- Aon Risk Services Australia Ltd v Australian National University

Supreme Court of NSW|2016-11-02|Before: Black J

ffs) M J Dawson (First, Third and Fourth Defendants)

Solicitors: Baron & Associates (Plaintiffs) Piper Alderman (First, Third and Fourth Defendants) File Number(s): 2016/139964

Judgment

By Originating Process filed on 6 May 2016, the First Plaintiff, Mr Jacob Henley, originally sought a declaration that he is the sole director of the Second Plaintiff, TVH Enterprise (Australia) Pty Ltd ("TVH") and an order that the Australian Securities and Investments Commission amend its registers to reflect that proposition. Although both Mr Henley and TVH were named as Plaintiffs in the proceedings, I will treat the Plaintiffs' case below as Mr Henley's case, since whether he had authority to bring it on behalf of TVH depends on the matters in issue in the proceedings. The First, Third and Fourth Defendants, Messrs Kong, Nguyen and Huang ("Relevant Defendants") contested Mr Henley's entitlement to relief. The Second Defendant, Mr Lieu, gave evidence in support of the other defendants in the proceedings but did not appear and did not actively seek to defend the proceedings. Mr Lieu's evidence on cross-examination was that he has had little or nothing to do with TVH's business and therefore has not taken steps to defend the case (T89-90).

Affidavit evidence

The Plaintiffs (or, more particularly, Mr Henley) rely on affidavits of Mr Henley dated 5 and 6 May 2016 and 2 November 2016. In his first affidavit dated 5 May 2016, Mr Henley refers to the opening of gyms under his control through the Henley Group of companies, in several locations in Queensland and New South Wales. Mr Henley also refers to Mr Nguyen's role in providing accounting services to the Henley Group of companies between 2010 and November 2015. Mr Henley refers to the circumstances in which TVH was incorporated to operate a gym in Kensington and Mr Nguyen acquired an interest in it and gives evidence as to TVH's activities in respect of the gym, and also refers to TVH's involvement with aspects of another gym business in George Street, Sydney. By his second affidavit dated 6 May 2016, Mr Henley gives evidence that he had not observed Mr Nguyen to have had involvement in TVH's management of the Sydney CBD and Kensington gyms since November 2012 and that Messrs Kong, Lieu and Huang were not involved in TVH's management of the Sydney CBD and Kensington gyms at any stage. By his further affidavit dated 2 November 2016, Mr Henley responded to Mr Nguyen's affidavit dated 10 August 2016 and also responded to Mr Huang's affidavit dated 1 November 2016.
Mr Dawson, who appears for the Relevant Defendants, submits that Mr Henley's evidence was unsatisfactory and the evidence of other witnesses or of documents should be preferred. There are matters that give rise to concern as to aspects of Mr Henley's evidence. Although his affidavit evidence was that he disputed Mr Huang's shareholding in TVH (Henley 5.5.16 [10]), he accepted in cross-examination that Mr Huang had acquired a third of the shares in each of the companies in the Henley Group in exchange for an investment by him and associates of about $2 million in the Henley Group and that his affidavit evidence disputing that Mr Huang was a shareholder of companies in the Henley Group was incorrect (T30). That was a major reversal of his evidence as to a significant matter, which is not readily explicable by error in Mr Henley's affidavit evidence. Mr Henley's affidavit evidence was also that he had not resigned or been removed as a director of TVH and had continued as a director of TVH from August 2012 to the present (Henley 5.5.16 [29]); however, he accepted in cross-examination that he had "retired" as a director of TVH in June 2014 when Mr Huang and his associates had invested in the Henley group of companies (T31). Those positions were at least in tension. Mr Henley also took contradictory positions in cross-examination as to whether his companies were in breach of a lease of gym premises from Mr Huang's mother (T32, 36). I consider that Mr Henley's evidence should be approached with considerable caution.
Mr Henley also relies on two affidavits of Ms MacDonald dated 5 and 6 May 2016. Ms MacDonald's affidavit dated 5 May 2016 referred to a conversation between her and Mr Nguyen in around early November 2015 relating to a suggested transfer of Mr Henley's shares in TVH to Mr Nguyen. Mr Nguyen denied the conversations with Ms MacDonald set out in her affidavit, without seeking to provide any alternative account of those conversations. Ms MacDonald was not available for cross-examination and it is not necessary to address that evidence further, where the state of the shareholdings in TVH was not in issue in the proceeding. Mr Dawson submits, and I accept, that no inference should be drawn in favour of either party from the fact that Ms MacDonald was not available for cross-examination, in circumstances of illness.
The Relevant Defendants rely on affidavits of Mr Nguyen dated 10 August 2016 and 28 September 2016. Mr Nguyen's affidavit dated 10 August 2016 dealt with a range of matters and aspects of that evidence was not read, on the basis that they were not relevant to the issues in these proceedings. Mr Nguyen refers to a loan of $61,600 made by Mr Huang, inter alia to TVH, on the terms of a loan agreement dated 24 April 2015 and to other loans made by Mr Huang to the Snap Fitness Clubs or other entities comprising the Henley Group, and to a loan made by Mr Huang's mother, who is (as I noted above) the proprietor of the premises from which the Snap Fitness Club at Waterloo is operated, to TVH and others also by a loan agreement dated 24 April 2015. Mr Nguyen also refers to several other loans made by other persons to TVH and others. Mr Nguyen also refers to Mr Huang's wish to exit his investment in the Henley Group, to an agreement reached in mid-2015 for Mr Huang to sell his interest in the Snap Fitness Clubs and other entities comprising the Henley Group to Messrs Henley and Nguyen and interests associated with them, and his evidence is that the relevant share sales have not completed and loans made by Mr Huang and persons associated with him have not been repaid. Mr Nguyen also deals with events surrounding a contested meeting of shareholders of TVH in February 2016 which I will address below. By his affidavit dated 28 September 2016, Mr Nguyen attached a copy of what was said to be a complete notice of the meeting of shareholders to be held on 2 February 2016 and gave evidence that the copy of that notice attached to his earlier affidavit was incomplete.
The Relevant Defendants also rely on affidavits of Mr Huang dated 10 August 2016, 28 September 2016 and 1 November 2016. Mr Huang's affidavit dated 10 August 2016 was lengthy and also canvassed matters beyond those in issue in these proceedings and some parts of that affidavit were not read. Mr Huang refers to a meeting with Mr Henley and Mr Nguyen in early 2014 in which he was offered a one-third interest in the gyms and associated businesses and agreed to provide funds to the Henley Group on that basis. He refers to having been granted that one-third interest in several businesses in June 2014 and to his loans to TVH and other entities, in evidence that takes substantially the same form as Mr Nguyen's evidence as to that matter. He also refers to his seeking to exit the Snap Fitness business, on the basis that loans made by him and persons associated with him had not been repaid, in March 2015 and to further steps taken to seek to implement that exit. Mr Huang also deals with events surrounding the contested meeting of shareholders which I will address below. By his further affidavit dated 1 November 2016, Mr Huang annexed an invoice recording calls on his mobile phone, and gave evidence of a telephone call to Mr Henley on 11 January 2016, in which he claims to have advised Mr Henley that he had sent Mr Henley a notice of the shareholders' meeting for TVH and that his intention was to "take back" control of TVH.
I also approach the evidence of Messrs Huang and Nguyen with caution. Their hostility to Mr Henley was evident in their cross-examination, and there were aspects in which their evidence was argumentative and other aspects in which their evidence was imprecise. Mr Huang was also plainly reluctant to disclose the identity of the person who he claimed had advised him of the likely ineffectiveness of a circular resolution passed by some of the shareholders of TVH on 8 January 2016. I recognise that, in matters where parties feel aggrieved by their dealings with each other, there is a risk that evidence may be consciously or unconsciously affected by their sense of the rightness of their cause.
The Relevant Defendants also rely on affidavits of Mr Kong dated 20 September 2016 and 1 November 2016 and Mr Lieu dated 26 September 2016. I will refer to their evidence in dealing with the shareholders' meeting of TVH on 2 February 2016 below. Messrs Kong and Lieu are plainly associates of, and in a common cause with, Messrs Huang and Nguyen, although Mr Lieu had a limited involvement in TVH as I noted above, and I also consider their evidence should be approached with caution. I give significant weight to documentary evidence, and the objective probabilities, to the extent that they assist in resolving the disputed issues of fact.
The Relevant Defendants also rely on an affidavit of Mr Cho dated 31 October 2016. Mr Cho was a credible witness, although his involvement in events was limited. I will refer further to his evidence below. The Relevant Defendants rely on an affidavit of Mr Son dated 10 August 2016. Mr Son, who is a solicitor who acted for Mr Huang and others, gave evidence of steps which had previously been taken to seek to enforce loan agreements against, inter alia, TVH. However, Mr Son did not address the question whether he had given advice as to the invalidity of a circulating resolution to Mr Huang on 8 January 2016, an important matter which I will address below.

Chronology of events and several peripheral matters

TVH was incorporated on or about 24 May 2012 (Henley 5.5.16 [18]). By his Points of Claim, Mr Henley contends that, on or about 6 August 2012, TVH's initial sole director and sole member, Mr Tin Van Huynh, ceased to be a director and member of TVH and Messrs Henley and Nguyen were appointed as directors of TVH and Messrs Henley and Nguyen became members of TVH. The Relevant Defendants admitted by their Points of Defence, that Mr Henley had been a member of TVH since 1 January 2016 and holds 40 ordinary shares, beneficially, in TVH. It appears to be common ground that, in August 2012, Mr Henley and Mr Nguyen entered some form of business relationship in relation to the "Snap Fitness" gym business (Henley 5.5.16 [17]-[18]; T30). On or about 2 August 2012, Messrs Henley and Nguyen were appointed directors of TVH and obtained equal shareholdings in TVH (Henley 5.5.16, [10], [18]; T30].
By his Points of Claim, Mr Henley also pleads that TVH had not adopted a constitution under s 136 of the Corporations Act and its internal management is governed by the replaceable rules applicable under ss 134-135 of the Corporations Act. Mr Henley's position is that a document headed "Constitution of TVH Enterprise (Australia) Pty Ltd" (Huang 10.8.16, Ex D2, Tab 2) was not adopted when TVH was incorporated or by subsequent special resolution. Mr Henley relies on the replaceable rules which relevantly provide that a director may be appointed by resolution of members passed in general meeting, under s 201G of the Corporations Act, and a director may be removed by resolution of members of a proprietary company under s 203C of the Corporations Act. Mr Dawson accepted that, although there is evidence directed to whether TVH adopted a constitution, nothing turns on the point and it need not be determined in the proceedings. There is no suggestion that anything turns on whether TVH's constitution or the replaceable rules apply and I need not determine that question.
In June 2014, Mr Huang and persons associated with him advanced approximately $2 million to the Henley Group of companies (Nguyen 10.8.16 [26]; Huang 10.10.16 [18]; T30). The Relevant Defendants submit that the Court should find that Mr Huang was a member of TVH on and from June 2014. It is not necessary to reach that finding, where Mr Henley contests that matter in affidavit evidence, although he appears to have accepted it in cross-examination, as I noted above, and the Plaintiffs have neither sought to establish the contrary in these proceedings nor sought to challenge the notice of meeting dated 8 January 2016 given by Mr Huang on the basis that he was not a shareholder and was not entitled to issue it. Whether the Plaintiffs would subsequently be entitled to raise such a contest as to Mr Huang's shareholding in TVH in other proceedings, where the Plaintiffs had the opportunity to and did not raise it in these proceedings, is a matter to be addressed in those other proceedings.
An issue was also raised by the Relevant Defendants as to whether Mr Henley ceased to hold office as a director of TVH in June 2014. By their Points of Defence, the Relevant Defendants contend that Mr Henley was a director of TVH from 2 August 2012 to 25 June 2014, reflecting the suggestion that he ceased to hold office at that time.
An issue was also raised as to whether Mr Henley resigned as a director of TVH in June 2014. In his affidavit evidence, Mr Henley denied that he ceased to hold office in TVH in June 2014 or at all and stated that "I have never resigned from [TVH]" (Henley 5.5.16 [8]). However, Mr Henley's evidence in cross-examination was that he "retired" as a director of TVH when Mr Huang invested in TVH in 2014 (T31). Mr Neggo submits that there is no reason that Mr Henley's affidavit evidence should not be accepted. I do not accept that submission, since it seems to me highly unlikely that Mr Henley was drawing a subtle distinction in cross-examination, accepting that he had "retired" as a director but not accepting that he had ceased to hold office as a director. It seems to me that Mr Henley abandoned the position taken in his affidavit in cross-examination, and in fact accepted that he had ceased to hold office in TVH at that time. There is some other evidence to support that proposition, including notification of his resignation to the Australian Securities and Investments Commission in June 2014 and the later execution of loan and sale of share agreements (to which I refer below) by Mr Nguyen who there stated that he was sole director of TVH, in circumstances that Mr Henley executed other documents on behalf of other companies.
Mr Dawson submits that the Court should find that Mr Henley resigned as a director of TVH in June 2014. Mr Neggo submits that the resignation of a director requires formal steps to be taken, including the giving of a written notice of resignation under s 203A of the Corporations Act and that no such steps were taken in that case. It is not necessary to determine the question whether Mr Henley resigned as director of TVH in June 2014 since that question cannot have any effect on the outcome of the proceedings or the orders to be made in them, where the Relevant Defendants admit, by their Points of Defence, that Mr Henley was reappointed as a director in November 2015 and nothing appears to turn on the interim period.
Several documents executed by TVH in April and May 2015 provide some support for the proposition that Mr Henley had ceased to hold office as a director of TVH in June 2014, if it were necessary to determine that question. In April 2015, Mr Huang and persons associated with him as lenders and companies in the Henley Group including TVH as borrowers, and Mr Henley as guarantor, entered into several loan agreements confirming the earlier loans and the time for repayment (Huang 10.8.16 [36]; T36-37). The loan agreements dated 24 April 2015 between, inter alia, TVH as borrower on the one hand and Messrs Chen, Ying and Wang and Ms Xu were signed by Mr Henley on behalf of some companies within the Henley Group, but by Mr Nguyen as sole director of TVH. A Sale of Shares Agreement between Mr Huang, Mr Nguyen and TVH dated 29 May 2015, which provided for the sale of 40 shares in TVH from Mr Huang to Mr Nguyen was signed by Mr Nguyen as director of TVH. By contrast, Sale of Shares Agreements between Mr Huang and Messrs Henley and Nguyen in respect of The Henley Group Pty Ltd, The Henley Group Redlight Investments Pty Limited and Yelneh Industries Pty Limited were signed by both Messrs Nguyen and Henley on behalf of those entities. By letter dated 5 June 2015, solicitors acting for Mr Huang and others wrote to The Henley Group Pty Limited advising that settlement of the share sales must occur on 9 June 2015. It appears that settlement did not occur.
The Kensington gym owned by TVH was sold to a third party in late 2015, with two instalments of the purchase price remaining due in the second half of 2016. On 11 September 2015, TVH entered into a management agreement with the purchaser of its Kensington gym which was signed by Mr Nguyen on behalf of TVH. Mr Henley's evidence is that TVH has managed the business on behalf of the purchaser since the sale, and that he has overseen the responsibilities of TVH under the management agreement since that time.
A further issue arose as to whether Messrs Kong and Lieu were appointed as directors of TVH in October 2015. The Relevant Defendants initially contended (and Mr Henley denied) that Messrs Kong and Lieu were appointed as directors of TVH on 2 October 2015 (Points of Defence [15]) but did not press that contention (T13). Mr Henley makes submissions as to why that contention should be rejected. I need not address those submissions where that contention was not pressed by the Relevant Defendants.
Between 16 November 2015 and 20 November 2016, a further meeting of directors of TVH purportedly occurred at which Mr Nguyen resigned as a director of TVH and Mr Henley was appointed in his place. There seems to be no contest as to the appointment of Mr Henley as a director at that time. The Relevant Defendants admitted in their Points of Defence that Mr Henley was a director of TVH from 16 November 2015 to 2 February 2016 although they sought to amend their Defence in a manner that would have required leave to withdraw that admission in part, in circumstances to which I will refer below. The starting date of that period reflects an acceptance that Mr Henley was reappointed as a director at that time. There is a degree of contest as to whether Mr Nguyen resigned as a director of TVH at that time. Mr Henley contends (Points of Claim [13]-[14]) that Mr Nguyen resigned as a director of TVH at that time and that Mr Henley was thereafter TVH's sole director and, in his first affidavit, Mr Henley refers to the circumstances of that resignation. There is other evidence suggesting that Mr Nguyen in fact signed resignation documents for several companies, including TVH, on that date, because he later emailed Ms MacDonald seeking confirmation that there had been no changes to directorships and that "any resignation documents that were signed last week were destroyed as they are incorrect" and seeking confirmation that the Henley Group had no immediate plans to change any directorships in the foreseeable future. Mr Henley's case is also that TVH's board accepted that resignation by minutes of the board signed by Mr Nguyen on the same day, and that position was subsequently notified to the Australian Securities and Investments Commission.
The Relevant Defendants deny that Mr Nguyen resigned as a director of TVH on 16 November 2015, on several grounds. Mr Dawson initially submitted, and I accept, that it is not necessary to determine whether Mr Nguyen's removal or Mr Henley's appointment as a director in November 2016 were valid. Mr Dawson subsequently, and inconsistently, submitted that, although the Relevant Defendants had not put the matter in issue, the Court could not be satisfied that Mr Nguyen's letter of resignation was delivered to TVH in accordance with the requirements of s 203A of the Corporations Act or that a meeting of directors took place so as to bring about Mr Henley's appointment as a director in November 2015. I do not consider that I should reach findings as to contested factual matters that are not necessary to decide in the proceedings. It also seems to me that a determination of the matter, on the basis that Mr Henley had not been appointed a director of TVH in November 2015, where the Relevant Defendants had not put that matter in issue, would deprive him of procedural fairness.

Whether notice was given of a shareholders' meeting on 2 February 2016

Another issue arose, which it is necessary to determine, as to whether Messrs Nguyen and Huang were validly appointed as directors of TVH and Mr Henley was removed as a director of TVH at a general meeting of TVH on 2 February 2016. Mr Henley contends that, since Mr Nguyen's resignation, there has been no valid or effective general meeting of members of TVH to appoint Messrs Nguyen and Huang as directors of TVH and, since Mr Nguyen's resignation, there has also been no valid or effective general meeting of members of TVH to remove Mr Henley as a director of TVH. This issue depended both on whether notice of the meeting was given and on whether the meeting was held.
Mr Henley's position is that, if the meeting of 2 February 2016 occurred, it was not properly convened and it was not valid or effective to appoint Messrs Huang and Nguyen as directors or to remove Mr Henley as a director. Mr Henley submits that, because he is a member of TVH, he was entitled to receive notice of a meeting of members of TVH under s 249J of the Corporations Act and to vote on any resolution of members to appoint another person as a director or to remove him as a director and that he did not receive such notice.
Messrs Huang and Nguyen gave evidence that a circulating resolution was sent early in the afternoon of 8 January 2016, by a solicitor acting for Messrs Huang and Nguyen, which purported to appoint Messrs Huang and Nguyen as directors of TVH and to remove Mr Henley as director and secretary of TVH with immediate effect (Huang 10.8.16 [66]; T47). That resolution could not, of course, take effect under s 249A of the Corporations Act unless Mr Henley also voted in its favour. By email dated 11 January 2016, Mr Henley advised Messrs Huang's and Nguyen's solicitor that the circulating resolutions were "invalid for a number of reasons" and foreshadowed that his solicitors would correspond with the Messrs Huang's and Nguyen's solicitor to set out the basis of that invalidity.
The Relevant Defendants contend that Mr Huang also, on that date, gave a further notice of a general meeting of shareholders which was then held on 2 February 2016. That account of events obviously raises a question why, after the Messrs Huang's and Nguyen's solicitor had sent a circular resolution of members of TVH to Mr Henley for signature on 8 January 2016, Mr Huang would then, on the same date, give a further notice of a meeting of shareholders. Mr Huang explained that course in cross-examination on the basis that he received advice that afternoon that the circulating resolution would not be effective without agreement from all members (T54), which was plainly unlikely if Mr Henley did not wish to be removed as a director of TVH. Mr Huang only disclosed the source of that advice with apparent reluctance, in cross-examination, and identified Mr Son as having given that advice. Mr Son did not address the question whether he had given that advice in his affidavit evidence in the proceedings. In these circumstances, it may be open to the Court to draw an inference that Mr Son's evidence as to that matter would not have assisted the Relevant Defendants' case and that it should be less ready to draw the inference that that advice explains why a circulating resolution and a notice of meeting were sent on the same day: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419; Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361. I do not draw that inference, because it is not necessary to do so where it would not have been sufficient to displace the result that I reach on other grounds.
Mr Huang's evidence was that he prepared and signed the notice of meeting of shareholders dated 8 January 2016 that afternoon (Huang 10.8.16 [71]-[73]; T50). That notice of meeting was signed by Mr Huang as shareholder and provided for the election of Messrs Huang and Nguyen as directors, the election of Mr Nguyen as company secretary, and the removal of Mr Henley as director and company secretary, and for the transaction of any other business brought forward in conformity with TVH's constitution. It appears that the first version of the notice of meeting exhibited to Mr Huang's affidavit (Ex D2, Tab 39) omitted the annexure to that notice, which set out the matters to be dealt with at that meeting. A complete copy of that notice had previously been exhibited in an affidavit sworn by Mr Nguyen in other proceedings, and I did not understand Mr Henley ultimately to contend that there was any issue as to the completeness of the notice, or to press the point raised in the Points of Claim, that the notice did not state the general nature of the business to be dealt with at the meeting, so as to comply with s 249L of the Corporations Act.
Mr Huang's evidence is that he gave that notice of meeting to Mr Kong who gave it to Mr Cho to be posted to Mr Henley (Huang 10.8.16 [72]-[75]). Mr Huang's evidence is that he also placed copies of the notice of that shareholders' meeting in the letterbox of premises at Alexandria which he understood Mr Henley then to own or occupy and under the front door of the Kensington gym and that Mr Henley was not in attendance when that occurred (Huang 10.8.16 [76]; T54). Messrs Kong and Nguyen gave evidence that Mr Huang also provided copies of the notices to them, in person, on that day, although Mr Kong was not then a shareholder in TVH, but purportedly a director of it.
By a further affidavit dated 1 November 2016, Mr Kong gave evidence that Mr Huang handed him a sealed and stamped envelope, addressed to Mr Henley, and that Mr Kong gave instructions to Mr Cho to post that envelope in a post office box. By his affidavit dated 31 October 2016, Mr Cho gave evidence that he was handed an envelope on the afternoon of 8 January 2016, which he posted on that date. It seemed to me, having regard to Mr Cho's cross-examination, that he did have a recollection of posting mail on that date, since there were other reasons why he remembered the events of that date, but, not surprisingly, he had no particular knowledge whether an envelope addressed to Mr Henley at a particular address was one of the letters that he posted on that date, although the form of his affidavit which had been prepared by solicitors acting for the Relevant Defendants might have suggested to the contrary. Mr Neggo submits that Mr Cho's evidence is unreliable (T99-100). I accept that Mr Cho's evidence does not establish that he posted the particular letter addressed to Mr Henley as distinct from the fact that he posted the letters he was given that day. However, unless I disbelieved the evidence of Messrs Huang and Kong, it establishes that Mr Cho was given the notice of the meeting in an envelope addressed to Mr Henley for posting, and I accept Mr Cho's evidence that he posted the letters that he was given for posting on that day.
Ultimately, this issue depends on questions of credit. Mr Huang gives evidence that he prepared a notice of the meeting addressed to Mr Henley; Mr Kong gives evidence that he passed an envelope containing that notice of meeting to Mr Cho for posting; Mr Cho gives evidence of attending to posting of the letters that had been given to him on that day, although, as I noted above, he cannot identify the envelope addressed to Mr Henley as one of those letters; and each of the Relevant Defendants gives evidence that he received notice of the meeting, although only Messrs Huang and Nguyen were recorded as shareholders in addition to Mr Henley. Although I have recognised the need for a degree of caution in accepting Messrs Huang's and Kong's evidence, I do not think that sufficient basis exists to reject their evidence as to these matters.
Mr Nguyen's evidence was that, on or about 8 January 2016, he was given notice of a meeting of TVH's members to take place on 2 February 2016. By affidavit dated 20 September 2016, Mr Kong also gives evidence of having been provided by Mr Huang, on 8 January 2016, with notice of the meeting of TVH's members scheduled to take place on 2 February 2016. Mr Neggo submits that there is "real doubt" that notices were given to the Relevant Defendants and Mr Lieu on 8 January 2016, where each of the Defendants was relatively vague in their evidence as to how that notice was given to them. It was not necessary for such notice to be given to anyone other than the other shareholders, Mr Nguyen and Mr Henley, and a lack of precision in evidence, after the passage of nearly ten months, is not necessarily indicative of dishonesty on the part of the Relevant Defendants or Mr Lieu, each of whom maintain that they were given the notice in the evening and in the city central business district. I also do not think that sufficient basis exists to reject this evidence.
On the other hand, by his third affidavit, Mr Henley denied receiving notice of the shareholders' meeting as to his removal as a director, either at the address of the offices of the Henley Group at Surry Hills or at the address in Alexandria or at the gym operated by TVH in Kensington. I have pointed to the difficulties with Mr Henley's evidence above. Ms MacDonald's evidence, by her affidavit dated 2 November 2016, is that, in January and February 2016, she had given instructions to the receptionist at the Henley Group's Surry Hills address to collect mail from the letterbox each day and deliver it to her unopened and that occurred (MacDonald 2.11.16 [7]) and she also instructed that receptionist to deliver mail delivered to those premises by the operations manager and club managers (including the manager of the Kensington gym) to her and that mail was also delivered to her unopened (MacDonald 2.11.16 [8]). Ms MacDonald also gives evidence that she had given instructions to the operations manager who oversaw club managers, including for the Kensington gym, to deliver all mail received at that address to her and that mail was delivered weekly and handed to the receptionist and then to Ms MacDonald (MacDonald 2.11.16 [14]-[15]). Ms MacDonald gives evidence as to her practice for review of that mail and her evidence is that she did not receive a notice of meeting for the shareholders' meeting on 8 February 2016 and would have brought it to Mr Henley's attention and discussed it with him had she received it (MacDonald 2.11.16 [13]).
As I noted above, Ms MacDonald was not available for cross-examination and was not cross-examined and I should accept her evidence as to these matters, so far as it goes. However, Ms MacDonald's evidence of a general practice for the delivery of mail, and of the fact that the general practice was generally complied with, does not establish that it was always complied with or not capable of failure; and, second, Ms MacDonald does not say that Mr Henley could not have or did not himself collect mail, whether directly from the receptionist or from the Surry Hills letterbox or from the Kensington gym, if he wished to do so. Ms MacDonald also does not give any evidence of any practice that mail delivered to the Alexandria premises would be brought to her rather than Mr Henley's attention. Mr Henley's evidence in cross-examination was not wholly consistent with Ms MacDonald's evidence, since he described a practice by which, he accepted, items of mail from the Kensington gym were delivered to him, without referring to any role of Ms MacDonald in that process (T29.30).
There seems to be no issue that, if notice of the meeting was in fact given on 8 January 2016, and was in fact delivered to Mr Henley, then the meeting was validly called under s 249F of the Corporations Act, which permits a holder of more than 5% of shares in TVH to call a meeting of members. However, Mr Neggo submits that the meeting was not properly convened, as provided by s 249J of the Corporations Act or at all. Mr Neggo submits, and I accept that there is no evidence that notice of the meeting was given to Mr Henley personally. Mr Neggo submits that there is also no evidence that the notice was sent to Mr Henley's address recorded in TVH's register, and indeed no evidence of what that address is. It seems to me that I can reasonably infer, in the absence of evidence to the contrary, that the address recorded for Mr Henley in TVH's register is likely to coincide with the address recorded, in respect of his shareholding interest in ASIC's records, which record that address as being the address of the Kensington gym. Mr Huang's evidence is that he put the notice under the door of the Kensington gym, but that would not amount to service by post to that address. Mr Dawson submits that s 249J(3) prescribes non-exclusive means of service of such a notice. Even if it did not, principles of informal service and s 1322 of the Corporations Act would apply if that notice in fact came to Mr Henley's attention.
Mr Neggo rightly accepts that proof of non-receipt of the letter by Mr Henley does not establish that delivery did not occur, that there is a presumption in favour of delivery under s 160 of the Evidence Act 1995 (NSW) and that the giving of the notice is deemed to have been effected unless the contrary is proved under s 29 of the Acts Interpretation Act 1901 (Cth). As Mr Neggo recognises, the fact of non-receipt of a document does not displace deemed delivery of the document, if delivery is not disproved: Deputy Commissioner of Taxation v Contract Synergies Administration Pty Ltd [2011] FCA 743; (2011) 282 ALR 713 at [7], [10]. In this case, as in Deputy Commissioner of Taxation v Contract Synergies Administration Pty Ltd above, there is no evidence that the notice addressed to the Surry Hills premises was returned by Australia Post as undelivered. Under s 160(1) of the Evidence Act, absent evidence raising doubt, a postal article sent by prepaid post addressed to a person at a specified address in Australia is presumed to be received at that address on the fourth working day after being posted and, under s 29(1) of the Acts Interpretation Act, service by post is deemed to be effected by properly addressing, prepaying and posting a document as a letter and, unless the contrary is proved, at the time at which the letter would be delivered in the ordinary course of post.
Mr Neggo submits that Mr Henley has adduced evidence sufficient to establish a cogent explanation that would discharge the onus of establishing that notice of the meeting was not delivered to him, using the language of Hall J in Tsoukatos v Mustafa [2007] NSWSC 614 at [40]. I am not satisfied of that matter. The difficulties with Mr Henley's evidence are such that I could not accept his evidence that he did not receive the letter, at least by post at the Surry Hills premises and by hand to the Kensington gym or the Alexandria premises, without corroboration, and Ms MacDonald's evidence does not exclude the possibility that the mailing system within the Henley Group failed to deliver a notice of shareholders' meeting that was in fact delivered to the letterbox at the Surry Hills premises or the Kensington gym to her, or that Mr Henley had received that notice when it was delivered to either of those addresses or the Alexandria address, to which Ms MacDonald had not referred. It does not seem to me that the presumptions which arise under s 29 of the Acts Interpretation Act and s 160 of the Evidence Act have been displaced.
Mr Neggo also submits that the presumption under s 160 of the Evidence Act could only give rise to a presumption of receipt on the fourth day after posting, and that at least 21 days' notice must be given of a meeting of members under s 249H(1) of the Corporations Act. Mr Neggo submits that, on that basis, no properly convened meeting could have occurred, based on the posting of the notice, until 4 February 2016, whereas the meeting is alleged to have taken place on 2 February 2016. Mr Dawson responds, and I accept that, s 249J(4) of the Corporations Act provides that, where notice of meeting is sent by post, it is taken to be given three days after it is posted, and that notice is therefore taken to be given on 11 January 2016, more than 21 days before the meeting was held on 2 February 2016.
Mr Neggo also submits that, if the meeting of 2 February 2016 occurred, the failure to give notice as required by s 249J of the Corporations Act for which Mr Henley contends would be an irregularity that caused substantial injustice, in that Mr Henley would be deprived of an opportunity to attend the meeting and speak against the motion, and it could not be assumed that he could not have persuaded the other shareholders to a different view. It is not necessary to address that submission, where the proposition that notice of the meeting was not delivered to Mr Henley has not been established, and it has not been established that the lateness of delivery for which Mr Neggo contends would cause substantial injustice to Mr Henley.
Mr Henley has therefore not established on the balance of probabilities (as he would need to do to support the declaration he seeks on this basis) that 21 days' notice of the meeting was not given to Mr Henley, albeit by post to the Surry Hills address and by hand to the Kensington gym. To the extent that notice was not given by one of the means specified in s 249J of the Corporations Act, or was slightly less than 21 days' notice as Mr Neggo contends, that is at most an irregularity that caused no injustice to Mr Henley and is validated under s 1322 of the Corporations Act without the need for a further order by the Court.

The meeting on 2 February 2016

The Relevant Defendants contend (Points of Defence [17]) that, on 2 February 2016, there was a meeting of TVH's members at which resolutions were passed appointing Messrs Nguyen and Huang as directors of TVH and removing Mr Henley as director of TVH. They rely on their affidavit evidence in that respect.
The minutes of meeting of shareholders dated 2 February 2016 recorded that Messrs Nguyen and Huang were present as shareholders and also stated that Messrs Kong and Lieu were present as "directors" and "officers"; that 40 votes were cast in favour of the appointment of Messrs Nguyen and Huang as directors; that there was a vote for removal of directors; and that a resolution was passed that Mr Henley be removed as a director, that Mr Nguyen be appointed as secretary and that Mr Henley be removed as secretary. The minutes recorded other business being transacted, with a resolution that Mr Henley was not to "enter any premises owned or operated by [TVH] and its associated entities", "access, control or manage any businesses of [TVH] and its associated entities", "access, control or manage any funds or money (cash or otherwise) of [TVH] and its associated entities", "speak or act on behalf of [TVH] and its associated entities", "engage in or enter into any agreements on behalf of [TVH] and its associated entities", and that Mr Henley was to "surrender all information, logins and passwords pertaining to the operation of all businesses of [TVH] and its associated entities".
Mr Nguyen's affidavit evidence is that he attended that shareholders' meeting, at offices in Spring Street Sydney, on 2 February 2016 and that Messrs Kong, Lieu and Huang also attended (although, I interpolate, Messrs Kong and Lieu were not shareholders in TVH) and that resolutions were passed appointing him and Mr Huang as directors of TVH and removing Mr Henley as a director of TVH.
In his affidavit dated 10 August 2016, Mr Huang also gave evidence of the meeting on 2 February 2016, in terms that were broadly similar to Mr Nguyen's evidence. As I noted above, by his further affidavit dated 1 November 2016, Mr Huang annexed an invoice recording calls on his mobile phone, and gave evidence of a telephone call to Mr Henley on 11 January 2016, in which he claims to have advised Mr Henley that he had sent Mr Henley a notice of the shareholders' meeting for TVH and that his intention was to "take back" control of TVH. Mr Huang was cross-examined about his use of the language "take back" control, as distinct from "take control". It seems to me that little turns on that and, in any event, there is some force in Mr Huang's response that he had control, or at least a degree of control, when he was an equal shareholder and when the parties were on better terms. In making that observation, I make no finding as to whether Mr Huang was in fact an equal shareholder in TVH, which is not in issue in the proceedings.
By his affidavit dated 20 September 2016, Mr Kong also gives evidence of attending that meeting and of the passage of resolutions for Mr Nguyen and Mr Huang's appointment as director and for Mr Henley's removal as a director, and Mr Lieu gave evidence, by affidavit dated 26 September 2016, to similar effect.
Mr Neggo squarely put to Mr Huang in cross-examination that a decision had been made by the Relevant Defendants, and perhaps by Mr Lieu, later in 2016 that they wanted Mr Henley out of the business and that Mr Huang had created backdated minutes of a meeting of members on 2 February 2016. That proposition was denied by Mr Huang (T61). Mr Neggo also squarely put to Mr Nguyen that no decision was made that Mr Henley be removed as a director until around May 2016 and Mr Nguyen rejected that proposition (T71). That proposition was, of course, inconsistent with the circulating resolution of 8 January 2016, as Mr Nguyen pointed out, and Mr Nguyen's evidence was that, because that would not succeed, the Relevant Defendants proceeded with notice for a meeting to remove Mr Henley (T71-72). Mr Kong also rejected the propositions, put to him in cross-examination, that the meeting on 2 February 2016 did not occur and that he had formed the view, closer to May 2016, that he wanted to remove Mr Henley as a director and the minutes were backdated (T81). These propositions emphasise the serious character of the finding that is sought against the Defendants.
Mr Neggo put to Mr Huang in cross-examination that he had not notified Mr Henley of the resolution excluding him from management of TVH passed on 2 February 2016 and his response was that "we had spoken", although Mr Huang also accepted that none of Messrs Kong, Nguyen, Lieu or him sought to attend the Kensington gym and advise Mr Henley that he had been removed as a director and could not work there any more (T60). Mr Nguyen's evidence in cross-examination was that he had tried to contact Mr Henley to advise him of the outcome of that meeting, but Mr Henley would not speak to him and that both he and Mr Huang had tried to contact Mr Henley to organise a meeting to resolve matters (T71). Mr Kong accepted in cross-examination that he personally did nothing to notify Mr Henley of the resolutions that were passed, or to remove him from his involvement in the Kensington gym business (T77), and he did not notify ASIC of the change of directorship until May 2016 (T81).
Mr Henley's evidence was that he first became aware that he was no longer recorded as a director of TVH on 3 May 2016, through his subscription to a website which alerts him to changes to ASIC records relating to certain companies (Henley 5.5.16 [7]). He denies that he resigned from office (in evidence limited by s 136 of the Evidence Act as submission only), or was present at any meeting of directors or members at which a resolution was moved for his removal from office (Henley 5.5.16 [8]).
Mr Neggo submits that the fact that the meeting did not occur is supported by some inconsistencies in the evidence given by Messrs Huang, Nguyen and Kong as to the time the meeting began and how long it continued. There were some inconsistencies in that respect, of a modest character, but I am not satisfied that those matters provide sufficient basis to reject the witnesses' evidence or find that the meeting did not occur at all. The existence of some inconsistency in evidence is consistent with honest evidence being given, and it would have been more disturbing if the witnesses had given identical accounts of the time at which the meeting commenced and how long it had lasted.
Mr Neggo also points to the other business of the meeting and submits, as appears to be the case, that those other resolutions were not communicated to Mr Henley. Mr Neggo also submits that it is "wholly implausible" that Mr Henley would have been left to manage TVH's affairs until the proceedings commenced, and thereafter, in accordance with an undertaking given by the Relevant Defendants to the Court on 10 May 2016. There is obvious force in that submission. On the other hand, Mr Dawson responds that, within a short period after the resolution had passed, proceedings had been commenced relating to a termination over the lease of the premises occupied by the Waterloo gym, owned by Mr Huang's mother, and Mr Henley had obtained an injunction restraining the termination of the lease. The Defendants not taking active steps to enforce the other resolutions is equally explicable by a prudent wish not to expand the field of conflict, and there would also have been obvious difficulty in giving effect to such resolutions, if Mr Henley did not recognise their efficacy, without first establishing that the meeting had in fact occurred, a matter which Mr Henley denied. There is also no reason to think that the Defendants had any particularly compelling need to remove Mr Henley from the day-to-day management of TVH, given his experience in the gym business, particularly after these proceedings had commenced. The commercial motivations of all parties in this matter also have a degree of obscurity about them, which makes it more difficult to reason as to what would ordinarily be expected to be done, by persons who had more transparent commercial motivations.
This issue also depends on issues of credit since Messrs Huang and Nguyen give evidence, supported by Messrs Kong and Lieu, that they attended the meeting and passed the relevant resolutions. The credit issues in respect of this meeting are squarely raised by the Plaintiffs' submission that that meeting did not occur at all. A finding that the meeting did not occur at all requires that the Court be satisfied that it should reject the evidence of each of Messrs Kong, Lieu, Nguyen and Huang that the meeting in fact occurred and find that the minute of the meeting is false. These are plainly serious findings, and I approach them on the basis that I must take into account the gravity of that allegation under s 140 of the Evidence Act 1995 (NSW), which is consistent with the approach recognised in the general law in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449.
Mr Henley has not established on the balance of probabilities (as he would need to do to support the declaration he seeks on this basis) that I should reject the evidence of all of Messrs Kong, Lieu, Nguyen and Huang that the meeting in fact occurred and find that the minute of the meeting is false. I cannot exclude that possibility, but Mr Henley needed to do more that establish that possibility existed to succeed in obtaining the declaration he seeks, which required that he establish his case on the balance of probabilities.

The Relevant Defendants' application to amend their Points of Defence

By Amended Points of Defence, which the Relevant Defendants seek leave to file, they seek to introduce a further defence that any appointment of Mr Henley as director of TVH made on or about 16 November 2015 ceased on or about 16 January 2016 by operation of s 201H(2) of the Corporations Act, as it was not confirmed by members of TVH. The application to introduce that defence was first foreshadowed on 1 November 2016, after references had been made to that matter in the Relevant Defendants' outline of submissions served on 28 October 2016. The question whether that amendment should be allowed was reserved to be addressed in this judgment. I do not permit that amendment, for the reasons noted below.
Mr Dawson draws attention to the matters relevant to whether the Court should grant an application to amend a pleading, including ss 56-59 and 64 of the Civil Procedure Act 2005 (NSW) and the matters identified by the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175; Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 at [5]-[10] and Cardinal Group Pty Ltd (in liq) [2015] NSWSC 1761.
Mr Neggo submits that leave to amend should be refused for two reasons, namely that the amendment would create prejudice to the Plaintiffs, having regard to the way their case was conducted, and that it would require leave for the Relevant Defendants to withdraw a pleaded admission that Mr Henley was a director from 16 November 2015 to 2 February 2016, where, he submits, no proper basis for a grant of such leave has been established.
The first submission is based on the proposition that, had the argument under s 201H(2) of the Corporations Act been identified at an earlier point, Mr Henley would have relied on the principle that members' unanimous assent to a matter has the same effect as a resolution at a general meeting. Mr Neggo accepts that, in order to establish unanimous consent, Mr Henley would first need to establish that the shareholders in TVH were only Messrs Henley and Nguyen, and not also Mr Huang, and that Messrs Henley and Nguyen had unanimously assented to Mr Henley continuing as a director by their actions on and about 16 November 2015. Mr Neggo accepts that that proposition cannot be established if Mr Huang was a shareholder of TVH. In his first affidavit, Mr Henley referred to his intention to challenge Mr Huang's claim to hold 40 shares in TVH, with the result that Messrs Henley and Nguyen would each hold half of the shares in TVH. However, that matter was not further addressed in the evidence, where that question was not in issue in these proceedings. Mr Dawson had opened the Relevant Defendants' case on the basis that the shareholdings in TVH were not in issue in the proceedings, which he submitted were to be determined on the basis that TVH's shareholders are Mr Henley, Mr Nguyen and Mr Huang.
Mr Dawson responds that there is no relevant prejudice to Mr Henley, since the raising of a viable defence based on the operation of s 201H of the Corporations Act is not itself a relevant prejudice. That proposition is not necessarily an answer to a potential prejudice in Mr Henley being required to meet that defence without having led the evidence necessary to allow him to invoke principles of unanimous consent, if the issue as to the shareholdings in TVH again became relevant. I recognise that the prospects of such a defence may well be questionable, at best, where Mr Henley conceded in cross-examination that his evidence challenging Mr Huang's shareholding was incorrect (T30), although I do not think I can properly conclude that such a defence was hopeless. Mr Dawson also submits that this defence arises from the existing factual matrix, by operation of legislation, and there is no further evidence that either party could adduce to support or resist the defence. I do not accept that submission. Although the matter on which the Relevant Defendants rely arises from the existing factual matrix, any evidence on which Mr Henley could rely to answer the defence has not been led in the proceedings.
Mr Dawson also submits that the Plaintiffs elected to take the course of not contesting Mr Huang's shareholding when the proceedings were commenced without reference to any conduct on the part of the Relevant Defendants. Assuming, without deciding, the correctness of that proposition, it does not seem to me to be an answer to the detriment which Mr Henley would suffer if the Relevant Defendants are permitted to raise an issue, in submissions immediately prior to the hearing and at the hearing, where the Plaintiffs have not led evidence in response to it. Mr Dawson also points out that Mr Huang's status as shareholder was implicitly in issue, so far as he convened the shareholders' meeting on 2 February 2016 in his capacity as a shareholder, and it would have been open to the Plaintiffs to deny his capacity to do so on the basis that he was not a shareholder. While there is substantial force in that proposition, the Plaintiffs did not in fact deny Mr Huang's standing to convene the meeting on that basis, and that does not alter the fact that that matter was not in issue.
I assume, without deciding, that a defence of unanimous consent might provide an answer to reliance by the Relevant Defendants on s 201H(2) of the Corporations Act. It seems to me that Mr Henley would be shut out of establishing the matters necessary to establish such a defence if it were raised at this late stage, and that would ordinarily be sufficient reason not to grant leave to amend the Defence. It not necessary to decide the matter on that basis, given the issues as to the strength of such a defence, given the conclusion that I reach on other grounds below.
Mr Neggo also points out that the Relevant Defendants admitted that Mr Henley was a director from 16 November 2015 to 2 February 2016, by their Points of Defence dated 28 September 2016, which was verified by affidavit, and that the proposition they now seek to advance is inconsistent with that admission. Mr Neggo also points out that an admission made in a pleading cannot be withdrawn without leave under r 12.6(2) of the Uniform Civil Procedure Rules 2005 (NSW). Even if the Points of Defence are not properly characterised as a pleading, at least for this purpose, it seems to me that the Court would adopt a similar approach to amendment of Points of Defence to that which it would adopt in respect of a pleading. Mr Neggo also points out, and I accept, that a withdrawal of an admission will not ordinarily be permitted unless sufficient cause is shown for it: SLE Worldwide v WGB [2005] NSWSC 816 at [55]-[57]; Karadaghian v Big Beat (Australia) Pty Ltd [2014] NSWSC 496 at [48]. No evidence has been led in this case to explain the circumstances in which that admission was made or is now sought to be withdrawn. It also seems to me that, where Points of Claim and Points of Defence had been ordered to seek to clarify the issues in the proceedings and give each party notice of the other's case, and in circumstances where the factual issues in the proceedings are contentious, then the parties should not be permitted to depart from an admission which had a significant impact upon the matters in issue, without sufficient cause being shown. It seems to me that this is sufficient reason that the amendment should not be permitted.
Accordingly, I decline leave to the Relevant Defendants to amend their Points of Defence in the manner that was sought. It is therefore not necessary to deal with the impact, if any, of s 201H(2) of the Corporations Act. Mr Dawson also submits, that, even if this amendment were refused, the Court would be reluctant to exercise a discretion to make a declaration where it would be contrary to the known facts and law. It is by no means apparent that facts that are not established in the proceedings, or a legal issue that is not raised in them, would properly prevent the making of a declaration. However, this issue does not arise, given the findings that I have reached on other grounds above.

Orders and costs

Accordingly, I order that the Plaintiffs' Originating Process filed 6 May 2016 be dismissed and that Mr Henley pay the First, Third and Fourth Defendants' costs of the proceedings, as agreed or as assessed. There should be no order for costs against TVH, where that would erode the successful defendants' economic interest in that company, and no order for costs in favour of the Second Defendant who did not take an active role in the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 December 2016

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