closely connected such that the latter impeaches the former (or, alternatively, such that it would be inequitable or unconscionable for Mr Siah's claim to proceed without it being set off against the Company's claim).
However, whether a claim should be set off will depend upon the conduct of the parties.
8.1 Legal set off
In Western Australia, legal set off arises under the Statutes of Set Off, two English Acts (namely, the Insolvent Debtors Relief Act 1728 (UK) and the Set-off Act 1735 (UK)) which were received into Australian law and which still have effect in this state.[476] Legal set off is a procedural device, which enables the parties to have their actions tried together in one action.[477]
[476] Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 67; PN Corporation Pty Ltd v Oxford Uniforms Pty Ltd [2012] WADC 149; (2012) 81 SR (WA) 347 [88].
[477] Fuller v Happy Shopper Markets Ltd [2001] 1 WLR 1681, 1690.
In PN Corporation Pty Ltd v Oxford Uniforms Pty Ltd, Principal Registrar Gething summarised the principles on the availability of legal set off:[478]
(a)a defendant may set off a mutual debt owed to it by the plaintiff: Hazcor [Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62], 64, 67, 69;
(b)only liquidated sums can be a set‑off against each other: McDonnell & East Ltd v McGregor [[1936] HCA 28; (1936) 56 CLR 50], 62;
(c)the debt sought to be set‑off must be an actionable debt, one capable of being pursued in a separate proceeding: Rawley v Rawley (1876) 1 QBD 460, 463 ‑ 465;
…
(e)the debts need not arise at the same time: Day & Dent Constructions Pty Ltd (in liq) v North Australian Properties Pty Ltd (1982) 40 ALR 399; and
(f)the debts need not arise out of the same transaction: Re Daintrey [1900] 1 QB 546, 573 - 574.
[478] PN Corporation Pty Ltd v Oxford Uniforms Pty Ltd [2012] WADC 149; (2012) 81 SR (WA) 347 [88].
Further, only common law claims can be the subject of legal set off.
To be mutual, the debts must be between the same parties and be held in the same right.[479] There appears to be mutuality between Mr Siah's claim against the Company and the Company's claim against Mr Siah.
[479] Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 67.
However, the debts sought to be set off do not appear to be for liquidated sums. In Victorian Workcover Authorityv Esso Australia Ltd,[480] Gleeson CJ, Gummow, Hayne and Callinan JJ said:[481]
This requirement of [mutual] 'debts' [in the Statutes of Set-off] did not refer merely to a claim that could have been the subject of the old action of debt. Rather, in Stooke v Taylor, Cockburn CJ said that the plea under the statutes was 'available only where the claims on both sides [were] in respect of liquidated debts, or money demands which can be readily and without difficulty ascertained'. More recently, in Stein v Blake, Lord Hoffman said that this statutory or legal set-off 'is confined to debts which at the time when the defence of set-off is filed were due and payable and either liquidated or in sums capable of ascertainment without valuation or estimation'. The test formulated by Cockburn CJ encompasses the old indebitatus accounts, including claims in quantum meruit and quantum valebat where goods had been sold or services were performed without the agreement of a price and the claims were disputed on grounds which could easily be resolved in the litigation.
[480] Victorian Workcover Authorityv Esso Australia Ltd [2001] HCA 53; (2001) 207 CLR 520.
[481] Victorian Workcover Authorityv Esso Australia Ltd [2001] HCA 53; (2001) 207 CLR 520 [30]. (footnotes omitted)
However, according to Meagher, Gummow & Lehane's Equity: Doctrines & Remedies, actions in tort and claims for unliquidated damages based on contract are not claims for liquidated debts.[482]
[482] See Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2015) [39.060(b)], in particular, the commentary and cases at footnotes 70 and 71.
Further, legal set off is available only in respect of claims at law. It is possible that, to the extent that Mr Siah's claim against the Company is one for oppression (as opposed to breach of contract), this requirement may not be met.
8.2 Analogous equitable set off
Equity recognises a form of set off that is analogous to legal set off. Analogous equitable set off is available where legal set off would have been available but for the fact that the claims concerned are not common law claims.[483] It also seems that the requirement of mutuality is less strict for analogous equitable set off.[484]
[483] See Clark v Cort (1840) Cr & Ph 154; (1840) 41 ER 449, discussed in Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2015) [39.060(b)], in particular, the commentary and cases at footnotes 70 and 71..
[484] See The Laws of Australia [15.4.1030].
Analogous equitable set off does not appear relevant to the present case, given that neither party's claim is an equitable claim and, further, given that mutuality does not appear to be a factor that precludes legal set off between the parties' claims.
8.3 Classical equitable set off
Classical equitable set off, unlike legal set off, is a substantive defence which 'can provide immediate justification for refusal to pay the debt otherwise due'.[485]
[485] Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52; (2009) 77 ATR 242 [152].
Classical equitable set off differs from legal set off in several ways, including the following:
(1)equitable set off does not require mutuality;
(2)an equitable claim may be set off against an equitable claim or against a common law claim; and
(3)the claims to be set off need not be for liquidated sums.
However, classical equitable set off requires that the claims to be set off are closely connected. There are two lines of authority on the precise formulation of this requirement.
The first line of authority requires that the claims to be set off are so closely connected that the countervailing claim impeaches the title of the originating claimant to bring the claim.[486] In James v Commonwealth Bank of Australia, Gummow J explained:[487]
With reference to the judgment of Lord Cottenham LC in Rawson v Samuel, Lord Wilberforce and Lord Simon of Glaisdale have pointed to the need for some ground for equitable intervention beyond the mere existence of a cross‑claim and to the requirement that the equity 'impeach the title to the legal demand': see Aries Tanker Corporation v Total Transport Ltd; 'The Aries' [1977] 1 WLR 185 at 190 ‑ 192, 193 ‑ 194; [1977] 1 All ER 398 at 404 ‑ 405,406 ‑ 407.
…
In Rawson v Samuel the Lord Chancellor referred to the impeachment of 'the title to the legal demand' not merely the right to obtain judgment on the demand ... Nevertheless, these authorities, particularly Piggott v Williams … (which antedates Rawson v Samuel), suggest that it is sufficient that the existence of the legal demand, in this case the applicant's claims to payment by the banks on the indemnities, would not have come about or were at least contributed to by the applicant's own breaches of duty owed to the banks. In Rawson v Samuel (at 180; 459) the Lord Chancellor expressly approved Piggott v Williams, saying that 'the complaint against the solicitor for negligence went directly to impeach the demand he was attempting to enforce'.
[486] See, for example, Rawson v Samuel (1841) Cr & Ph 161; (1841) 41 ER 451; James v Commonwealth Bank of Australia (1992) 37 FCR 445, 457 ‑ 472 (where Gummow J considers both lines of authority, but adopts the former); Hazart Pty Ltd v Rademaker (1993) 11 WAR 26, 38;
[487] James v Commonwealth Bank of Australia (1992) 37 FCR 445, 458 ‑ 459.
In Piggott v Williams,[488] a solicitor filed a bill against his client to give effect to a security for costs on a copyhold estate. The client cross‑claimed that the fees incurred by the solicitor would have been avoided had the solicitor acted with integrity, skill and attention. The Vice‑Chancellor held that this was a 'clear case of equitable set off'.
[488] Piggott v Williams (1821) 6 Madd 95; (1821) 56 ER 1027.
Somewhat similarly, in James v Commonwealth Bank of Australia,[489] the applicant receiver, who had been appointed by the first and second respondents, claimed he was entitled to be indemnified by the respondents for debts incurred whilst trading as the respondents' receiver and manager. The respondents denied that the applicant was so entitled and pleaded that the applicant had incurred those debts as a result of his own personal default or negligence. The respondents cross‑claimed that they suffered loss and damages by reason of the applicant's breaches of duty, false representations and negligence. They sought to set off any amount recovered against them on the indemnities and any damages recovered by them in their cross‑claim. It was ultimately unnecessary to decide the set off issue because, Gummow J held, the applicant was not entitled to be indemnified by the respondents. However, in obiter, Gummow J found that set off would have been available had the parties been able to make out their respective claims.[490] Relevantly, Gummow J observed that:[491]
[T]here is a number of cases in which A's breach of duty or obligation owed to B has brought about or at least contributed to the existence of B's liability to A and in which an equitable set‑off has been allowed.
Similarly, his Honour said that there are several authorities, in particular Piggott v Williams, which suggest that:[492]
[I]t is sufficient that the existence of the legal demand, in this case the applicant's claims to payment by the banks on the indemnities, would not have come about or were at least contributed to by the applicant's own breaches of duty owed to the banks.
[489] James v Commonwealth Bank of Australia (1992) 37 FCR 445.
[490] James v Commonwealth Bank of Australia (1992) 37 FCR 445, 459 ‑ 460.
[491] James v Commonwealth Bank of Australia (1992) 37 FCR 445, 457.
[492] James v Commonwealth Bank of Australia (1992) 37 FCR 445, 459.
The alternative line of authority requires that the claims to be set off are so closely connected that it would be inequitable or unjust for the originating claim to proceed without being set off against the countervailing claim.[493] This line of authority was criticised by Gummow J in James v Commonwealth Bank of Australia and, according to Michael Evans, Bradley Jones and Theresa Power, the 'weight of authority' appears to be in favour of the 'impeachment' test.[494]
[493] See, for example, AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705.
[494] Evans M, Jones B and Power T, Equity and Trusts (4th ed, 2016) [38.10] ‑ [38.12].
In D Galambos & Son Pty Ltd v McIntyre, the plaintiff builder claimed the balance due under the contract between it and the defendants.[495] By a counterclaim, the defendants claimed damages for breach of contract for defects in the builder's work.[496]
[495] D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10, 11.
[496] D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10, 11.
As regards the plaintiff's claim, it was common ground that $1,000 was still owing under the contract. Further, the plaintiff claimed additional fees by way of extras, which the defendants appeared not to dispute.[497]
[497] D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10, 11.
As regards the defendants' claim, Woodward J found that the plaintiff was liable to pay the defendants' damages in a sum that exceeded the amount that the defendants were liable to pay the plaintiff.[498]
[498] D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10, 11 ‑ 15.
In the context of considering the appropriate form of judgment to be pronounced and the appropriate order for costs, Woodward J determined that these claims could be set off against one another. Woodward J reviewed several authorities on set off and extracted the following principles:[499]
(i)Failure in part to perform a contract, or defective performance of a contract requiring work to be done again or directly reducing the value of work done or goods supplied, may be raised as a defence to an action for money due under that contract ...
(ii)Claims for money due under a contract and for damages for breach of the same contract (arising, for example, from delay) may be set‑off against each other where the equity of the case requires that it should be so. This will depend upon how closely the respective claims are related, particularly as to time and subject‑matter. The general conduct of the respective parties will, as always, be relevant to the granting of such equitable relief …
(iii)Even where one of the claims is not in terms based upon the contract, but it flows out of and is directly connected with it, a court may be prepared to recognize an equitable set‑off …
(iv)The above statements of principle cannot be regarded as having universal application. They do clearly apply to contracts for work and labour, but special considerations are relevant in other areas such as ‑ bills of exchange …
[499] D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10, 25 ‑ 26. (footnotes omitted)
In formulating these principles, Woodward J relied upon (among other authorities) Government of Newfoundland v Newfoundland Railway Co,[500] which was criticised by Gummow J in James v Commonwealth Bank of Australia. Nonetheless, Gummow J referred to D Galambos & Son Pty Ltd v McIntyre as a case that illustrates the operation of the principles of the 'impeachment' test and that demonstrates that the requirement of 'impeachment' has not been narrowly construed.[501]
8.4 The nature of the claims ‑ The project management fees and the Company's claim against Mr Siah for defective performance
[500] Government of Newfoundland v Newfoundland Railway Co (1888) 13 App Cas 199.
[501] James v Commonwealth Bank of Australia (1992) 37 FCR 445, 458.
In this matter there was a contractual agreement made between Mr Wong and Mr Siah as directors of the Company to share the project management fees payable to the Company for the Bentley Project and the Cloverdale Project, as part of their agreement to manage and run the business of the Company together. Part of that agreement was that Mr Siah would carry out the project management and site supervision work in exchange for his agreed share of the fees. In essence, the Company seeks to set off Mr Siah's share of the fees based upon a claim that Mr Siah was required to perform his duties competently and his defective performance should entitle the Company to set off its loss and damage caused by Mr Siah's defective performance.
The facts of this case appear distinguishable from the facts of Piggott v Williams and the assumed facts on which Gummow J considered (in obiter) the issue of set off in James v The Commonwealth Bank of Australia. This is not a case in which 'A's breach of duty or obligation owed to B has brought about or at least contributed to the existence of B's liability to A'; that is, it is not possible to say that Mr Siah's breach of duty or obligation owed to the Company (to perform his management services competently and without negligence) brought about or contributed to the existence of the Company's contractual liability to Mr Siah (to pay him his project management fees), or vice versa.
The facts of this case appear more analogous to the circumstances considered in D Galambos & Son Pty Ltd v McIntyre, where classical equitable set off was found to have been available. Both cases concern a claim by one party (Mr Siah and the plaintiff builder in D Galambos & Son Pty Ltd v McIntyre) for money due under a contract for services (project management services and building services, respectively) and, in response, a claim by the other party (the Company in the present case and the defendant owner in D Galambos & Son Pty Ltd v McIntyre) that the first party failed to perform those services to a required standard. A difference in the factual circumstances is that the Company sued Mr Siah in negligence and for breach of s 180(1) of the Corporations Act, whereas the defendant in D Galambos & Son Pty Ltd v McIntyre sued the plaintiff builder for breach of contract. Nonetheless, Woodward J's summary of principles relevantly included that equitable set off may be available even where one of the claims is not in terms based upon the contract, but it flows out of and is directly connected with it. The Company's claim against Mr Siah, though not based upon contract, alleges that Mr Siah was negligent in performing the services that the contract required him to perform. As such, D Galambos & Son Pty Ltd v McIntyre might suggest that classical equitable set off is available in the present case.
However, it is ultimately unnecessary to decide whether the impeachment test (or the alternative test for equitable set off) can be satisfied in the present case. Regardless of whether either of those tests can be satisfied, classical equitable set off is not available in light of the unclean hands maxim. It is clear that from the time Mr Wong relieved Mr Siah of his duties as project manager and site supervisor that he was the only director in control of the Company, and in that role the only person in control of the Company. From that point in time, the Company acted solely through Mr Wong. To seek equitable relief a party must not himself be guilty of tainted relevant conduct, that is, he who seeks equity must do equity.[502] After Mr Wong took over the role of engaging subcontractors he engaged some contractors to rectify defective work (or engaged Mr Tan's company to do so) that should have been rectified by and at the cost of the subcontractors who had carried out the defective work. For the reasons that I have summarised in 5.3, by failing to recall those subcontractors to rectify the particular defective work, Mr Wong caused the Company to incur additional expenses which I have calculated as an amount no less than $17,755.
[502] CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1 [257] (Callinan & Heydon JJ).
As both Mr Siah and Mr Wong caused the Company loss, in that both incurred additional expenses to be paid by the Company which should not have otherwise been paid had they competently carried out their duties, and as both Mr Siah in his individual capacity and Mr Wong through his family companies are the only shareholders of the Company, I am of the opinion that the Company should be denied relief.
However, for the reasons that follow in 9.0, I am of the opinion that the additional costs incurred in constructing the two projects, incurred because of the conduct of Mr Siah and Mr Wong, should be accounted for as construction costs of each of the projects when taking an account to value the shares of the Company.
9.0 Disposition of plaintiff's oppression claim and defendants' counterclaims
9.1 The plaintiff's oppression claim
For the reasons that I have given in 4.12.1 and 4.12.2, the following declarations should be made:
(a)A declaration that the appointment of Guat See Ooi and Cheng Kee Tan as directors of the Company on 24 October 2015 is invalid, and is set aside.
(b)A declaration that the resolution purporting to increase the share capital of the Company by 55,000 shares on 5 December 2016 is invalid, and is set aside.[503]
[503] The effect of this declaration when made will be that Mr Siah's shareholding in the Company should be restored to 45%.
For the reasons I have given generally:
(a)an order should be made that Mr Siah be paid his outstanding project management fees for the Bentley Project and Cloverdale Project to be assessed as 85% of $110,000 for the Bentley Project, and 50% of the amount of $120,000, less the amounts paid to Mr Siah as project management fees, including any amounts paid to the Han Jie Firstland partnership on his behalf from fees owed to him;
(b)an order should be made that an account should be taken or/and an expert appointed to investigate the relevant transactions, income, expenses and expenditure on construction works arising from the Bentley Project, the Cloverdale Project, the Ocean Reef Project, the project entered into with Mr Wong's sister‑in‑law and any other project undertaken by the Company for the purpose of valuing the shares of the Company as if the oppression had not taken place, including:
(i)to investigate the accounts of the Company; and
(ii)to assess whether particular transactions referred to in these reasons were expenses properly claimed or were made at arm's length; and
(c)an order should be made that Firstland Investments and Firstland purchase Mr Siah's shares in the Company.
In assessing the relevant transactions, expenses and expenditure of the Bentley Project and the Cloverdale Project: (a) as I have only found that the Company has proved that it has suffered loss and damage in the amount of $7,436.80 for the cost of rectification work or for additional costs of work performed out of sequence that was caused by a breach of duty owed to the Company by Mr Siah, which when regard is properly had to the scale of these projects I have found to be minor breaches of duty; and (b) because I have found that because Mr Wong did not take steps to require subcontractors to rectify some work or seek to recovery of the cost of such work and the total cost of that work is at least $17,755. I am of the opinion that in assessing the total construction costs for both of these projects for the purposes of valuing the shares of the Company that the cost of rectification work and additional works for all of these items (including the items that Mr Wong should have required the subcontractors to rectify at their cost) should be treated in the valuation as construction costs incurred by the Company.
9.2 The defendants' counterclaims
For the reasons I have given, each of the counterclaims should be dismissed.
9.3 Further orders
I will hear the parties further as to whom the orders in favour of Mr Siah should be made against, including orders as to costs, and whether any additional orders should be made to reflect these reasons for decision.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
VV
Associate to the Honourable Justice Smith
29 JANUARY 2021
184
25
0