Kanik, in the matter of ThinkRed Recruitment Central Pty Ltd v Swan Elope Pty Ltd [2025] FCA 462

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

1. The Plaintiff in this matter seeks orders that the Second Defendant, ThinkRed Recruitment Central Pty Ltd (the Company), be wound up under either:

(a) s 232 and s 233 of the Corporations Act 2001 (Cth) (the Act); or

(b) s 461 of the Act.

1. Ultimately, the Plaintiff did not press relief on the basis of s 232 and s 233 of the Act and was content to only rely on s 461(1)(k) of the Act, that it was just and equitable that the Company be wound up.
2. The Plaintiff is one of the shareholders of the Company and the First Defendant is the other shareholder. As I will explain, there is an irreconcilable dispute between the shareholders of the Company, which includes what is the correct shareholding of the Plaintiff in the Company. The First Defendant has expressed its position as being that it consents to the winding up and/or it does not oppose the Company being wound up.
3. Although the First Defendant consents (or at least does not oppose) the winding up orders sought, the Court must still be satisfied that such Orders are appropriate. That is, to use the words of s 461(1)(k) of the Act, the Court is of the opinion that it is just and equitable that the company be wound up.
4. For the following reasons, I am satisfied that it is just and equitable that the Company be wound up because there has been an irretrievable breakdown in the relationship of the members of the Company and both of the shareholders of the Company seek that the Company be wound up. As such, I will order that the Company be wound up on the basis that it is just and equitable to do so: s 461(1)(k) of the Act.

1. On 5 December 2024, the Plaintiff lodged an originating application seeking, amongst other relief which is no longer pressed, an order under s 461(1)(k) of the Act that the Company be wound up on the basis that it would be just and equitable to do so.
2. The Plaintiff also sought an order for costs from the Defendants. This is also no longer sought. The Plaintiff now seeks his costs out of the property of the Company, in accordance with s 466(2) of the Act.
3. The Plaintiff has provided an affidavit in support of this application. Given the position of the other shareholder in the Company, being the First Defendant, there is no conflicting evidence.
4. The Plaintiff became a director of the Company on 8 May 2023. This was with Ms Swanepoel, who is also a director of the Company and was a director from the incorporation of the Company on 1 September 2022. This is the current position of the Company.
5. The Plaintiff holds 30 out of the 130 issued shares in the Company. The First Defendant holds the other 100 shares in the Company. Ms Swanepoel is the sole director and shareholder of the First Defendant.
6. The business conducted by the Company was recruitment services to companies and employers within the property and real estate agency industry.
7. The Plaintiff came to know Ms Swanepoel in around January 2020, as they both worked in similar industries. The Plaintiff ran a rent roll business, which refers to a portfolio of contracts or arrangements for the management of property by a real estate firm. That is, it includes managing the property itself, the lease and the rent roll (which includes all such properties being managed).
8. Ms Swanepoel ran a business which was described to the Plaintiff as a temping agency and real estate contractor. Ms Swanepoel also operated another business through another company, which was engaged in property sales and management.
9. Discussions between the Plaintiff and Ms Swanepoel took place regarding the management of ten rent roll properties by one of Ms Swanepoel controlled companies, as the Plaintiff was operating a property management company at the time. This, the Plaintiff says, was so that Ms Swanepoel could have additional time to devote to the business of the Company.
10. Discussions also took place between the Plaintiff and Ms Swanepoel regarding the Plaintiff's investment in the Company. The Plaintiff was provided with a spreadsheet of projected expenses, revenue and profit for the Company. The Plaintiff was advised that his investment of $80,000 would be for 30% of the shares in the Company.
11. The Plaintiff says he expressed his concern to Ms Swanepoel at the time, as he had never done recruitment work before and he queried what would occur if he did not enjoy working in the business of the Company. Ms Swanepoel informed the Plaintiff that if he wanted to leave, he would be repaid his initial investment. This would be possible as it was proposed that the Plaintiff's investment of $80,000 would be placed into a bank account, along with any profit proceeds, which would be available to the Plaintiff at any time. That is, those funds would be available for immediate refund and payment, should the Plaintiff desire an exit.
12. On or about 6 April 2023, the Plaintiff entered into a Heads of Agreement (HOA) with Ms Swanepoel to become, what the HOA termed, a 30% "partner" in the Company.
13. On or around 27 April 2023, the Plaintiff entered into an agreement entitled the "Issuance of Shares Agreement" (Shares Agreement) with the Company. The Shares Agreement recorded that the Company would issue an additional allocation of shares equal to 30% of the current Company shares. The Investor, which was the Plaintiff, was to purchase that 30% of the Company's shares for $80,000 plus GST, which was payable within 7 days of signing the contract. The contract contained certain other warranties and conditions precedent. The contract could be terminated by either party for any reason upon 7 days' notice, within 14 days of signing. The Shares Agreement also provided an exit clause, which allowed either party to exit the business in the future. If the plaintiff wanted to exit within the first 12 months, the value of the shares would remain unchanged. If either party wanted to exit after the first 12 months, the business would be valued at market value and the other party would be given the first option to purchase the shares. The Shares Agreement was between the Plaintiff and the Company and it did not detail who was the other party in the context of these clauses.
14. On or about 6 July 2023, the Plaintiff says that he entered into an agreement for the sale of the rent roll to purchase the 10 rent roll managements owned by an entity controlled by Ms Swanepoel. That agreement is recorded as being between Absolute Real Estate Solutions Pty Ltd T/A Executive Estate Agents as the seller and Kanik & Co Real Estate Pty Ltd as the buyer (Rent Roll Agreement). The Plaintiff has executed the Rent Roll Agreement as director of the buyer and Ms Swanepoel has executed it as director of the seller.
15. The Plaintiff was issued 30 shares, out of the total 130 shares, which he complains is not 30% of the total shares in the Company. The Plaintiff submits he only holds 23% of the shares in the Company. The Plaintiff says he has sought the additional shares to take his holding to 30% but these have not been issued to him.
16. The Plaintiff also explains that after the purchase of the shares in the Company he became aware that the operation of the Company was not as he expected. The day-to-day management of the Company was very "loose" and was largely based on working from home. There was also no on the job training for the Plaintiff.
17. The Plaintiff describes his role changing soon after he commenced. The Plaintiff was working for the Company approximately 20 hours a week, while continuing to operate his own business.
18. On about 28 September 2023, the Plaintiff made the decision to leave and advised Ms Swanepoel that he would be exiting and was seeking to be repaid his initial investment. This was within 12 months, and as such he was seeking return of his initial investment. At that time, he was advised by Ms Swanepoel that his contribution of $88,000 was not in a separate bank account for immediate withdrawal but had been spent. The Plaintiff did not have access to the Company's financials and was therefore unable to ascertain what the funds he had paid to the Company for the shares had been used for.
19. On 30 November 2023, the Plaintiff records a conversation wherein it appears he again asked Ms Swanepoel to buy him out of the Company, where she responded that "I can't buy you out, no". Ms Swanepoel also advised that she would provide the Plaintiff with a breakdown to explain where the funds invested had been spent. However, this has never been received by the Plaintiff.
20. The only information that the Plaintiff has regarding the Company (prior to issuing these proceedings, and the Notice to Produce, discussed below), has only been what Ms Swanepoel has provided to him. The Plaintiff does not have access to the financial accounts of the Company and as such is unable to ascertain its financial situation or general direction.
21. On 29 November 2023, the Plaintiff made enquires with the Company's accountant as to the Company's compliance with its taxation obligations. It was by way of this enquiry that the Plaintiff first learned that the Company was on a payment plan with the Australian Taxation Office.
22. The last time the Plaintiff had any involvement in the business of the Company was September 2023. Since then, there has not been any meetings of directors or shareholders of the Company. The Plaintiff has not been provided with any financial statements, nor is he aware of any financial statements being prepared, and further, he does not know whether the Company is still carrying on business.
23. The Plaintiff gives evidence that his last conversation with Ms Swanepoel was on 30 November 2023. Since that date, the Plaintiff has not been able to ascertain the financial situation or the operations of the Company.
24. The Plaintiff made further enquiries of the accountant on 20 December 2023. However, no additional information was provided.
25. On 5 June 2024, the Plaintiff instructed his solicitors to write to Ms Swanepoel's solicitors requesting financial information about the Company. It does not appear that there was any response to this correspondence.
26. On 22 October 2024, the Plaintiff again instructed his solicitors to write to the solicitors for Ms Swanepoel. This letter set out the background to the Company including the shareholdings and directorships, the HOA and the Shares Agreement. Amongst other matters, the letter claimed that the Plaintiff had been excluded from involvement in the management of the affairs of the Company and that information regarding the Company had not been provided to him. Relevantly the letter stated that there has been a clear breakdown in the mutual trust and confidence between the directors and shareholders, such that the Plaintiff would be entitled to seek that the Company be wound up on the just and equitable grounds. No response to that letter was received, which caused the Plaintiff to commence these proceedings.
27. On 25 October 2024, the Plaintiff received two Director Penalty Notices relating to GST and PAYG withholding amounts that the Company had failed to pay.
28. The Plaintiff gives evidence which is uncontradicted that he:

(a) has no access to any of the financial records of the Company;

(b) does not know whether the Company is carrying on business, occupying premises or has any employees; and

(c) is not aware of the circumstances which lead to the Company being liable for the tax amounts, which were then the subject of the Director Penalty Notices.

1. The Plaintiff gives evidence that he has been excluded from management decisions of the Company regarding financial and employment decisions and has been denied access to the financial records of the Company. Furthermore, the Plaintiff does not know whether the Company is carrying on any business or earning any revenue, whether it has any employees or contractors carrying out any work for it, and he does not have any current information regarding the assets or liabilities of the Company.
2. The Plaintiff believes he was misled about several matters when entering into the HOA and the Shares Agreement. The Plaintiff states that he no longer trusts Ms Swanepoel. The Plaintiff is concerned that the Company may be insolvent.

1. Section 461(1)(k) of the Act provides that the Court may order the winding up of a company if the Court is of the opinion that it is just and equitable that the company be wound up. The relevant principles are well settled.
2. Gordon J, then of this Court, summarised the principles in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ACSR 189; [2013] FCA 234 at [19]- [21] as follows:

(2) Winding up under s 461(1)(k) of the Act

1. In the present case, the appointment of a provisional liquidator is sought where the winding up is sought on the just and equitable ground under s 461(1)(k) of the Act. There is no dispute that ASIC has standing to bring an application to wind up a company on the statutory just and equitable ground: ss 462(2) and 464 of the Act. The classes of conduct which justify the winding up of a company on the just and equitable ground are not closed, and each application will depend upon the circumstances of the particular case: Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 374 and 376-379; Australian Securities and Investment Commission v Kingsley Brown Properties Pty Ltd [2005] VSC 506 at [95]- [97]; Nilant v RL & KW Nominees Pty Ltd [2007] WASC 105 at [117]. Nevertheless, it is possible to discern some guiding principles from the authorities.
2. It has long been established that a company may be wound up where there is "a justifiable lack of confidence in the conduct and management of the company's affairs" and thus a risk to the public interest that warrants protection: Loch v John Blackwood Ltd [1924] UKPC 45; [1924] AC 783 at 788. In Australian Securities and Investments Commission v ABC Fund Managers [2001] VSC 383; (2001) 39 ACSR 443 at [119], Warren J (as her Honour then was) set out three "general fundamental principles":

First, there needs to be a lack of confidence in the conduct and management of the affairs of the company ... Second, in these types of circumstances it needs to be demonstrated that there is a risk to the public interest that warrants protection. Third, there is a reluctance on the part of the courts to wind up a solvent company.

(Citation omitted.)

1. In relation to the first, a lack of confidence may arise where, "after examining the entire conduct of the affairs of the company" the Court cannot have confidence in "the propensity of the controllers to comply with obligations, including the keeping of books, records and documents, and looking after the affairs of the company": Galanopoulos v Moustafa [2010] VSC 380 at [32]; see also Australian Securities Commission v AS Nominees Limited [1995] FCA 1663; (1995) 62 FCR 504 at 532-3; ABC Fund Managers at [117]-[118]; Australian Securities and Investments Commission v International Unity Insurance Pty Ltd [2004] FCA 1059; (2004) 22 ACLC 1416 at [135]- [139].

1. In Australian Securities and Investment Commission v Planet Platinum Ltd [2015] VSC 682 at [18], Efthim AsJ succinctly and helpfully described the principles as follows:
   1. A lack of confidence appears to be a foundation for applications for winding up on the just and equitable ground. It relates to the directors' conduct in regard to the company's business. Where there has been a lack of competence in the management and conduct of the affairs of a company, a lack of confidence may arise.

1. The two directors have not spoken to each for more than 15 months. The Plaintiff, who is a director, has no knowledge of the Company's current activities, if any.
2. As part of this litigation, the Plaintiff issued Notices to Produce to the Company and to the other shareholder and First Defendant. Part of the documents received were financial statements, including a balance sheet as at 26 February 2025. That balance sheet recorded only $100 as cash at bank and a tax debt of more than $30,000. It also showed non-current liabilities to Ms Swanepoel (one for each of the 2023 year and one of the 2024 year). Similarly there are recorded, again for each of the 2023 and 2024 years, loans to related entities of Ms Swanepoel. The profit and loss produced on 26 February 2025 records no trading, no income and a modest negative position due to bank fees.
3. The income statement produced for the year ending 30 June 2024 records sales of $129,563 but ends the year with an accumulated loss of $77,613.10. The comparative 2023 year also shows a final negative position of $109,607.26. The balance sheet for the year ended 30 June 2024 records a share capital of $80,100 and associated loans to entities controlled by and associated with Ms Swanepoel totalling $86,295.57.
4. It is apparent that the financial statements were provided by the Company's accountant on 8 October 2024, and these are signed by Ms Swanepoel, as director. Ms Swanepoel has also signed the Company's tax return for the year ending 30 June 2024, which records a loss of $77,613. It is around this time, on 25 October 2024, that the Plaintiff received Director Penalty Notices in relation to amounts of GST and PAYG due and owing by the Company, which it had failed to pay.
5. These matters are worth noting, as despite the Plaintiff's requests for information from Ms Swanepoel, none was provided however, it is clear that Ms Swanepoel was aware of the position of the Company.
6. The Plaintiff continues to agitate his claim that he was not issued 30% of the shares in the Company, but was only issued 23% of the shares. Ms Swanepoel denies that she has breached any agreement in relation to the shares.
7. The Shares Agreement records that the Company will issue "an additional allocation of shares equal to 30% of the current company ...". If the Company at that time had 100 shares, an additional 30% of those shares would be 30 shares. The HOA records "To pay $80,000 + GST in exchange for a share issuance of 30% in the Company". There is an apparent difference between these two provisions. However, it is not necessary for the purposes of this application to consider the proper construction of the Shares Agreement and whether or not the HOA informs its construction.
8. As was observed by Finkelstein J in Booker v You Run the Business Pty Ltd [2008] FCA 1762 at [10], it is not necessary to resolve the issues in dispute, nor to determine who is to blame, what is clear is that the present situation cannot be allowed to continue.
9. This is because there is clearly a fundamental disagreement between the directors and shareholders as to what the correct issuance of shares was pursuant to the agreements between the parties.
10. Further, the Plaintiff's solicitors have made allegations against Ms Swanepoel regarding the use of the Company's funds. These have been denied, with a response "However, if your client holds concerns about the propriety of certain transactions, that is a matter for the Company (or any future liquidators) to explore." This is consistent with the position taken by the First Defendant that it consents to the winding up of the Company.
11. It is clear and the Plaintiff (one of the directors of the Company) gives evidence that he has lost trust and confidence in Ms Swanepoel, the other director of the Company. This is in circumstances where there has been a break down in communications, a lack of information being provided to the Plaintiff and matters occurring within the Company without the Plaintiff's knowledge.
12. I am satisfied that there has been an irretrievable breakdown in the relationship between the members of the company, and that the company's operations in the future would, therefore, not be able to be conducted in any commercially viable and sensible way: Johnny Ocean Restaurant Pty Ltd v Page [2003] NSWSC 952 at [32].
13. In such circumstances, I am of the opinion that it is just and equitable to wind up the Company.

I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wheatley.