- Australian Securities and Investments Commission v Planet Platinum

Supreme Court of NSW|2023-06-08|Before: Black J

Solicitors: Longton Legal (Plaintiff) Sadler Legal (First Defendant) Piper Alderman (Second, Third, Fourth Defendants) File Number(s): 2022/00362820

Nature of the application

By Amended Statement of Claim filed, by leave, on 20 March 2023, the Plaintiff, Ms Yang, seeks certain orders in relation to the affairs of four companies (together, "Companies"), Vaucluse 29 Pty Ltd ("Vaucluse 29"), Bayview 66 Pty Ltd ("Bayview 66"), One Lake Macquarie Pty Ltd ("One Lake Macquarie") and Point Piper One Pty Ltd ("Point Piper One").
The First Defendant, Mr Li, is a director of each of the Companies. He previously filed a Defence in the proceedings but does not now oppose certain relief sought, in respect of declarations and orders in relation to shareholdings of the Companies, and neither consents to nor opposes the orders sought that three of the Companies be wound up. The Companies were joined as Defendants, and three of them are now in provisional liquidation. The three Companies in provisional liquidation have appeared but have not taken an active role in the application. The Fifth and Sixth Defendants have filed submitting appearances. The proceedings were discontinued against the Seventh Defendant.

Affidavit and other evidence

Ms Yang reads several affidavits and tenders several documents in respect of the application. By her affidavit dated 6 June 2023, she refers to her personal history and to the circumstances in which she and Mr Li married and incorporated several companies which in turn acquired several properties. Ms Yang also refers to the circumstances in which Mr Li requested that she sign certain corporate documents relating to Vaucluse 29 in mid-June 2022. She refers to a disagreement between herself and Mr Li, in late June or early July 2022, in respect of the terms of which a further property would be purchased, and to her having then discovered that Mr Li had moved into one of the properties that had been purchased and was now residing there with his former wife. Ms Yang refers to the fact that she then moved to her former residence reflecting an apparent breakdown in her and Mr Li's marital relationship.
Ms Yang refers to having been provided with certain further documents by Mr Li on 12 July 2022, and to his urging her to sign those documents and to her response that she wished to look at the documents. Those documents were tendered (Ex P4) and comprised a transfer of shares in respect of Vaucluse 29, by which Ms Yang's shares in Vaucluse 29 would be transferred to Point Piper One; a director's resolution in respect of Bayview 66, which purported to cancel certain ordinary shares of Ms Yang, issue new shares to Ms Yang which would have restricted rights and issue new shares to Kingland AC Pty Ltd ("Kingland"), a company associated with Mr Li, which would have wider rights, and a shareholder agreement in respect of Bayview 66 setting out the narrow rights attached to the shares to be issued to Ms Yang and the wider rights of the shares to be issued to Kingland; similar documentation that would have changed the shareholding and share rights in respect of Point Piper One; and, in respect of One Lake Macquarie, a director's resolution providing for the issue of new ordinary shares to Ms Yang and new A class shares to Kingland, and a shareholder agreement providing that the ordinary shares issued to Ms Yang would have restricted rights and the A class shares issued to Kingland would have wider rights. Each of the tendered documents was executed only by Mr Li and not by Ms Yang.
Ms Yang also refers to the content of certain notifications given, apparently on Mr Li's behalf, to the Australian Securities and Investments Commission ("ASIC") on 18 July 2022, which recorded transactions which Mr Yang says took place without her consent or her attendance at any shareholders meeting, where she was the then sole shareholder of the relevant companies. The notifications lodged with ASIC broadly record the cancellation of shares and the issue of new shares as contemplated by the documents (unsigned by Ms Yang) to which I have referred above. Plainly, of course, the lodgement of a notification with ASIC does not in itself bring about a corporate transaction which has not validly occurred.
Ms Yang's affidavit also exhibits a letter dated 28 October 2022, by which her solicitor noted that she had become aware of the notifications given to ASIC, and protested the content of those notifications. Her solicitor there observed that: "The purported share cancellations, share class creations and alteration to various share class rights had been undertaken by [Mr Li] with a complete disregard for the requirements of the Corporations Act and their duties as a director of the Companies ... these changes to the share structure of each of the Companies, which [have been] lodged with ASIC, were clearly invalid, and have resulted in significant loss and damage to [Ms Yang]."
While Ms Yang's solicitor there pointed to the possibility that the purported transactions were undertaken in breach of Mr Li's duties as a director of the Companies, which has the premise that they were in fact undertaken, a further possibility is that those transactions were not validly undertaken as a matter of corporations law and had no legal effect. I will return to that matter below. Ms Yang's solicitor there also identified the possibility, likely well-founded, that the relevant transactions would amount to oppression for the purposes of ss 232-233 of the Corporations Act 2001 (Cth) ("Act").
Ms Yang also relies on the affidavit dated 15 May 2023 of Mr Tonks, who is one of the joint and several provisional liquidators who were appointed to Vaucluse 29, Bayview 66 and One Lake Macquarie by the Court. Mr Tonks there refers to an initial report dated 24 February 2022 prepared by the provisional liquidators and submitted to the Court, and to correspondence with the Australian Taxation Office ("ATO") in respect of capital gains tax liabilities of the Companies. Mr Tonks also referred to several ongoing legal disputes which involved the Companies.
Ms Yang also tendered the provisional liquidators' report dated 24 February 2023. That report referred to a meeting between one of the provisional liquidators and Mr Li, where the provisional liquidators had sought information as to the Companies' affairs and dealings, and noted the incompleteness of the information provided to them. It referred to the Companies' activities, which included, in the case of two Companies, the acquisition and sale of properties, as to which it appeared that no tax returns had been lodged with the ATO, notwithstanding that capital gains tax was payable in respect of those sales; that report also addressed the properties owned by two other Companies and the present position in respect of those properties. The provisional liquidators noted that the financial position of each of the Companies was uncertain, and they had not been provided with financial statements or accounts or written financial records that correctly recorded and explained their transactions; they again noted the fact that, in respect of two of the Companies, sales of property had given rise to capital gains tax liabilities, as to which no tax returns had been lodged with the ATO; in respect of a property owned by One Lake Macquarie, substantial construction work was under way, but the company was dependent on the provision of additional finance to pay for that work; and, in respect of One Lake Macquarie, there had been an attempted sale of the property to an associate of Ms Li at an apparent undervalue immediately prior to the provisional liquidators' appointment, which they had not permitted to complete.
In summary, the provisional liquidators noted that the financial position of the Companies were uncertain; the Companies had not prepared financial statements or lodged tax returns with the ATO; on the basis of the information known to the provisional liquidators' accurate accounts could not be prepared without further information; the books, records and information provided to the provisional liquidators were incomplete; and the Companies appeared to have substantial deficiencies in assets, subject to completing accounts, and they had wholly funded their assets and operations for borrowing; and were, in the provisional liquidators' view, insolvent. Ms Yang also tenders a consent of the provisional liquidators to appointment as liquidators of the three Companies to which they have been appointed as provisional liquidators.
By further affidavit of Mr Zhao dated 6 June 2023, she refers to the translation of a document from Chinese to English. Ultimately, no attention was paid to that document in the course of submissions, and I need not address it further. A further affidavit dated 8 June 2023 of Mr Aqualina, who is the solicitor with conduct of the matter for Ms Yang, refers to orders which had been made by the Court under s 247A of the Act for the production of the books and records of the Companies and notes that no share register was produced to Ms Yang in response to that order, and that the provisional liquidators have advised that no company registers have been produced to them. In these circumstances, and in the absence of any evidence of Mr Li indicating that company registers exist, I am comfortably satisfied that the Companies do not presently maintain share registers.
Mr Li had affirmed an affidavit dated 8 December 2022, which set out his account of relevant events, and supported the Defence which he had filed in the proceedings. That affidavit was not read and I proceed on the basis that Ms Yang's account of events is relevantly uncontested.

The relief sought by Ms Yang in relation to the shareholding in the Companies

The issues raised by these proceedings are now in relatively narrow scope and several matters which might have arisen had Mr Li adduced evidence no longer arise.
First, a question arises as to the fact of, and legal validity of, the transactions that purportedly took place in relation to Vaucluse 29 in mid-June 2022, and the further transactions notified to ASIC in respect of the Companies in mid-July 2022. I am comfortably satisfied that those transactions did not have legal effect, where Ms Yang's uncontested evidence refers, in relation to the mid-June transactions, that she had no knowledge of and did not consent to them, and her involvement would have been necessary as sole shareholder in the Companies for them to take place; and the mid-July transactions are documented only in documents which Ms Yang has not signed, and she again gives uncontested evidence that she did not consent to them or attend any shareholders' meeting in respect of them.
I also bear in mind that, so far as those transactions involved the transfer of shares in Vaucluse 29 or an issue of shares in the Companies, a person's membership in a company is determined under s 231 of the Act, which provides that a person may be a member, relevantly, if they agree to become a member of the company after its registration and their name is recorded on the register of members and s 1071B of the Act in turn provides that, subject to two exceptions that are not presently relevant, a company may only register a transfer of securities if a proper instrument of transfer has been delivered to the company. There is no indication here that the steps necessary to bring about any transfer of Ms Yang's shares in Vaucluse 29, or the issue of new shares to Kingland, took place, where there is no evidence that share registers exist for the Companies, or that any relevant entry into them was made, or that any relevant transfer of the shares was executed. To the contrary, Ms Yang's uncontested evidence is that she did not consent to and did not participate in the relevant transactions. As I noted above, Mr Li does not oppose orders rectifying the Companies' registers to record Ms Yang as the sole shareholder in each Company to the extent that the shares originally issued were allotted to her.
First, Ms Yang seeks relief, in respect of each of the Companies, in the form of declarations that the purported transactions which she challenges are void and have no effect. That relief properly recognises that there is a question whether the transactions occurred, where the relevant corporate steps to undertake them do not appear to have been undertaken. I am satisfied that, given the dispute between the parties, this is a proper case for declarations that record that the purported transactions were void and of no effect in respect of each of the Companies and that conclusion follows from the findings which I have made above.
A declaration is sought in respect of Vaucluse 29, Bayview 66 and One Lake Macquarie that Ms Yang is the only shareholder in each of those companies, with a specified number of ordinary shares, and that also follows from the findings that I have reached above. A declaration is sought, in respect of Point Piper One that a purported cancellation or forfeiture of shares was void and of no effect, and that a purported issue of shares was also of no effect, and that also follows from the findings which I have reached above.
Ms Yang then seeks two orders, which are based on the form of the orders made by Brereton J in Re Hillsea Pty Ltd [2017] NSWSC 1870, which deal with the position where a company ought to have, but has not, maintained a register of members and correct the position in respect of its shareholding by, first, bringing such a register into existence and then rectifying the content of that register to record the correct position. The approach was noted with approval in my decision in Re Medical Training & Development Pty Ltd [2021] NSWSC 981 at [28], where I accepted that the Court had jurisdiction to make an order that a company bring a share register into existence and enter the relevant person's name in it as holder of the relevant shares. There may be an open question whether that could take place in a single step, by bringing a register into existence which recorded the correct position, but there is no reason not to take the two-step approach adopted in Re Hillsea, as Ms Yang seeks to do.
The orders sought by Ms Yang in this respect are straightforward in respect of three of the Companies, which are now in provisional liquidation, and, depending upon the further orders sought below, will be placed in liquidation, where the Court can proceed on the basis that the liquidator will comply with the Court's orders. No question arises of any issue of shares to Ms Yang or alteration in her or Mr Li's status while the Companies are in liquidation, for the purposes of s 468A of the Act, since the relief granted will confirm the existing position. If I were wrong in that view, and to the extent that leave would be required under s 468A of the Act to transfer or issue shares while the three Companies are in liquidation, this judgment requires the relevant transfer or alteration in Ms Yang's and Mr Li's status and any leave can, if required, be formalised by a further order.
The fourth company, Point Piper One, is not presently in liquidation and Mr Li is presently its director. In Hillsea at [31], Brereton J noted that the Court would not normally appoint an opposing party to take a particular step in the context of an order for specific performance, and I accept that it may be preferable not to appoint Mr Li to undertake the relevant steps in Point Piper One here. Mr Marshall, who appears for Ms Yang, pointed out that, in Hillsea, Brereton J left open the possibility that a person associated with the company may take such steps. Ms Yang is such a person as she is, as, on the findings that I have reached, the sole shareholder of Point Piper One. Accordingly, in respect of Point Piper One, an order can properly be made that Ms Yang take the relevant steps to bring a register into existence and correct its contents.
A further issue relates to records now maintained by ASIC, which reflect the information provided by notifications given to ASIC in mid-July 2022 which, on the findings I have reached above, did not correctly record the position in respect of the Companies. It is well established that the Court has power under s 1322 of the Act to require the rectification of records maintained by ASIC, although that would ordinarily require that ASIC be joined as a defendant in the proceedings: Re Centura Global Holdings Pty Ltd (2016) 111 ACSR 185; [2016] NSWSC 62 at [55]-[57]; Re Seabay Kitchen Pty Ltd [2019] NSWSC 790 at [12]; Re Embedded Claims Pty Ltd [2021] NSWSC 969 at [8]; Re Medical Training and Development Pty Ltd [2021] NSWSC 981 at [28]. I am satisfied that such orders should be made here, to ensure that the position disclosed by ASIC's records corresponds to the position that will be properly recorded in the Companies' share registers. I am satisfied that I should order that ASIC be joined as the Eighth Defendant in the proceedings, while reserving to it liberty to apply, if it has any difficulty with its joinder to the proceedings or the orders which will bind it in respect of the rectification of its records.

Winding up of Vaucluse 29, Bayview 66 and One Lake Macaquarie

The final question is whether three of the companies, Vaucluse 29, Bayview 66 and One Lake Macquarie should now be wound up, where they are presently in provisional liquidation. The fourth company, Point Piper One, is not in provisional liquidation and Ms Yang does not seek an order to wind it up.
I referred above to the provisional liquidators' report which discloses, variously, in respect of the three companies, issues as to their ability to access funding; a lack of company records, at least so far as company records have not been made available to the provisional liquidator, including appropriate financial records; and a failure to lodge tax returns in respect of capital gains tax payable by two of those companies. I also bear in mind that the relationship between Ms Yang, as the sole shareholder of the Companies on the findings which I have reached above, and Mr Li as their present director, has plainly broken down, and that Ms Yang, as sole shareholder, seeks orders that those three companies be wound up.
The grounds on which the Court may make an order for winding up, on the just and equitable ground under s 461(k) of the Act are well established. An order for winding up may properly be made on that ground where a company was established on the basis of a personal relationship involving mutual confidence and would require mutual cooperation and that confidence or cooperation has broken down and a shareholder has been denied access to information and excluded from major decisions. It seems to me that, although Ms Yang was the sole shareholder in the Companies, the appointment of Mr Li as sole director plainly required a degree of mutual cooperation between the parties. That matter supports a winding up order, although I recognise that Ms Yang as director of those Companies could alternatively remove and replace Mr Li by the exercise of her powers as a shareholder. A winding up order may more readily be made where a company is insolvent on a cash flow or possibly a balance sheet basis or fails to maintain appropriate financial records, and I am satisfied having regard to the provisional liquidators' report that that position is established here for the three Companies that are sought to be wound up. A company can also be wound up on the just and equitable ground, where there has been a failure to comply with statutory obligations in respect of taxation: Australian Securities and Investments Commission v Planet Platinum (prof liq apptd) [2015] VSC 682. That is also established here, having regard to the provisional liquidators' report in respect of two of the Companies that are sought to be wound up.
For these reasons, I am satisfied that the winding up orders that are sought in respect of each of Vaucluse 29, Bayview 66 and One Lake Macquarie should be made and it is appropriate that the provisional liquidators now be appointed as the liquidators of each of those Companies.

Costs

Ms Yang seeks an order that Mr Li pay the costs of the proceedings, as agreed or as assessed. Mr Sadler, solicitor, who appears for Mr Li, rightly accepts that he could not put a submission contrary to an order that reflects the general rule that costs follow the event. There is plainly a proper basis for such an order here, where Ms Yang has succeeded in obtaining the relief sought and Mr Li maintained a defence of the proceedings until a very late stage in the proceedings, before abandoning it. Accordingly, I will order that Mr Li pay Ms Yang's costs of the proceedings, as agreed or as assessed. I will also reserve liberty to the provisional liquidators and liquidators of the Companies to apply for an order for costs as against Mr Li, within seven days, if they seek such an order and it cannot be made by consent.

Orders

For these reasons, I make orders in the form initialled by me and placed in the file.

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: 13 June 2023

At a glance

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Judgment (8 paragraphs)

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