Yang v Zhang

Case [2022] FCA 697

FEDERAL COURT OF AUSTRALIA

Yang v Zhang [2022] FCA 697  

File number(s): QUD 300 of 2021
Judgment of: DOWNES J
Date of judgment: 16 June 2022
Catchwords: CORPORATIONS – application for orders for declarations and rectification of ASIC and company register – where first defendant lodged documents with ASIC to change company details of directors and shareholdings – whether changes were made with prior agreement of plaintiff – consideration of form of relief which should be granted – whether appropriate to order that register be created by company if it does not have one – application granted
Legislation: Corporations Act 2001 (Cth) ss 168, 169, 175, 1070A(1)(b)(i), 1322
Cases cited:

Day, in the matter of A Bliss Clinic Pty Limited v Goodwin (No 2) [2020] FCA 869

Golden Gate Petroleum Ltd (ABN 090 074 785), in the matter of Golden Gate Petroleum Ltd (ABN 090 074 785) (2010) 77 ACSR 17; [2010] FCA 40

Grant v John Grant and Sons Proprietary Limited [1950] HCA 54; (1950) 82 CLR 1

In the matter of Centura Global Holdings Pty Ltd (2016) 111 ACSR 185; [2016] NSWSC 62

In the matter of Hillsea Pty Ltd [2017] NSWSC 1870

Taylor v Goldana Investments Pty Ltd (No 2) (2015) 236 FCR 298; [2015] FCA 947
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 88
Date of last submissions: 4 May 2022
Date of hearing: 19 April 2022
Counsel for the Plaintiff: Mr S Hogg
Solicitor for the Plaintiff: Hickey Lawyers
Counsel for the First Defendant: Mr JP Hastie
Solicitor for the First Defendant: HTW Legal Group
Counsel for the Second Defendant: The Second Defendant did not appear

ORDERS

QUD 300 of 2021
BETWEEN:

HUARUI YANG

Plaintiff
AND:

EDWARD YE ZHANG

First Defendant

AUS-CHINA INTERNATIONAL PTY LTD ACN 103 263 350

Second Defendant

ORDER MADE BY:

DOWNES J

DATE OF ORDER:

16 JUNE 2022

THE COURT DECLARES THAT:

1.The plaintiff has held 150 fully paid shares in the second defendant since 22 January 2007.

2.The plaintiff has been a director of the second defendant since 22 January 2007.

THE COURT ORDERS THAT:

1.The interlocutory application which was accepted for filing on 13 April 2022 is dismissed.

2.If the second defendant does not have a register of members within the meaning of s 168(1) of the Corporations Act 2001 (Cth), then the second defendant shall forthwith set up such a register and record in that register that Huarui Yang has held 150 shares in the second defendant since 22 January 2007.

3.If the second defendant does have a register of members within the meaning of s 168(1) of the Corporations Act 2001 (Cth), then the second defendant shall correct its register so that it records that Huarui Yang has held 150 shares in the second defendant since 22 January 2007.

4.Pursuant to s 1322(4)(b) Corporations Act 2001 (Cth), the Australian Securities and Investments Commission is directed to rectify its registers by amending…

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AGLC
Yang v Zhang [2022] FCA 697
Case
[2022] FCA 697
Decision Date

CaseChat Overview and Summary

The matter of Yang v Zhang was heard in the Federal Court of Australia, where the plaintiff, Huarui Yang, sought declarations and rectification of the Australian Securities and Investments Commission (ASIC) and company register. The dispute arose from the first defendant lodging documents with ASIC that changed the company's details regarding directors and shareholdings, without the plaintiff's prior agreement. The plaintiff argued that the changes were made without his consent and sought rectification of the company's register and ASIC records to reflect his position as a shareholder and director since 22 January 2007.

The court was required to determine whether the changes to the company's details were made with the plaintiff's prior agreement, and if not, what form of relief should be granted. The court considered the evidence provided by the parties, including the invitation sent by Mr Zhang to Mr Yang to become a shareholder and director of the company, and the meeting held on 14 February 2007. The court found that the plaintiff had agreed to become a shareholder and director of the company and that the changes to the company's details were made without his consent. The court also considered whether it was appropriate to order the company to create a register if it did not already have one.

The court granted the plaintiff's application and ordered the second defendant to set up or correct its register to reflect the plaintiff's shareholding and directorship since 22 January 2007. The court also directed ASIC to rectify its registers to reflect the correct shareholding and directorship details. The court noted that there would be further submissions on the issue of costs, limited to 3 pages, and that the issue of costs would be determined on the papers. The orders were made pursuant to the Corporations Act 2001 (Cth) and the Federal Court Rules 2011.

Orders

Orders of the court

1. The interlocutory application which was accepted for filing on 13 April 2022 is dismissed.

2. If the second defendant does not have a register of members within the meaning of s 168(1) of the Corporations Act 2001 (Cth), then the second defendant shall forthwith set up such a register and record in that register that Huarui Yang has held 150 shares in the second defendant since 22 January 2007.

3. If the second defendant does have a register of members within the meaning of s 168(1) of the Corporations Act 2001 (Cth), then the second defendant shall correct its register so that it records that Huarui Yang has held 150 shares in the second defendant since 22 January 2007.

4. Pursuant to s 1322(4)(b) Corporations Act 2001 (Cth), the Australian Securities and Investments Commission is directed to rectify its registers by amending the Form 484 Change to company details lodged on 14 December 2017 (Document 7E9746487) to record Huarui Yang as being a director of Aus-China International Pty Ltd ACN 103 263 350 with a share and member holding of 150 ordinary shares in Aus-China International Pty Ltd ACN 103 263 350 since 22 January 2007 and to record Edward Zhang as increasing his shareholding by 250 shares and not 400 shares as was recorded in Document 7E9746487.

5. There be liberty to the plaintiff and to the Australian Securities and Investments Commission to apply as to matters relating to giving effect to Order 4.

6. By 4.00 pm on 24 June 2022, the parties file and serve any further submissions as to the appropriate costs order which should be made (limited to 3 pages) accompanied by any affidavit which is relevant to the issue of costs only.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

As the parties have already made submissions as to costs, they will be directed to make any further submissions as to costs, limited to 3 pages, and the issue of costs will be determined on the papers.RELEVANT FACTS Prior to 22 January 2007, the shareholders and directors of the Company were Mr Zhang and members of his family.Invitation by Mr Zhang On 17 January 2007, Mr Zhang sent an invitation to certain people, including Mr Yang, to become shareholders and directors of the Company in order to raise funds to complete the purchase of the land. The invitation, which was signed by Mr Zhang, relevantly stated:I am writing to invite you to visit Perth from 10 February to 25 February 2007 to attend to the following matters: Due to the restructure of [the Company], you are to become a new shareholder and director. We will hold a meeting of the Board of Directors at 10.00am on 14 February 2007 to discuss related matters. Your presence at the meeting is essential. Before the meeting we will hold a number of discussions to prepare for the meeting. As agreed upon by the new shareholders and directors, [the Company] has offered to purchase [the land], which is block of about 37,000 square metres with an established three-bedroom house. The settlement date is 28 March 2007, we need you to come to finalise matters regarding financial arrangement and future development. You are also needed for other matters related to the restructured company. Please find attached the Agenda for the Meeting of Board of Directors, the Offer for purchasing the block and the List of New Shareholders and Directors.(emphasis added) An agenda which was attached to the invitation stated as follows:Time and Date: 10.00am 14 February 2007 (Wednesday) Venue: Unit 12, 5 Aberdeen Street, East Perth, Western Australia 6004Members of the Board of Directors Attending the Meeting: Dr Edward Ye Zhang (Chairman), Mr YAO Liang, YANG Huarui, Mr TANG Jian, Mr HE Qiang, Ms LI Hongyue (Secretary)10:00amCall to order by Dr Edward Ye Zhang 10:05am Quorum to be established: All five members of Board of Directors and Ms LI Hongyue (Secretary)10:15amAgenda to be approved10:20amChair Report by Dr Zhang 10:40am Discussion about settlement of [the land]11:00am Discussion about application for development of [the land] 11:20am Discussion about establishment of Auschina Travel Pty Ltd 12:00noonLunch 2:00pmTreasurer Nomination 2:20pmOther Matters 3:00pmResolutions4:00pmEnd of MeetingMeeting in 2007 Mr Yang, Mr Zhang and Mr Qiang He attended a meeting in Perth in early 2007. They each gave evidence at trial. Other attendees at the meeting included Mr Liang Yao and Mr Jian Tang but they did not give evidence, and there was no explanation for why they were not called. No party submitted that any inference should be drawn from these matters. By his second affidavit, Mr Zhang gave evidence about the meeting to the effect that:(a)Mr Yang, Mr Yao and Mr Tang said words to the effect that they were interested in being involved in purchasing the land for the purposes of developing it;(b)it was discussed, and “agreed”, by “each of us” that the Company would be used for the purchase and development of the land; and(c)it was discussed, and “agreed”, that Mr He would represent the Chinese investors, including Mr Yang, in relation to their involvement with the land and the Company.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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