The McSharers' evidence and analysis
708 Mr McSharer's evidence as to this final phase was as follows.
709 On 26 November 2012, the Receivers sold the York farm, and on 23 December 2012, Astraea vacated the York farm and transported the stock to a farm at South Eneabba for agistment.
710 On 30 December 2012, he, Mrs McSharer and Ms Manner did a reconciliation of stock numbers and this indicated that they were short approximately 600 sheep. There was a document entitled "Sheep Reconciliation as at 30th December 2012" (Sheep Reconciliation document) which broadly reflects such a shortage.
711 On 27 February 2013, Astraea made a formal complaint with the police in Lancelin in relation to the missing stock.
712 Since 27 June 2012, the entities which are related to Mr McSharer and hold the "A" class shares in Astraea, which, as I have said at [427] of these reasons, he referred to as the "McSharer Group", have been providing financial support to the operations of Astraea.
713 On 1 January 2013, the amounts due and payable to the McSharer Group entities were converted into a loan, evidenced by a loan agreement. He explained that all the amounts are secured by a Personal Property Security Registration of 24 May 2012.
714 On 16 March 2013, Astraea emailed the Hendersons and Ms Katie Payne, asking for capital contribution into the company and made an offer to resolve the issues, but that no response was received.
715 Mr McSharer said that on 9 April 2013, the firm Macdonald Rudder sent a letter to Mrs McSharer. This letter was addressed to both Mr and Mrs McSharer and outlined, under "item 12", that Macdonald Rudder was instructed by its client Ms Payne that she is the legal and beneficial owner of 50% of the issued capital in Astraea.
716 Mr McSharer said that item 12 of this letter was the first occasion that Astraea was advised that Ms Payne was not holding the "B" class shares on behalf of the Hendersons.
717 I do not regard this as evidence of such ownership. The preponderance of the evidence discloses that Ms Payne held the shares as nominee for the Hendersons.
718 Mr McSharer outlined several tasks undertaken by Astraea in the relation to the sheep in the second half of 2013. He also outlined the amounts owed by Astraea to the McSharer Group as at 8 August 2013, including a "non cash" amount of $236,015.16, which he explained was for services provided to Astraea by Fides Consulting.
719 On 7 July 2013, Ms Payne offered her "B" class shareholding in Astraea for sale.
720 A letter dated 7 July 2013 from Ms Payne to Mrs McSharer (the Share Transfer Letter) states that the "B" class shares in Astraea are to be transferred from Ms Payne to Swamp Haven as trustee for the Henderson Farm Management Trust. It also encloses an executed transfer form and a letter of consent from Swamp Haven. It asks that Mrs McSharer please attend to this transaction immediately and register the transfer with ASIC.
721 On 13 August 2013, entities associated with the "A" class shares in Astraea acquired Ms Katie Payne's shareholding.
722 On 14 August 2013, Mrs McSharer as director wrote to Katie Payne setting out the basis for which the transfer was declined and stating that the director intended to proceed in accordance with Astraea's constitution.
723 On 16 October 2013, he sent an email to Katie Payne and the Hendersons indicating that Astraea needed urgent financial assistance and requesting Katie Payne or the Hendersons to provide that assistance and an undertaking to restructure Astraea should the "B" class shareholders be prepared to contribute to the capital of the company. However, he said that no response was ever received.
724 He said that Mrs McSharer then approached the "A" class shareholders - Fides Consulting and Skyprince - for financial assistance and these entities agreed to provide ongoing financial support. He outlined various communications between Astraea and the entities providing financial assistance in relation to the loan agreement. He said that at 31 January 2014, several amounts were outstanding including $108,557.51 owed to Skyprince for cash advances, $227,405.96 to Fides Consulting for "non cash" amounts and $10,187.71 to "B & H McSharer personally" for a cash advance. He explained that Astraea sold sufficient stock to repay the cash payments to Fides Consulting and Skyprince. He noted that by this time, the amounts had accrued interest.
725 He stated that Astraea had engaged Fides to advise Astraea, pursuant to a letter of engagement dated 19 August 2011. He said that Fides had claimed management fees from Astraea pursuant to this letter of engagement. He reiterated that he personally had not charged Astraea for a single service and that neither Fides nor he personally had charged the Hendersons for any services at any time. He said that Fides had charged Astraea for operational management, financial and consultancy services to Astraea, noting that this remains unpaid.
726 He also said that Fides Consulting did not invoice or charge Astraea for any service provided until the relationship with the Hendersons had irretrievably broken down, due to them taking possession of the farm, purporting to rescind the Stock Purchase Agreement. He said that Mrs McSharer did not draw any directors' fees until May 2012. He also asserted that Mrs McSharer as director of Astraea made all final decisions in relation to the affairs of Astraea. He also stated that Astraea had paid for the services of Delta Protective Services, because Astraea were missing approximately 600 sheep which were believed to have been stolen and requested Delta Protective Services to investigate the matter. He explained that Mr Henderson had access to the farm and Astraea felt he was a person of interest in the theft.
727 Mrs McSharer recalled that on 9 July 2012, "as Sole Director of Astraea Group", she authored and sent Katie Payne a letter advising the extreme difficulty the company was experiencing due to the conduct and actions of the Hendersons. She said she asked Katie Payne for her views on how to address the future of Astraea, as she was the Hendersons' nominee for the "B" class shareholding. Like Mr McSharer, she outlined the various farming activities undertaken in relation to the sheep in the second half of 2012.
728 She said that on 28 September 2012, she had Astraea write to Fides Consulting acknowledging the debts and requesting Fides Consulting to forbear debt recovery so that Astraea could address this issue. It is addressed to Mr McSharer and signed by Mrs McSharer. She explained that this letter was sent because, as proceedings in this Court had been commenced, Fides Consulting wanted to be paid for the consulting service and cash advances as Astraea was not able to make payment at that point in time.
729 She said that on 18 October 2012, she read an email from the Receivers advising that they had sold the York farm.
730 She said that on 1 November 2012, she had Astraea write to Fides Consulting proposing that the outstanding debt be converted into a loan as at 1 January 2013. Again, it is addressed to Mr McSharer and signed by Mrs McSharer.
731 She recalled that on 3 December 2012 she read a letter from Fides Consulting to Astraea accepting the proposed offer to convert the debt into a loan. This document was addressed to Mrs McSharer and signed by Mr McSharer.
732 She recalled that she and Mr McSharer met with an acquaintance to express interest in agistment of sheep on a property at Greenhead, and said that an agreement was made for the sheep to be agisted at Greenhead.
733 She said that she had Astraea vacate the York farm and transported the sheep from York to South Eneabba.
734 She recalled that on 30 December 2012 she, Mr McSharer and Ms Manners did a reconciliation of stock numbers and said that this reconciliation revealed that Astraea was short approximately 800 sheep. However, as I outlined earlier in these reasons, the Sheep Reconciliation document as at 30 December 2012 reveals a shortage of approximately 600 sheep.
735 She said that a complaint was made to the police in York about the missing sheep. She explained that she felt this was a necessary step as the number of sheep missing was substantial and Astraea "had issues with re-tagged sheep beforehand with the Hendersons".
736 She also recalled that a formal complaint was made on 27 February 2013 with the police in Lancelin, alleging that Mr Henderson had the opportunity to steal the sheep at the time when Mr Henderson was illegally in possession of the York farm.
737 She said that since 27 June 2012, McSharer Group entities had been providing financial support to the operations of Astraea. She said that this was necessary because Astraea was unable to look after the operations of the company "in and of itself". She explained that she had explored alternative financial and capital sources due to the inherent cash flow issues Astraea was facing but had found it difficult to raise finance and capital through the banks because Astraea had no suitable assets to offer up for security for a loan.
738 She said that on 16 March 2013, she had Astraea email the Hendersons and Katie Payne to request that they make some capital contributions and also made an offer to resolve the issues between the parties, but that she did not receive any response.
739 She said she then had Astraea write to Fides Consulting and Skyprince requesting financial support. As with other correspondence, the documents demonstrate that this was essentially correspondence between Mr and Mrs McSharer.
740 She recalled numerous other communications between Astraea, Fides Consulting and Skyprince in relation to the provision of financial support.
741 Mrs McSharer recalled receiving the Share Transfer Letter. She said that she was angry at this because in March 2013, she had written to Katie Payne asking for capital contributions and had not received a reply. She said that upon receiving the Share Transfer Letter and the accompanying form, "as Sole Director" she undertook her own due diligence and she reviewed the constitution of Astraea on shareholdings and shareholders' rights. She said she conducted a search which revealed that the owners of Swamp Haven were the Hendersons. Mrs McSharer explained that she left the shareholding issue to one side for the time being because of the proceedings in this Court and the day-to-day operations of Astraea.
742 However, she said that after due consideration, on 13 August 2013, the "A" class shareholders in Astraea acquired the "B" class shareholding.
743 She said that on 14 August 2013, she had Astraea write to Ms Payne declining to register the transfer and explaining the reasons for this decision, which were based on the constitution of Astraea. This letter included the following:
In accordance with clause 13.5 of the company's Constitution, I decline to register the transfer.
The Constitution of the company sets out the procedures in clause 13 of the "Transfer of Shares" which I must follow.
I have determined that the documents prepared by you represent a "Transfer Notice" in accordance with clause 13.8 of the company's Constitution. A Transfer Notice is not revocable. I am required to proceed in accordance with the requirements of the Constitution.
The shares identified in the "Transfer Notice" have been offered to the existing shareholders in accordance with clause 13.11 of the company's Constitution.
The company has received a 100% (one hundred precent (sic)) acceptance for your shares by the existing members.
The consideration for each share is 10 cents.
…
Please find attached the company's Bank Cheque payable to you for the total value of the shares.
744 Mrs McSharer recalled receiving a letter from Mrs Henderson on 22 August 2013. This letter makes clear the Hendersons' objection to what is described as "the illegal and oppressive action [Mrs McSharer] ha[s] taken". It asserts that the action taken contravenes the provisions of the constitution of Astraea. Mrs McSharer's letter in response does not address the complaint in relation to contravention of the constitution, but is principally aimed at asserting that Katie Payne was not a nominee of the Hendersons.
745 Mrs McSharer referred to further communications between Astraea, Fides Consulting and Skyprince in relation to financial support and outstanding debts owed by Astraea. She said that she was successful in the weeks leading up to 31 March 2014 in selling sheep and raising capital in Astraea from the sale proceeds. She said that in April 2014, following demands for payment, she had Astraea repay part of the debts owed to Fides Consulting and Skyprince.
746 She recalled that by May 2014, Astraea's financial position was looking "grim". She said she did not have enough capital to get through to the next shearing, and that Astraea only owned a small amount of sheep. She recalled that Astraea was, at this time, exploring voluntary administration.
747 As with much of the evidence given by Mr and Mrs McSharer, I find large parts of the evidence as to this final phase of the relationship unsatisfactory and unreliable.
748 The evidence of Mr McSharer that Mrs McSharer made all final decisions for Astraea did not withstand scrutiny in the cross-examination of Mrs McSharer. I find that Mrs McSharer at all times acted in accordance with Mr McSharer's directions or wishes in relation to the affairs of Astraea. Indeed, in cross-examination she agreed with counsel's suggestion that she had no previous experience as a company director and in that situation would have been "out of her depth" fairly easily. She agreed, however, that she was comfortable with the situation because her husband was there to help her and did help her.
749 In relation to drafting the 16 February Agreement, which Mr McSharer said both he and Mrs McSharer drafted, she said during cross-examination that her part had been typing and formatting. Perhaps most tellingly, Mrs McSharer explained why Mr McSharer's mobile telephone number was on the letterhead of Fides Consulting, rather than her own, because he was the main contact for Fides Consulting and he is "the head of [her] family… He is the head of [their] household".
750 I do not accept that Mrs McSharer made all final decisions. I find that all material decisions were made by Mr McSharer and carried out by Mrs McSharer in accordance with her husband's wishes. As to the refusal to the transfer of shares, although Mrs McSharer gave evidence in her witness statement that she undertook her own due diligence and reviewed the constitution of Astraea on shareholdings and shareholders' rights, it was apparent from her evidence under cross-examination that she had almost no understanding as to how these provisions operated.
751 I do not accept that she conducted such investigations. I note also that Mrs McSharer conceded that Mr McSharer had "suggested the idea" to transfer the shares to the "A" class shareholders.
752 As I have mentioned, Mrs McSharer's evidence was that the purported transfer was made in reliance on clause 13.11 of Astraea's constitution. However, that rule only authorises the offer of shares of one class to other shareholders of the same class. It could not authorise the transfer of "B" class shares to "A" class shareholders. This was pointed out to Mrs McSharer in the letter from Mrs Henderson. The response from Mrs McSharer ignored the legal issues raised in Mrs Henderson's letter. Mrs McSharer was, in cross-examination, unable to explain the provision she claimed to have used to transfer the "B" class shares to the "A" class shareholders.
753 I infer that the transfer of the "B" class shares to the "A" class shareholders was Mr McSharer's method of finally excluding the Hendersons from any legal or beneficial ownership of the sheep.
754 As I have mentioned, according to the evidence of Mr and Mrs Henderson it was a term of the agreement reached at Childers that neither the McSharers nor the Hendersons should be paid for the work that they did, other than by dividends resulting from the success of Astraea's activities - at least until the Denmark Litigation Rights had been secured and the litigation was on foot. For reasons outlined above, I accept this evidence.
755 Mr and Mrs McSharer both deny this. They say that the arrangement agreed at Childers included the payment of director's fees to Mrs McSharer and the payment of consultancy fees to Fides Consulting. I reject their evidence in this regard. I do so based on my findings as to the lack of credibility generally of Mr and Mrs McSharer, but also by the specific anomalies in their evidence about the minutes by which these payments were supposedly approved. I have already dealt with these anomalies.
756 There were additional anomalies concerning the evidence about these payments. During their cross-examination, both Mrs McSharer and Ms Manners testified that Astraea's accounts for the period to 7 February 2012 did not exclude any debts or liabilities which should properly have been included. However, neither the director's fees nor the Fides Consulting payments were included in these accounts. Furthermore, Mrs McSharer began claiming these fees only when the relationship with the Hendersons had been terminated.
757 Mrs McSharer was taken, in cross-examination, to a copy of the purported minutes of 17 August 2011 recording a resolution to pay a directors' fee of $500 per week. This document contains a handwritten note in the following terms: "Mum - need to calculate from 17 August 2011 to current date @ $500/week". Mrs McSharer admitted that this was written in May 2012, and that it was a reference to backdating her director's remuneration. I find that the minute upon which this instruction was annotated was created in May 2012.
758 That finding combined with the general lack of credibility of Mr and Mrs McSharer, leads me to conclude that the arrangement agreed at Childers did not include the payment of director's fees to Mrs McSharer and the payment of consultancy fees to Fides Consulting.
759 I find, in accordance with the evidence of the Hendersons, that it was a term of the agreement reached at Childers that neither the McSharers nor the Hendersons should be paid for the work that they did, other than by dividends resulting from the success of Astraea's activities.
760 I accept the evidence of Hendersons and do not accept the evidence of the McSharers to the extent that it seeks to contradict that of the Hendersons.
761 Mrs Henderson recalled that during January 2013, she noticed vehicles parked for extended periods not far from where she was staying in Mandurah. She said that when attending the office of Chan Galic as part of the pre-trial processes in the matter in this Court, she read and copied correspondence between Delta Protective Services and Astraea, together with a receipt of $2,800 for surveillance on her.
762 Mr Henderson said at various times that the respondents' then lawyers assured the Court that arrangements would be made for the Hendersons to inspect the sheep. He said that Mr McSharer, however, changed his mind and Mr Henderson was frustrated at driving from his work at Broomehill, Western Australia only to be told that the inspection was called off at the last minute.
763 He recalled that another agreement was made that the Hendersons would inspect the sheep on 26 January 2013. He recalled that he and Wesley Henderson drove to meet Mr McSharer, as agreed, to inspect the sheep. He said that on this occasion, Mr McSharer told Mr Henderson and Wesley Henderson to get on the back of their Landcruiser for the inspection. Mr Henderson said that he and Wesley Henderson refused to do so, as it is illegal to do so. He recalled that Mr McSharer then raised his voice and insisted that they do so, eventually threatening that if they did not get on the back of the Landcruiser, they would not be allowed on to the property. Mr Henderson said that they refused once more, and Mr McSharer did not allow them on to the property. I accept this evidence.
764 This event is yet another example of the bullying and intimidatory conduct in which Mr McSharer engaged in his dealings with the Hendersons. The refusal to transfer the "B" class shares in accordance with the Hendersons' wishes, the acquisition of the "B" class shares in Astraea, and the subsequent refusal to respond to Mrs Henderson's legal challenge were further examples of such conduct.
765 I find the totality of the conduct of both Mr and Mrs McSharer during phases 5, 6 and 7 constituted unconscionable conduct on their part in contravention of s 21 of the ACL. It was at all times motivated by their dishonest purpose in depriving the Hendersons of any interest in the sheep. The McSharers by their misleading and deceptive conduct had earlier gained a legal interest in half of the sheep through Astraea by means of the Stock Purchase Agreement. This further conduct denied the Hendersons even their indirect shareholding in Astraea.