[2013] FCA 284
Australian Securities and Investments Commission v Plymin (No 1) (2003) 175 FLR 124[2011] NSWSC 186
Bideena Pty Ltd as trustee for Bideena Pty Ltd Superannuation (2016) 334 ALR 146[2016] NSWSC 735
Briginshaw v Briginshaw (1938) 60 CLR 336[1938] HCA 34
Campbell v BackOffice Investments Pty Ltd (2008) 66 ACSR 359[2008] NSWCA 95
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304[2004] VSCA 54
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688[2005] NSWCA 243
LPD Holdings (Aust) Pty Ltd v Phillips (2013) 281 FLR 227157 ALR 615[1998] FCA 1200
Re a companyex parte Shooter (No 2) [1991] BCLC 267[1991] BCC 44
Re Brenfield Squash Racquets Club Ltd [1996] 2 BCLC 184
Re Enterprise Gold Mines NL (1991) 3 ACSR 531[2004] FCAFC 153
Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213[2003] NSWSC 910
Watson v Foxman (1995) 49 NSWLR 315
Wayde v NSW Rugby League Ltd (1985) 180 CLR 459[1985] HCA 68
White Constructions (ACT) Pty Ltd (in liq) v White (2004) 49 ACSR 220
Judgment (76 paragraphs)
[1]
) v Rodrick [2013] QCA 372
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Joint v Stephens [2008] VSCA 210
Lewis (as liquidator of Doran Constructions Pty Ltd (in liq)) v Doran (2005) 219 ALR 555; [2005] NSWCA 243
LPD Holdings (Aust) Pty Ltd v Phillips (2013) 281 FLR 227; [2013] QSC 225
Lucy v Lomas [2002] NSWSC 448
Lukaszewicz v Polish Club Ltd [2019] NSWSC 446
Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692
Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133
Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342
Patterson v Humfrey [2014] WASC 446
Quick v Stoland Pty Ltd (1998) 87 FLR 371; 157 ALR 615; [1998] FCA 1200
Re a company; ex parte Shooter (No 2) [1991] BCLC 267; [1991] BCC 44
Re Brenfield Squash Racquets Club Ltd [1996] 2 BCLC 184
Re Enterprise Gold Mines NL (1991) 3 ACSR 531; (1991) 9 ACLC 168
Re Quest Exploration Pty Ltd (1992) 6 ACSR 659
Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd (2004) 207 ALR 136; [2004] FCAFC 153
Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213; [2001] NSWSC 621
SX Projects Pty Ltd (in liq) v Battaglia [2018] NSWSC 1830
Taxa Australia Pty Ltd v Wang [2016] NSWSC 1913
Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168
United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514; [2003] NSWSC 910
Watson v Foxman (1995) 49 NSWLR 315
Wayde v NSW Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68
White Constructions (ACT) Pty Ltd (in liq) v White (2004) 49 ACSR 220; [2004] NSWSC 71
Zhong v Shield Resources Pty Ltd [2023] NSWSC 1611
Texts Cited: ASIC, Regulatory Guide 217, "Duty to prevent insolvent trading"
Category: Principal judgment
Parties: Xuxu Li (First Plaintiff)
Kevin Ross Waters-Marsh (Second Plaintiff)
Xiaosi Chaney Qian (Third Plaintiff)
Mana Assets Management Pty Ltd (Fourth Plaintiff)
XCQ Holdings Pty Ltd (Fifth Plaintiff)
Phoenix Group Australia Pty Ltd (Sixth Plaintiff)
Feng Ye (First Defendant)
Thomas Gem Stone Pty Ltd in its own right and in its capacity as trustee of the Ye Family Trust (ABN 39 218 802 573) (Second Defendant)
Shield Formply Australia Pty Ltd (Third Defendant)
Shield Resources Pty Ltd (Fourth Defendant)
Shield Holdings Australia Pty Ltd (Fifth Defendant)
Shield Holdings South Australia Pty Ltd (Sixth Defendant)
Shield Hardwood Pty Ltd (Seventh Defendant)
Shield Intermodal Pty Ltd (Eighth Defendant)
Shield Equipment Qld Pty Ltd (Ninth Defendant)
Shield Timber SA Pty Ltd (Tenth Defendant)
Shield Biomass Energy Pty Ltd (Eleventh Defendant)
Shield Equipment Pty Ltd (Twelfth Defendant)
Shield Construction Material Group Pty Ltd (Thirteenth Defendant)
Oz Plantation and Hewer Pty Ltd (Fourteenth Defendant)
Representation: Counsel:
M R Elliott SC / B Goodyear (Plaintiffs)
J C Kelly SC / A E Maroya (Defendants)
The parties are shareholders in what I will call the Shield Group of companies. The Shield Group is involved in a timber business, operating out of Queensland and South Australia.
The principal protagonists are the first plaintiff, Ms Xuxu Li, the second plaintiff, Ms Li's husband, Mr Kevin Waters-Marsh, and the third plaintiff, Mr Xiaosi Qian, on the one hand, and the first defendant, Mr Feng Ye, on the other. During the hearing, the parties adopted the convention of referring to these individuals by the given names by which they are known: Suzie, Kevin, Robin and Thomas respectively. I will do the same.
A chart showing the various members of the Shield Group, and how Suzie, Kevin, Robin and Thomas and their related corporate entities, as well as other entities, hold their shares, is attached. The document also shows of which companies the individuals are directors. Annexure 1 - Share Structure Diagram
During the hearing, attention focused on eight of the Shield Group companies:
1. Shield Resources Pty Ltd ("Shield Resources"), the fourth defendant;
2. Shield Hardwood Pty Ltd ("Shield Hardwood"), the seventh defendant;
3. Shield Holdings South Australia Pty Ltd ("Shield Holdings South Australia"), the sixth defendant;
4. Shield Formply Australia Pty Ltd ("Shield Formply"), the third defendant;
5. Shield Holdings Australia Pty Ltd ("Shield Holdings Australia"), the fifth defendant; and
6. three subsidiaries of Shield Holdings Australia, that is:
1. Shield Equipment Pty Ltd ("Shield Equipment"), the twelfth defendant;
2. Shield Timber SA Pty Ltd ("Shield Timber SA"), the tenth defendant; and
3. Shield Intermodal Pty Ltd ("Shield Intermodal"), the eighth defendant.
A document showing the shareholding in those companies, and their operations, is attached. Annexure 2 - Shareholding Table
Thomas is a director of each company in the Shield Group. Through his company, Thomas Gem Stone Pty Ltd, the second defendant ("Thomas Gem Stone"), Thomas holds the majority of shares in each company. Thomas said that he "was educated at Xiamen University in Economics" and that he "worked for [the] government of the PRC in the administration and management of timber resources from about 1991 to 1998, before going into business for myself".
He deposed that:
"I have been involved in the timber industry in Australia and elsewhere for the past 17 or more years. I set up a plywood manufacturing plant in Beihai in the People's Republic of China in 2012. Part of the timber business I conducted after the Beihai plant became operational was the export of logs from Australia to the PRC for the manufacture of different varieties of plywood."
[4]
The claims in the proceedings
Suzie, Kevin and Robin (together, the "Plaintiffs") bring a number of claims against Thomas.
As articulated in their Amended Commercial List Statement, Suzie and Robin claim that they have been oppressed in the manner proscribed by s 233 of the Corporations Act 2001 (Cth) (the "Act") by Thomas's conduct in allegedly:
1. failing to agree, as Thomas is said to have represented he would, on a "fair" redistribution of shares in the Shield Group having regard to Suzie's and Robin's contributions to the business;
2. seriously mismanaging the construction of the sawmill located on a property at Nangwarry in South Australia owned by Shield Holdings South Australia (the "Nangwarry Property");
3. engaging in various acts said to be attempts to "remove or diminish" Suzie;
4. diverting the funds of various companies in the Shield Group for his own benefit;
5. refusing to pay monthly payments due under a loan of $4.8 million from Judo Bank Limited to Shield Formply;
6. refusing to pay Suzie, Robin and Kevin arrears of salary and entitlements and refusing to repay loans advanced by Suzie and Robin to various companies in the Shield Group.
Suzie also makes a number of claims in relation to a property at Chinchilla in Queensland (the "Chinchilla Property") which is registered in the name of Thomas Gem Stone.
Suzie and Robin seek:
1. orders that Thomas and Thomas Gem Stone transfer to them and their associated companies:
1. for no consideration, their shares in Shield Resources, Shield Hardwood, Shield Formply, Shield Holdings Australia and Shield Holdings South Australia so that Suzie and Robin or their companies hold 30% and 20% respectively, a combined 50% share, in each of those Shield Group companies; and
2. for $31,309, [1] their remaining shares in those Shield Group companies, three-fifths to Suzie or her company and two-fifths to Robin or his company;
1. a declaration that the Chinchilla Property is held on trust for Shield Resources and consequential orders including that it be transferred to Shield Resources;
2. an order that Thomas be removed as a director of each of the companies in the Shield Group;
3. an order rescinding a resolution of Shield Holdings Australia made on 12 September 2023 pursuant to which family members of Thomas were appointed directors; and
4. orders that Thomas "repay" monies to certain companies in the Shield Group.
[5]
The wider background
All of these claims must be seen against the wider background that:
1. the relationship between the parties has irretrievably broken down;
2. the Shield Group is, if not actually insolvent, close to insolvency;
3. Thomas has, since November 2023, been excluded from any management role in the Shield Group;
4. none of the companies in the Shield Group has a functional board of directors; and
5. the affairs of the Shield Group are presently being conducted by the minority shareholders, Suzie and Robin, who have excluded Thomas from any management role, and who seek to have Thomas transfer to them his shares so they can somehow trade out of the Shield Group's present financial state.
[6]
The principal Shield Group entities
Before considering the various claims made in the proceedings, I will outline the role of the principal Shield Group entities.
[7]
Shield Resources Pty Ltd
Shield Resources conducts a softwood log export business using a facility in Bordertown and the Nangwarry Property in South Australia.
This was the company in association with which Thomas and Suzie first conducted a timber business together. They started working in this way in 2016 having known each other previously through a series of unrelated activities. Thomas suggested to Suzie that they work together on a business that would manufacture timber veneer in Australia, export it to China to be used to manufacture formply, a timber composite used by concreters for formworking, with such formply then being imported into Australia for sale here. Thomas had an interest in a factory in China that made formply. He had previously imported formply from China to Australia.
Thomas and Suzie agreed that they would be directors and make decisions together, that Suzie would be the Chief Executive Officer on a salary of $150,000 per annum and have an initial 4% shareholding; 2% held in Phoenix Group Australia Pty Ltd ("Phoenix Group Australia"), a company associated with Suzie and Kevin, and 2% held by Thomas for her.
Suzie's initial 4% shareholding increased to 6% in 2019, evidently in recognition of the role she was playing in the company, and then to 30% in 2022 in recognition of her role in securing funding to refinance the purchase by Shield Holdings South Australia of the Nangwarry Property, where a sawmilling operation is currently to be carried out.
Thomas, through Thomas Gem Stone, now holds 69.5% of the shares in Shield Resources and Suzie, through Mana Assets, holds 30%. A non-party, evidently supportive of Suzie's position, Awake (K&T) Pty Ltd ("Awake"), holds the remaining 0.5%.
Shield Resources has been supported financially in two ways. First, it is supported by loans from external parties which were organised when Thomas was not able to locate funding. One of those parties is Mr Yuping Zhong who in December 2023 obtained a judgment for $1.5 million against Shield Resources. [2] That judgment, and a further amount due to Mr Wang Yang of $3 million, has not been repaid.
Second, Shield Resources has been supported by Suzie and Robin through the provision of loan funds. Suzie contends that she is owed some $1.3 million and Robin contends he is owed some $2.36 million as well as an amount in the order of US$1.6 million.
[8]
Shield Hardwood Pty Ltd
Shield Hardwood is the operator of a hardwood timber export business carried out at the Chinchilla Property.
In 2018, Thomas Gem Stone acquired the Chinchilla Property from which Shield Hardwood now conducts this business. There is controversy about the circumstances in which this acquisition took place. I refer to this below. [3]
Thomas, through Thomas Gem Stone, holds 94% of the shares in Shield Hardwood. Phoenix Group Australia holds the balance of 6%.
[9]
Shield Holdings South Australia Pty Ltd
Shield Holdings South Australia is the owner of the Nangwarry Property from which Shield Resources carries out the softwood timber export business. Its function is to hold that property.
Thomas, through Thomas Gem Stone, holds 69% of the shares in this company. Suzie, through Mana Assets, holds 30% of the shares and Awake holds the balance of 1%.
It was Suzie's role in procuring the refinancing of the loan taken out by Shield Holdings South Australia to purchase the Nangwarry Property that led to her shareholding in Shield Resources being increased from 6% to 30% in 2022.
[10]
Shield Formply Australia Pty Ltd
Shield Formply was once used by Thomas to conduct the formply import business to which I have referred. [4]
It is now the borrower of funds that have been used to finance the operation of the South Australian softwood timber export business, and is currently indebted to Judo Bank in the sum of $4.8 million.
Thomas currently holds 70% of the shares in Shield Formply, with Suzie and Robin holding 20% and 5% of the shares respectively. Ms Rita Zhou holds the remaining 5% of shares.
[11]
Shield Holdings Australia Pty Ltd
Shield Holdings Australia was incorporated on 9 May 2023 at a time when the parties were contemplating the "restructure" of the Shield Group to which I will return. [5]
Shield Holdings Australia is the ultimate holding company of:
1. Shield Equipment, which owns the sawmill production equipment at the Nangwarry Property;
2. Shield Timber SA, which is the proposed operator of the sawmill operation the Nangwarry Property; and
3. Shield Intermodal, which employs and manages staff in South Australia.
Thomas, through Thomas Gem Stone, holds 64% of the shares in Shield Holdings Australia, and thus, in effect, the three companies referred to in the preceding paragraph. Suzie, through Mana Assets, holds 20% and Robin, through XCQ Holdings, holds the remaining 16%.
[12]
The parlous state of the Shield Group
All parties agree that the relationship of trust and confidence that hitherto existed between Suzie, Kevin and Robin on the one hand, and Thomas on the other, has broken down.
Thus, in their closing submissions, Mr Elliott SC and Mr Goodyear, who appeared for the plaintiffs, accepted:
"There is no question that the relations between Thomas, Suzie and Robin have completely broken down. They cannot continue in business together, and absent some other order better suited to address the present circumstances and rights of the respective parties, the appropriate order would appear to be one for the winding up of all companies in the Group …
The relationship between the parties is the same across the Group - Suzie is Suzie no matter which director cap she may be wearing at any one time, and so is Thomas. Therefore, if the relationship between them has broken down to a degree to justify winding up on the 'just and equitable' ground, then it would do so for all companies [in the Group]."
Because of that breakdown in relations, none of the companies in the Shield Group has a functional board of directors.
There is also an issue as to the solvency of companies in the Shield Group.
In that regard, the parties' submissions focused on the question of the solvency of Shield Resources.
Shield Resources is the principal trading company in the Shield Group and, as I have said, exports softwood from South Australia, manages the lease agreement for the Bordertown facility, and manages the operational machinery in South Australia. It also employs all staff for the Shield Group, apart from in Queensland. Mr Elliott and Mr Goodyear submitted that Shield Resources "plays an integral part in the operations of the Shield Group" and is the "face of the Shield Group".
[13]
The test for solvency
A company is "solvent if, and only if, [it] is able to pay all [its] debts, as and when they become due and payable". [6] If Shield Resources does not meet that definition, it is necessarily insolvent. [7]
Mr Elliott and Mr Goodyear pointed to the recent summary by Black J of the principles concerning insolvency in In the matter of Pacific Plumbing Group Pty Ltd (in liq). [8] His Honour said the relevant test:
"…adopts a 'cash flow test' of insolvency which turns upon the income sources available to the company and the expenditure obligations that it has to meet, although a balance sheet test can provide context for the application of the cash flow test [9] …
In Quick v Stoland Pty Ltd, [10] Emmett J summarised the applicable principles as follows:
'In order to determine whether the company was solvent at a given time, it would be relevant to consider the following matters:
• All of the company's debts as at that time in order to determine when those debts were due and payable.
• All of the assets of the company as at that time in order to determine the extent to which those assets were liquid or were realisable within a timeframe that would allow each of the debts to be paid as and when it became payable.
• The company's business as at that time in order to determine its expected net cash flow from the business by deducting from projected future sales the cash expenses which would be necessary to generate those sales.
• Arrangements between the company and prospective lenders, such as its bankers and shareholders, in order to determine whether any shortfall in liquid and realisable assets and cash flow could be made up by borrowings which would be repayable at a time later than the debts'." [11]
In relation to the arrangements between the company in question and "prospective lenders", Black J said in In the matter of Custom Bus Australia Pty Ltd (in liq): [12]
"The case law indicates that whether a company is able to pay its debts as and when they fall due and payable is a question of facts to be determined objectively and without hindsight in all the circumstances, including the nature of its assets and business, and the Court will have regard to commercial realities in that regard. [13]
In assessing a company's capacity to pay its debts, the Court should have regard to all of the assets of the company as at the relevant time in order to determine the extent to which those assets were liquid or realisable within a timeframe that would allow each of the debts to be paid as and when they became due. Apart from an assessment of the company's own assets, regard can also properly be had to funds which the company can borrow, on a secured or unsecured basis, or otherwise obtain from lenders or shareholders and which were, as a matter of commercial reality, available to the company to enable its debts to be paid. The case law recognises that, in determining a company's solvency, the Court may have regard to the likelihood that it will have funds available to it from sources with which it has no formalised agreement or understanding, including loans from its directors or from third parties, at least if they are not repayable in the short term, and the company's ability to borrow funds can also be taken into account." [14]
[14]
The 1 June 2024 Facility Agreement
So far as concerns Shield Resources, in closing oral submissions Mr Elliott accepted that "[t]he solvency question ultimately turns on your Honour's view about the $12 million facility that [Suzie and Robin] have obtained".
Mr Elliott was referring to a "Facility Agreement" dated 1 June 2024 expressed to be between Mana Assets as borrower and Mr Zhongping Huang and Ms Jia Zhaou as lenders, according to the terms of which Mr Huang and Ms Zhaou have agreed to lend Mana Assets $12 million.
The Facility Agreement is dated 1 June 2024; the Saturday before the hearing of these proceedings commenced. Suzie said that she had first approached the lenders on 30 or 31 May 2024; the Thursday or Friday before the hearing commenced.
According to the terms of that Facility Agreement, the lenders have agreed to make available to Mana Assets a "facility" of $12 million to be applied by Mana Assets "for the purpose of the operational funding needs of the Shield Group from time to time" and for an "availability period" of five years.
An interest rate of 10% per annum is specified, but this is subject to cl 9 which provides:
"9. INTEREST
9.1 Interest free period
(a) Subject to Clause 9.1(b) below, no interest accrues on any Loan.
(b) The Lender may issue the Borrower with written notice that interest will accrue on all Loans in accordance with Clause 9.2 on and from a date falling not less than one (1) Month after the date of the notice issued pursuant to this Clause 9.1(b).
9.2 Calculation of interest
The rate of interest on each Loan is the Interest Rate.
9.3 Payment of interest
(a) The Borrower must pay accrued interest on each Loan annually.
(b) All accrued but not yet paid interest shall be paid by the Borrower to the Lender on the Final Repayment Date." (Emphasis in original.)
Thus, according to the terms of the Facility Agreement, the advance of $12 million is interest free unless the lenders decide otherwise.
The Facility Agreement makes no provision for security.
In cross-examination, Suzie said that:
1. she had met the lenders, who are a couple who live in "the Crown building" in Sydney;
2. the lenders had agreed to fund the needs of Shield Resources;
3. the terms on which the lenders had agreed to advance the funds were wholly contained in the Facility Agreement; and
4. the lenders had $12 million available to provide pursuant to the Facility Agreement and had shown Suzie, on their mobile telephones, their bank statement showing the availability of the funds.
[15]
The other funds available
The other funds that Suzie and Robin contend are available to Shield Resources comprise:
1. liquid funds of $2,635,229 in the bank account of Mana Assets; and
2. liquid funds of RMB¥6,524,799 in Robin's bank account.
[16]
The conditional availability of these funds
The funds that Suzie or Robin, through their companies, could make available to Shield Resources are not available unconditionally.
Thus Suzie deposed:
"As I have previously said, I am reluctant to proceed with lending more money to the Shield Group in circumstances where Thomas is trying to wind the company up. I have no doubt these borrowings can be proceeded with should that attack on the company be removed."
Robin gave evidence to similar effect.
In cross-examination, Mr Kelly asked Suzie about a judgment entered against Shield Resources in favour Mr Yuping Zhong of $1,151,465.06 by Fagan J on 18 December 2023. [16]
This exchange occurred:
"Q. Well, what I suggest is, Shield Resources cannot do it because it does not have the capacity itself, or by anyone who is supporting it, to pay that judgment debt.
A. You're wrong.
Q. Let us look at the situation today. Are you saying to the Court that Shield Resources has the financial capacity or a supporting avenue under which it can and will pay that judgment debt?
A. Yes.
Q. What is that source of funds?
A. They will come from me or me and Robin, and to be most specific, it will come from me.
Q. You're saying, are you, that you personally --
A. Yeah.
Q. -- will lend to Shield Resources whatever money is necessary to pay that judgment debt?
A. Yes.
Q. There are no conditions to that support?
A. When you say no conditions, what do you mean?
Q. Is it a condition of your making those funds available to Shield Resources that the shareholding structure in Shield Resources should change?
A. Shield - Shield, well, we're here today is to talking about the Shield - Shield's group's shareholding structures, but apart from that, which will be decided by - by this Court, and if the judgment come to us, to Shield Resources, and Shield Resources need to pay, I will provide that support.
Q. Unconditionally?
A. At this stage I think so.
HIS HONOUR
Q. Even if Mana's shareholding remains at 30%?
A. Well, again, I said that's not my claim in this Court, and I'm expecting I would able to get the relief I'm asking for in this Court, and that meanwhile, and the business carry on as usual, and if the judgment coming at this stage saying okay, you've got to pay, this is amount, go pay it, and we have to pay it.
Q. So you'll lend Resources the money to pay the Zhong debt, what, if you get the relief from me that you're asking for. Is that it?
A. Okay, like - it's two different things, all right? One thing is if the judgment come - if whatever the proceeding is, and the Zhong's lawyer come to us say, this is judgment, this is what you need to pay, and then we have to pay it, and regardless what the structure is. Another thing is, I'm here today because all the reasons [I'm] telling your Honour, and why I think we should get relief from you, as another matter. If at the end of day, and we got the relief, and it separate from Zhong's matter. I - is that clear?" (Emphasis added.)
[17]
The expert opinions
Both sides adduced expert evidence in relation to the solvency of Shield Resources.
Suzie, Robin and Kevin relied upon a report from Mr Scott Kershaw of 21 June 2024.
Thomas relied upon a report from Mr Alan Walker of 19 June 2024 together with a "Solvency Report Memo" that Mr Walker prepared on 24 June 2024 which provides a summary of the "agreed and disagreed position" between the two experts.
Although time was allocated during the hearing for cross-examination of these experts, neither expert was cross-examined.
In his Solvency Report Memo, Mr Walker said that the following matters were common ground:
"Both experts agree that [Shield Resources] is loss making and has recorded cumulative losses of $3.98 million for FY22-FY24.
Both experts agree that no opinion can be provided as to the future financial performance of [Shield Resources] and whether it can service any new debt should it be secured given the lack of information provided.
Both experts agree that there are material omissions in the Financial Statements provided.
Both experts agree that [Shield Resources] may be insolvent on a balance sheet basis."
Mr Walker opined that Shield Resources is insolvent.
Mr Walker pointed to the general indicators of insolvency in the ASIC Regulatory Guide 217 [17] and concluded that six of those indicators were present, namely:
1. Shield Resources has a history of continuing trading losses;
2. Shield Resources is experiencing cash flow difficulties;
3. creditors are not being paid on agreed trading terms;
4. legal action has been commenced against Shield Resources and judgment has been entered against it; [18]
5. Shield Resources is unable to produce accurate financial information on a timely basis; and
6. it is not certain that Shield Resources has assets that can be sold in a relatively short period of time to provide funds to help meet debts owed, without affecting the company's ongoing ability to continue to trade profitably.
Mr Walker pointed out that "the company has previously been funded by shareholder loans and deferral of employee entitlements" and that both Suzie and Robin "have demanded the repayment of their loans in October 2023 and April 2024 respectively". Mr Walker also expressed scepticism as to the 1 June 2024 Facility Agreement and, evidently, did not take it into account when concluding "I do not consider that the company will be able to raise sufficient funds to meet its liabilities as and when they fall due".
[18]
Vcoco
On 6 October 2023, Robin, as Chief Financial Officer, sent Suzie and Thomas an email attaching a document entitled "Shield Debt Amounts as of 6 October 2023".
One of the debts recorded was to an entity described as "Vcoco" for $11.5 million.
That entry appeared to relate to another document known as the "Vcoco Trust Account Ledger" or the "Vcoco Family Trust Ledger" which, as Mr Elliott and Mr Goodyear accepted in their closing written submissions, "at first blush … looks like a ledger recording investments that Vcoco did in fact make".
Nonetheless each of Suzie and Robin gave evidence that, although Vcoco was initially interested in investing in the Shield Group, no investment was ever made.
However, on the face of it, the Vcoco Trust Account Ledger suggests that, as at 8 June 2023, Vcoco (whoever that is) had advanced $5,729,430 to one or other Shield Group entity, including substantial sums in cash and that, on one reading of the document, a further $6 million was to be invested.
In his affidavit, Robin said that:
"I … created a spreadsheet ledger, titled 'Vcoco Trust Account Ledger' accounting for all of my friends I had borrowed money from, in order to lend to the Shield Group, who would be paid back from the Vcoco investment."
Mr Elliott and Mr Goodyear submitted:
"In other words, it was simply a list showing people from whom Robin had borrowed money, and the amounts he borrowed (which he on-lent to the Shield Group). It was a list of people who Robin planned to repay, if Vcoco made the investment. As he explained at the hearing …
Q. Why did you call the 'Vcoco Family Trust ledger'?
A. Because, look, we were intending to repay this amount from Vcoco's investment."
The matter does not seem to be as simple as this.
The Vcoco Trust Account Ledger appears to suggest that, as at 8 June 2023, "Vcoco" had advanced to one or other Shield Group entity $5,729,430. Robin's 6 October 2023 document records an indebtedness from the Shield Group to Vcoco of $11.5 million.
Robin gave this evidence in response to my questions concerning the Vcoco Trust Account Ledger:
"Q. I'll ask this question. What does this record?
A. It's a record - look, as I said, look. Because of the Vcoco potential investment and - and the loan negotiation processing time, during - during the period of procession time, we were short of cash flow. Then I borrowed from one - from my friend, several friend. I said one of friends I borrowed from, one of the lender is Mr Oo who is based in - in Queensland. I borrowed around - I borrowed twice. One is in - there's August 2022, I borrowed $1.5 million from him. There's another one from January 2023, it's $1 million. He is in the show form of business and in construction industry. He said, 'Look, I have some cash. You want to borrow?' At that point in time no matter what kind of form of the funds, we have to take it. That's a reason, you know. He passed me around $2.5 million cash from - because that's from out of his out of tax pocket. That's the reason I borrowed that.
Q. What do the transfers and cash deposits on this document record?
A. That's, you know, look, for - for example the first one, that a cash deposit, you know. I put into Shield Resource's account. That's the amount I borrowed from my friend, Mr Oo, and the second one, yes, the second one, yes, I - that's the part of the $2.5 million cash. Then the third one, yes, it is, and then I have a look.
Q. Why did you call [it] the 'Vcoco Family Trust ledger'?
A. Because, look, we were intending to repay this amount from Vcoco's investment." (Emphasis added.)
[19]
Loans to the Shield Group by Robin's "friends"
On 29 September 2023, Suzie sent an email to Robin and Thomas suspending discussions in relation to the proposed "restructure" of the Shield Group. I will return to this subject below. [19] For present purposes, the point is that Suzie said in this email:
"All the fund sourced by Robin and injected to Shield Businesses will be personal loan of Robin and Robin will be personally liable for the any liability raised from third parties."
Robin replied to the email, several hours later, saying "confirmed and agreed".
Robin gave this evidence in relation to the arrangement suggested in Suzie's email:
"Q. The words, 'All the funds sourced by Robin and injected to Shield Businesses,' when you read that, you understood it to be a reference, did you, to the funds listed in a document that you had earlier circulated entitled Vcoco Family Trust.
A. No, I didn't refer to the ledger. I didn't refer to all the funds I released from third parties. …
Q. What amount of money did you have in mind when you first read a reference to all the funds sourced by Robin [and injected to] Shield Businesses?
…
A. Eight or nine million dollars from my memory as if we put the..(not transcribable)..on that particular date, 29 September 2023, my memory is around eight or nine million dollars.
Q. So is this right, when you first got Suzie's email and read that numbered paragraph 5 and saw that she was telling you that all the funds sourced by you and injected to the Shield businesses will be a personal loan of you?
A. Yes, because I --
Q. Let me finish. You understood her to be saying that some eight or nine million dollars would thus be taken up by you as a personal loan.
A. Yes, I know that because those funds are from my friends, and the - then to me, then into the Shield Business, because if you don't know Shield Business, they don't know who Thomas are, who Suzie are - who Suzie is, who Thomas is, and they rely on me and if this new structure has to be stopped, then I personally need to stand out and to, you know, to pay the loan from my friends -"
Robin then gave this evidence in answer to questions from me:
"Q. What did you understand Suzie to mean by [the paragraph set out at [94] above] ?
A. Pardon?
Q. What did you understand her to mean by what she wrote in paragraph-
A. I understand because those friends I - I rang my friends or us an agreement-
Q. No, no, no, what did you understand Suzie to mean when she wrote what's in paragraph 5 [in her 29 September 2023 email]? Being something to which you agreed, apparently.
A. Yes, Suzie in - in the item five, Suzie said all the funds are raised. All the fund - all from - I've ordered from my friends, we all - I will be person reliable for those, and I agreed. I agree.
Q. You mean liable to pay them to Shield?
A. No, I - I'm liable to pay to my friends. I'm responsible for chasing the loans from Shield, and then repay to my friends. That's what my understanding was."
[20]
Conclusion on solvency
This evidence bespeaks a most unsatisfactory state of affairs concerning the financial records of the Shield Group.
The present position is that Shield Resources does not have the benefit of the facility purportedly represented by the 1 June 2024 Facility Agreement that Suzie has said Mana Assets would make available assuming she were to achieve success in these proceedings; that is, assuming that I were to order that Thomas transfer his shares in the Shield Group companies to Suzie and Robin in the manner I have set out above. Further, the present position is that Suzie, Robin and Kevin have demanded that the monies they contend are due to them, being the loans and unpaid salary, be paid.
Mr Kershaw's tentative opinion that Shield Resources is solvent is made on the assumptions that Mana Assets will be able to draw on the $12 million under the 1 June 2024 Facility Agreement, and on-lend that sum to Shield Resources, and that the shareholder entitlements of some $3.1 million are not due and payable.
As I have said, I have grave reservations about whether any funds are available to Mana Assets by reason of the 1 June 2024 Facility Agreement. In any event, Mana Asset's preparedness to advance any such funds to Shield Resources is conditional in the manner I have described; suggesting that, at the moment, Shield Resources is likely insolvent.
The position might be different were I to order that Thomas transfer his shares in the Shield Group companies to Suzie and Robin and were Mana Assets to draw on the $12 million under the 1 June 2024 Facility Agreement and on-lend those funds to Shield Resources. But even then, and assuming the correctness of the very tentative conclusions that Mr Kershaw has expressed, it is by no means clear to me that Shield Resources could continue to trade solvently.
Suzie has described her ambitions in this regard as follows:
"If Robin and I were allowed to buy out Thomas's interest in the Shield Group companies, I would continue to operate all of the arms of the Business with a view to generating cash flows that could be used across the different activities, with the objective of making it an overall success and generating a return … I would be holding off seeking full payment of loan monies from the companies that owe me or Mana Assets money so as to allow this to happen."
[21]
Alleged oppression - principles
Section 233 of the Act enables the Court to make an order that a company be wound up or for the purchase of any shares by any member of the company.
Section 232 of the Act provides:
"The Court may make an order under section 233 if:
(a) the conduct of a company's affairs; or
(b) an actual or proposed act or omission by or on behalf of a company; or
(c) a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d) contrary to the interests of the members as a whole; or
(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company."
There was no dispute about the principles to be applied.
They are: [21]
1. The test of oppression is an objective one of unfairness. [22]
2. The Court must look to determine whether on the balance of probabilities the objective commercial bystander would be satisfied that the affairs of the company were being conducted unfairly. [23]
3. A director may act oppressively in the sense relevant to the operation of s 232 and yet not breach any fiduciary or other duty owed as a director. [24]
4. Conduct of a company's affairs may be oppressive even though the conduct is otherwise lawful. [25]
5. Conduct that has the effect of paralysing a company in the operation of its business is properly characterised as conduct contrary to the interests of the members as a whole. [26]
6. A shareholder of 50% of the shares in a company can seek relief for oppressive conduct because they do not have control in the form of power to prevent the oppression, particularly where individual strong arm tactics are used. [27]
7. The Court must formulate an opinion about oppression or unfair prejudice as at the date of the institution of proceedings and the issue of relief under s 233 must be determined as at the date of the hearing. [28]
8. The discretion under s 233 is wide as to the appropriate remedy. [29]
9. The nature of the remedy chosen by the Court under s 233 will be dependent upon the conclusions drawn by the Court as to the type of oppression with which the Court is dealing and the Court will choose the remedy which is least intrusive. [30]
10. The aim of any order under s 233 must be to put an end to the oppression. [31]
11. The Court should only look to wind up an otherwise solvent company as a "last resort". [32]
12. As a remedy for oppression, an oppressor can be ordered to sell their shares to the oppressed party. [33]
13. If an order is to be made for the purchase of shares under s 233 the task of the Court is to fix a price that represents a fair value in all the circumstances. [34]
[22]
Alleged oppression - the "restructure"
Mr Elliott and Mr Goodyear described this claim as the "backbone" of the Plaintiffs' oppression claim.
The allegation in the Plaintiffs' Amended Commercial List Statement is that:
"From time to time, Thomas has represented to Suzie and Robin that the ongoing financial support that Suzie and [Robin] [38] were providing in these regards would be recognised and rewarded when there was a restructure of the Shield Group later on, at which time they would sit down and agree on a fair distribution of shares in the Shield Group companies having regard to their contributions to the Business, including their ability to source and obtain funding for its continued operations and survival."
[23]
The course of events concerning the restructure
Suzie's evidence concerning the restructure commenced with her account of a conversation she said she had with Thomas in around 2017.
At that time, Suzie had, in effect, a 4% shareholding in Shield Resources. Thomas personally, or through Thomas Gem Stone, held the remaining shares in the Shield Group.
Suzie deposed that Thomas said:
"Thomas said to me and Robin … that we would have a three-way relationship each bringing our own skills - Thomas as timber expert, me in the CEO role … and Robin looking after financial management.
… Thomas said … that we would all need to sit down later once the funding for the major works required to build the factory had been sorted out, and agree then on a fair split of the shares between us."
Suzie said that in March 2018 she had another discussion with Thomas "along the same lines" and that:
"Thomas said to Robin and me that we were so important to the Business and that we were 'unbreakable' and 'like an iron triangle'. He said that right now he was holding the shares for all of us, but when funding arrived for the major works, he would redistribute the shares as part of a restructuring of the Business and its ownership. He referred to this future 'restructure' on a number of occasions over time."
Robin said that in around late 2018:
"… Thomas said that once the Shield Group was profitable and we obtained investments from third parties, Suzie, Thomas and I would sit down and work out how we should allocate the shareholdings to reward us for our respective efforts."
As Mr Kelly and Mr Maroya pointed out, the evidence of Suzie and Robin is consistent insofar as it suggests an agreement to agree upon some future date, but is inconsistent insofar as it concerns the occasion when any such negotiation was to take place. Suzie said it was when funding for building the factory had been "sorted out", [39] whereas Robin said it was when the Shield Group had achieved "profitability" and "investments from third parties". The two are, obviously, very different.
Suzie also deposed:
"… from June 2021 to 23 April 2023, I did not receive any salary or superannuation payments. In around May 2021, Thomas spoke to me and said to me that the Business could not afford to pay me any salary or superannuation, and he told me that I would be rewarded for my patience when the restructuring occurred."
[24]
Events in 2023
By 2023, relations between Thomas and Suzie had deteriorated. Thomas deposed that:
"Since February 2022, things have been very tense between Suzie and myself. We are barely on speaking terms. When we do speak, our conversation always ends up in an argument. Suzie blames me for her giving a mortgage over her home and a personal guarantee to support the borrowing that she negotiated to complete the purchase of the [Nangwarry Property]. On a number of occasions in 2022 and 2023, including the time the funding arranged [in relation to the Nangwarry Property] was refinanced … Suzie said to me words to the effect: 'You do not know how to run a business. You made a mess of funding Nangwarry. You should leave it to me and Robin to run the business.' I said words to the effect: 'I established the business. You seem to be moving in and taking over' …
My relationship with Robin also soured after he gave a personal guarantee in support of the purchase of the [Nangwarry Property]."
Nonetheless, there were further talks about restructuring in 2023.
In around May 2023, Suzie and Robin proposed that the shareholding in the Shield Group be split 50:30:20 between Thomas, Suzie, and Robin.
On 9 May 2023, and as a part of a proposed restructure, Shield Holdings Australia was incorporated as a holding company for the Shield Group. On incorporation, its shares were held 50:30:20 by the three companies associated with Thomas, Suzie, and Robin: Thomas Gem Stone, Mana Assets and XCQ Holdings. This evidently reflected the shareholding structure that Suzie and Robin then proposed.
On 22 May 2023, Thomas and Suzie had the following exchange via WeChat messages:
"[Thomas] Good morning to both of you! In order to regulate the management of the company and comply with Australian laws, here is my personal statement, specifically inform everyone.
[Suzie] Let's find some time in the next couple of days to have a meeting and clarify all the issues, so we can avoid any misunderstandings and suspicions.
It's not been easy for the three of us to get to where we are today. If there are any issues, let's address them face to face and resolve them directly. I don't like suspicion or internal strife.
[Thomas] I am the founder of the company and the sole majority shareholder. I have no rivals and no motive. The label of internal strife doesn't apply to me. One of you is my close neighbor and fellow-townsman, and the other is a long-time friend I've known for over twenty years. I'm much older than both of you, and as the elder brother, I fully trust both of you. At the same time, you have both contributed a lot. I have led everyone with dedication and hard work. I am very busy on work, now that we are close to reaping the rewards, I have little energy left. I'm confident that I have the vision for this situation. You both are smart people. I just want to know who initiated the following two documents. I really want to know where I have let everyone down all this time?"
[25]
The "coercion"
Suzie and Robin contend that they only agreed to the 64:20:16 ownership split because of what Mr Elliott and Mr Goodyear described as Thomas's "threat of a nuclear option".
It was hardly that, even on Suzie's and Robin's account.
Suzie said that in around June 2023:
"[Thomas] said that if we did not agree to a deal under which he had the majority ownership, he would stop works at the Nangwarry Property and just walk away, and would not cooperate with any efforts to refinance the [Nangwarry Property] to a new lender, which would be a problem for us as [the existing lender] had issued a default notice and … had the personal security Robin and I had provided for that loan, which included the house that I lived in."
Robin gave evidence to similar effect.
Suzie said:
"Because of Thomas' threat about what would happen if we did not agree to majority ownership, I gave in to Thomas' demand for it. I said to Robin that I felt like we had no choice about it, as the alternative Thomas was threatening was something I could not risk. He said he didn't think we had any choice. I hoped that the potential new investor would be able to come in, and after that happened, things would end up working out better and the new investor, Robin and I could work together to ensure that the Business was run properly and we were all treated fairly."
Robin deposed:
"Suzie said to me that she felt she did not have any choice given what Thomas was threatening to do. She said to me that Thomas had assured her that even though he was saying he wanted majority ownership, the Shield Group would continue to be operated and directed by the three of us as it had been. I said that was good, as it would enable Suzie and I to work together if Thomas wanted to do things we did not agree with."
Suzie said that, during these discussions:
"Thomas said to me that I did not need to worry about how the Business would be run and decisions would be made, and that things would continue on in the same way, whatever was on paper. I understood from this that Thomas was saying that Robin, Thomas and I would continue to direct the business, that I would remain as CEO and Robin as CFO."
Thomas disputed this. He gave this evidence in cross-examination:
"Q. You had spoken with Suzie and Robin about a restructure during 2023?
A. INTERPRETER: If my memory is correct, only when I received a notice of restructure on 22 May 2023 I - as the first time I learnt about the issue of restructure.
Q. In mid-2023, you knew that Robin and Suzie were saying that they should own 50% of the Shield companies?
A. INTERPRETER: Yes. At that time, I was very angry. They just did all that. They just want to steal the company from me with - yeah, with some bad intention.
Q. You were angry that they were now asking you to honour the promise that you had always made; correct?
A. INTERPRETER: No.
Q. But you were very angry?
A. INTERPRETER: I have the record for that.
Q. But you were very angry?
A. INTERPRETER: Yes.
Q. You told them that if that was their position, you would walk away from the Shield Group?
A. INTERPRETER: That's nonsense.
Q. You told them that you were the only one that could complete the construction of the sawmill in South Australia, didn't you?
A. INTERPRETER: Yes.
Q. You said unless they agreed to your shareholding proposal, you would walk away; correct?
A. INTERPRETER: That's nonsense. I'm the owner of the company. I don't have a reason to walk away."
[26]
The 12 September 2023 general meeting
On 12 September 2023, Thomas convened a meeting of shareholders of Shield Holdings Australia to consider a motion to appoint "three additional directors", being his wife and two family members.
The motion was carried, over Suzie's and Robin's objections.
I deal with this below, under the heading "Alleged oppression - attempts to remove or diminish Suzie". [42]
[27]
The 29 September 2023 board meeting
On 27 September 2023, Thomas sent Suzie a WeChat message requesting a meeting of the board of Shield Holdings Australia. The meeting was held on 29 September 2023. This was the first such meeting of that board.
Suzie has deposed that at that meeting Thomas proposed, without notice, that she be removed as Chief Executive Officer of Shield Holdings Australia and that he be appointed in her place.
Thomas gave this account of that meeting:
"During the course of the meeting an argument occurred about management control. Amongst other things, Suzie said words to the effect: 'I want to be the CEO of all companies in the group. You cannot manage any of them.' I said words to the effect: 'I started this business. I should be the CEO.' Robin said words to the effect: 'I need to be the CFO.' The meeting ended when Robin stormed out of the room."
[28]
Suzie's termination of the restructure discussions
Suzie evidently saw this as a departure from what she had understood Thomas to mean when he had said "things would continue on in the same way, whatever was on paper". [43]
Thus, she sent this email to Thomas and Robin:
"As a result of the discussion today, the restructure of Shield businesses can not be proceeded further. Therefore I request below:
1. Stop the restructure of Shield businesses immediately.
2. Terminate the Trust Deed of Shield Holdings Australia Unit Trust immediately.
3. Restore the business structure to pre-restructure stage immediately.
4. Withdraw the Subscription Agreement with Vcoco immediately.
5. All the fund sourced by Robin and injected to Shield Businesses will be personal loan of Robin and Robin will be personally liable for … any liability raised from third parties."
Later that day, Robin sent an email stating his agreement with the five propositions set out in Suzie's email.
There is no evidence that any step was taken in response to Suzie's and Robin's "request" that the "restructure of Shield Business" be stopped "immediately" or that the "Trust Deed of Shield Holdings Australia Unit Trust" be "terminated immediately".
What appears to have happened is that Suzie, with Robin's support, has sought unilaterally to put to an end the arrangements agreed in July 2023.
I have received no submissions as to what, if any, legal effect those actions had.
Those actions appear to have been born of the events in September 2023, to which I have referred, [44] rather than because of any "coercion" leading to the execution by Suzie and Robin of the 12 July 2023 documents.
[29]
Conclusion on restructure
Thus, on Suzie's and Robin's account of it, Thomas invited Suzie, and later Robin, to participate in a business that he founded. Each of Suzie and Robin made a substantial contribution to the business, both in its day to day activities but also in advancing funds to the business and working without salary. Thomas told them that, in due course, the three of them would sit down, discuss and endeavour to agree on a fair redistribution of shareholding in the Shield Group. They did this in about July 2023. Suzie and Robin proposed a 50:30:20 split. Thomas insisted on a 64:20:16 split: an outcome that involved some movement by Thomas but not as much as Suzie and Robin wanted. The result has not been shown to be so commercially unfair to amount to oppression. Ultimately, as relations continued to deteriorate between the parties, it was Suzie who sought to "stop the restructure".
I see no basis on which to describe Thomas's conduct as being oppressive.
[30]
Conduct of the company's affairs?
In any event, s 232 of the Act is only engaged if it is shown that, relevantly, the conduct of the affairs of the company in question is oppressive to a member of the company.
Thus it has been said that "the statutory remedy relates to acts done in the conduct of the affairs of the company or to acts or omissions of the company". [45]
The dispute here relates to the conduct of the shareholders inter se. The conduct does not concern the business or affairs of the companies in the Shield Group. The Plaintiffs do not allege that any of the companies in the Shield Group was a party to any agreement or representation or to the negotiations in July 2023 of which Suzie and Robin complain.
Even if what I have described could somehow be seen as the conduct of the affairs of any one of the companies in the Shield Group, its remoteness from the companies' separate existences to those of Suzie, Robin and Thomas, would cause me not to exercise the discretion under s 233 to, relevantly, make an order for the purchase by one member of the shares of another.
[31]
The acquisition of the Chinchilla Property
As I have said, the Chinchilla Property is in Queensland and is the site from which Shield Hardwood conducts a hardwood export business.
Since December 2018, Thomas Gem Stone has been the registered proprietor of the Chinchilla Property. As I have said, [46] the Plaintiffs seek an order that Thomas Gem Stone transfer the Chinchilla Property to a nominee of Shield Resources.
To understand the context in which that claim is made, it is necessary to examine the events leading to Thomas Gem Stone's acquisition of the property.
Suzie said that on 27 August 2018 she had a conversation with Thomas in which Thomas told her that:
"(a) since the Chinchilla Property was being purchased for the Shield Hardwood (Chinchilla) Log Export Business - part of the Shield Group's Business - Shield Resources should pay for the Chinchilla Property;
(b) property assets such as the Chinchilla Property were best held in a 'clean' company rather than an operating company that was heavily involved in the operations of the Business and incurring trading debts and the like;
(c) for that reason, although the Chinchilla Property was going to be paid for using Shield Resources' funds, it would be better to put it in the name of Thomas Gem Stone, a company he controlled, in order to protect the Property from what he called 'operational risks';
(d) Thomas Gem Stone would only hold the Chinchilla Property until arrangements were made for a new company in the Shield Group to be established to hold the Chinchilla Property, at which time the Chinchilla Property would be transferred to NewCo; and
(e) the shareholdings of NewCo would be in the same proportions as agreed in due course for the whole Shield Group."
Thomas denied any such conversation. He said:
"I deny the conversation attributed to me [as set out in the preceding paragraph]. The Chinchilla Property was located by a friend of mine, Mr Addy Cheung, in early 2018. I had a conversation with Suzie after that time in which I said words to the effect: 'I have been looking for a property in the Chinchilla area in Queensland to use as a timber handling site. A friend of mine has found one that may be suitable. Can you have a look and let me know what you think?' Suzie visited the site and reported back to me. I then inspected the site and decided to buy it. We never had any conversation about buying the site in the name of a new company or that she would be a shareholder. Suzie started to work in the Shield group of companies and in 2016 had not contributed any funds."
[32]
The funds used by Thomas Gem Stone to purchase the Chinchilla Property
On 14 September 2018, Thomas Gem Stone entered into a contract with Danma Property Pty Ltd to purchase the Chinchilla Property for $418,000.
On 17 September 2018, Shield Resources transferred $19,000 to the account of Thomas Gem Stone to pay for the deposit.
On 27 November 2018, Shield Resources transferred a further $416,584.48 to Thomas Gem Stone to pay the balance of the purchase price and related expenses such as stamp duty and solicitors fees.
The transaction is recorded in:
1. Shield Resource's bank statements with the description "Wdl Branch Eastwood"; and
2. Thomas Gem Stone's bank statements with the description "Shield Resources Loan".
During the hearing, much attention was focused on the descriptor "loan" appearing in Thomas Gem Stone's bank statement.
Argument before me proceeded on the basis that this reflected instructions given by Thomas to the relevant bank at the time.
Suzie's evidence about this was:
"I did not see this bank statement at the time, and was not responsible for the entries set out on the statement in relation to these payments. I did not even have access to the bank account of Shield Resources at the time. That is why I did not know that someone had referred to the $416,584.48 transaction as a 'loan', and if I had known and thought about it at the time, I would not have agreed to give it that description. The discussions I had with Thomas were as I have described above. We never talked about there being a 'loan' for the benefit of Thomas Gem Stone." (Emphasis added.)
Mr Elliott and Mr Goodyear submitted:
"The fact that Thomas described the transaction in a record in the Thomas Gem Stone bank statement as a loan only demonstrates that he was prepared to act privately with a view to preferring his own interests. It does not reflect the discussion he had with Suzie. It only demonstrates that he was prepared to say and agree one thing with Suzie, but privately take some different position."
Later in their submissions, Mr Elliott and Mr Goodyear put the matter more moderately:
"The fact that Thomas used the description 'Shield Resources Loan' that now appears in the Thomas Gem Stone bank statements , being a description he arranged at the time, reveals nothing more than an inaccurate description of the effect of the transaction, which is an unsurprising reality given the legal concepts involved and the fact he had no legal training. It does not begin to make the transaction a loan."
[33]
The improvements to the Chinchilla Property and the use by Shield Hardwood of the Chinchilla Property
Thereafter the Chinchilla Property was redeveloped to make it a suitable site for the operation by Shield Hardwood of its timber export business.
Those improvements included construction of permanent buildings and facilities, including a weighbridge, office building, shed, and various associated works. The funds to make those improvements were provided by Shield Resources for a little less than $400,000 and by Shield Hardwood for some $238,000.
My attention has not been directed to evidence showing how, if at all, this expenditure by Shield Resources and Shield Hardwood has been reflected in the financial records of those companies and of Thomas Gem Stone.
This expenditure has increased the value of the Chinchilla Property but, taking into account the depreciated replacement value of the improvements, by only some $313,800. [51]
But Shield Hardwood has had the use of these facilities, and of the Chinchilla Property itself since its acquisition by Thomas Gem Stone, evidently without charge or any formal arrangements.
As Mr Kelly and Mr Maroya submitted, the expenditure on these improvements related to the use of the Chinchilla Property for the purpose of carrying on a timber business, and it was Shield Hardwood, not Thomas Gem Stone, that carried on the business, and "in that way, all of the payments in question were for the benefit of [Shield] Hardwood, not Thomas Gem Stone".
[34]
The use by the Shield Group of the Chinchilla Property as security for external borrowings
The Chinchilla Property has been used as security for borrowings by other members of the Shield Group.
Most recently, on 28 August 2023, the Chinchilla Property was offered to Judo Bank as security for a $4.8 million facility it made available to Shield Formply to refinance the obligations undertaken by that company in relation to the purchase of the Nangwarry Property.
The Chinchilla Property was valued at $1,270,000 as at 30 October 2023. The Nangwarry Property was valued at $3,100,000 as at 20 September 2023. Whether in these circumstances there is any equity remaining in the Chinchilla Property is a matter which remains to be seen; but seems unlikely.
[35]
The proposed incorporation of the Chinchilla Property into the Shield Group in the 2023 restructure negotiations
During the course of the 2023 restructure negotiations, a proposal was made in relation to the Chinchilla Property.
As I have set out above, [52] Shield Holdings Australia was incorporated on 9 May 2023 with, at that point, a shareholding in the proportions of 50:30:20 for Thomas, Suzie and Robin, reflecting the restructure position as then proposed by Suzie and Robin.
On 11 May 2023, Shield Investments QLD Pty Ltd ("Shield Investments QLD") was incorporated as a wholly owned subsidiary of Shield Holdings Australia.
On or about 12 July 2023, Thomas, Suzie and Robin executed the documents to which I have referred, [53] having the effect that Thomas, Suzie and Robin hold shares in Shield Holdings Australia, and units in the Shield Holdings Australia Trust in the proportions 64:30:16 respectively.
On 19 July 2023, a further company, Shield Assets QLD Pty Ltd ("Shield Assets QLD"), was incorporated as a wholly owned subsidiary of Shield Investments QLD.
Those arrangements are reflected in the chart which I have attached to these reasons. [54]
At one stage, prior to execution of these documents, the solicitor engaged by Thomas in relation to the restructure, Mr Smith from Goodwin & Co Lawyers, prepared a Subscription Agreement in relation to a further trust into which it was evidently then hoped an external investor, perhaps Vcoco, would subscribe for units with a total value of $5.5 million.
The draft Subscription Agreement stated in Sch 2, as amongst the Conditions Precedent to the prospective investor subscribing for units:
"5. Establish a unit trust (QLD Trust), with a trustee to be named Shield QLD Investment Pty Ltd (Shield QLD), or such other name as the Issuer determines in its sole discretion. The Issuer will be the sole holder of all units in the QLD Trust and the sole holder of all shares in Shield QLD;
6. All current shareholders of Shield Hardwood Pty Ltd … will transfer ownership of their shares to Shield QLD, to be held on behalf of the QLD Trust;
7. Establish a company to be known as Shield QLD Assets Pty Ltd (Shield Assets), or such other name as the Issuer determines in its sole discretion. Shield QLD will be the sole holder of all shares in Shield Assets;
8. The transfer of ownership of the [Chinchilla Property] from the current registered proprietor to Shield Assets; …" (Emphasis in original.)
[36]
Suzie's and Robin's claim
In their Amended Summons the Plaintiffs seek:
"A declaration that Thomas Gem Stone holds the Chinchilla Property on trust for Shield Resources, either:
(a) absolutely; or in the alternative,
(b) on the basis that it is held for Shield Resources subject to and pending the:
(i) establishment of a new company in accordance with [the Act] that has its ordinary shares held 69.5% by Thomas Gem Stone, 30% by Mana Assets and 0.5% by Awake, and which has its directors Suzie and Thomas (and no other persons) (NewCo); and
(ii) transfer of the Chinchilla Property to NewCo."
In their Amended Commercial List Statement, the Plaintiffs allege:
"The funds [to acquire the Chinchilla Property] were provided by Shield Resources on the basis that Thomas Gem Stone would hold the Chinchilla Property not for itself, but instead on the basis that a new company in the Shield Group would be established with the same shareholdings as Shield Resources (NewCo) to hold the Chinchilla Property as part of a proposed restructuring of the Shield Group, with the Chinchilla Property to be transferred to NewCo upon NewCo's formation (the Underlying Purpose for the provision of funds).
Particulars
This was discussed and agreed between Suzie and Thomas prior to the purchase of the Chinchilla Property." (Emphasis in original.)
And:
"Further or in the alternative, Thomas and Thomas Gem Stone are parties to an agreement (Chinchilla Property Arrangement) with Suzie and Shield Resources under which Thomas Gem Stone is obliged to hold the Chinchilla Property for the benefit of Shield Resources pending the establishment of NewCo, and to do all things necessary to facilitate the establishment of NewCo and the transfer of the Chinchilla Property to NewCo." (Emphasis in original.)
It is then said to follow that:
1. Thomas Gem Stone holds the Chinchilla Property on an express, resulting, constructive or Quistclose trust [55] for Shield Resources;
2. alternatively, that Thomas and Thomas Gem Stone are obliged to give effect to the "Chinchilla Property Agreement";
3. alternatively, that Thomas and Thomas Gem Stone represented that they would purchase and hold the Chinchilla Property on the basis earlier pleaded, and it would be unconscionable for Thomas and Thomas Gem Stone to depart from the representation.
As developed in closing submissions, the Plaintiffs assert:
1. a resulting trust allegedly arising by reason of the provision by Shield Resources to Thomas of the "funds required to enter into and complete the [Chinchilla Sale Contract]"; or
2. an express trust said to have arisen by reason of the August 2018 conversation to the effect that Thomas Gem Stone would hold the Chinchilla Property "not for itself" but on the basis that NewCo would be established "with the same shareholding as Shield Resources" and that the Chinchilla Property will be transferred to "NewCo" on formation; or
3. a Quistclose trust or constructive trust in favour of Shield Resources arising from the failure of Thomas Gem Stone to transfer the Chinchilla Property to NewCo; or
4. an agreement in 2023 to transfer the Chinchilla Property to Shield Assets QLD as part of the restructure, which was then proposed but later broke down; or
5. a promissory estoppel, or an estoppel by convention, by which Thomas Gem Stone and Thomas are precluded from departing from a representation or convention that Thomas Gem Stone would "purchase and hold the Chinchilla Property on the basis described above".
[37]
The trust claims
Notwithstanding the prayer in the Amended Summons, the contentions in the Amended Commercial List Statement make clear that the Plaintiffs do not allege that Thomas Gem Stone was to hold the Chinchilla Property on trust for Shield Resources "absolutely".
Rather, the allegation is that the agreement was that Thomas Gem Stone was to hold the Chinchilla Property on trust for NewCo, with NewCo to have the same shareholding as Shield Resources "to hold the Chinchilla Property as part of a proposed restructuring".
The shareholding posited in the Amended Summons for NewCo is 69.5% to Thomas Gem Stone, 30% to Mana Assets and 0.5% to Awake. This has been the shareholding of Shield Resources since Suzie's shareholding, through Mana Assets, was increased from 6% to 30% in 2022. [56]
But this is not what Suzie says was agreed in the August 2018 conversation, which was that "the shareholdings of NewCo would be in the same proportions as agreed in due course for the whole Shield Group"; not as they were agreed in 2022 to be for Shield Resources itself.
In their written submissions, Mr Elliott and Mr Goodyear expressed the matter using the same language as Suzie had stated.
But in closing oral submissions, Mr Elliott put the matter as it is stated in the Amended Commercial List Statement. Thus, Mr Elliott submitted:
"… the agreement that we say was formed between Suzie in discussions between Suzie and Thomas was to the effect that money would come from Shield Resources on the basis that a new company would be set up in due course, having the same shareholdings as Shield Resources, and the property transferred to it …
I accept that the agreement that we sue on is an agreement under which the shareholding of the new co was to be identical to Shield Resources, and because Shield has its Queensland shareholding is different, I can't nominate Shield Assets [QLD] as new co. So we say there's an agreement to be performed by Thomas Gem Stone and Shield Resources under which a new company is to be established and the property transferred to it, and we seek orders for the performance of that agreement." (Emphasis added.)
A short answer to this case is that Suzie's evidence does not prove it.
Her evidence was that Thomas said the shareholding in NewCo was to be "in the same proportion as agreed in due course for the whole Shield Group", not the same shareholdings as Shield Resources "as part of a proposed restructuring of the Shield Group". [57]
[38]
No express trust, Quistclose trust, estoppel or Chinchilla Property Arrangement
The Plaintiffs' case for an express trust, a Quistclose trust, an estoppel and the alleged Chinchilla Property Arrangement depended on my acceptance of Suzie's evidence concerning the August 2018 conversation.
As I do not accept such a conversation took place, those claims must fail.
[39]
No resulting trust
The Plaintiffs' case for a resulting trust depended on establishing that Shield Resources paid for the Chinchilla Property.
For the reasons I have set out above, this has not been established. Thomas Gem Stone borrowed the purchase price from Shield Resources in September and November 2018 and repaid that borrowing in August 2019.
[40]
A constructive trust?
The Plaintiffs' alternative case was for a constructive trust.
In their written submissions, Mr Elliott and Mr Goodyear put the argument this way:
"There is a further and separate way in which a constructive trust arises, even if there was no conversation of the kind Suzie described in her evidence. On that scenario, Thomas (using the vehicle of Thomas Gem Stone) would have taken for himself an opportunity available for Shield Resources, and preferred his own interests to those of Shield Resources."
It is however by no means clear to me that the acquisition of the Chinchilla Property was an opportunity that should be seen as being available for Shield Resources in the relevant sense.
On Suzie's own account of the August 2018 conversation, Suzie agreed that Thomas Gem Stone should own the property to protect it from "operational risks". And Thomas Gem Stone's acquisition of the Chinchilla Property allowed Shield Hardwood to use it for its own purposes and without charge.
In any event, the only other shareholder in Shield Resources, Mana Assets, and its only other director, Suzie, agreed that Thomas Gem Stone was to acquire the Chinchilla Property.
Although I have not accepted Suzie's account of the August 2018 conversation, there is no suggestion in the evidence that she did not know of and agree to Thomas Gem Stone acquiring the property and using the resources of Shield Resources to do so; nor that she did not understand to what use Thomas Gem Stone would put the property.
[41]
Oppression?
Apart from the above matters, the only allegation of oppression made by Suzie and Robin concerning the Chinchilla Property is Thomas's alleged use of the funds of Shield Resources and Shield Hardwood to fund the improvements to the Chinchilla Property.
As I have said, my attention has not been directed to any evidence showing if or how those companies have accounted for the funds used to effect those improvements.
Suzie was, at the time, a director of and, through Mana Assets and Phoenix Group Australia, a shareholder in each of Shield Resources and Shield Hardwood. She knew that Thomas was causing the funds of those two companies to be used to fund the improvements to the Chinchilla Property.
Her evidence was that:
"This occurred with my knowledge … I stood by whilst the Chinchilla Property Improvements were paid for by Shield Resources and Shield Hardwood because I understood that the Chinchilla Property was really part of the Shield Group (and was going to be moved back to a Shield Group entity) and that the Chinchilla Property was not the private property of Thomas Gem Stone."
As I have not accepted Suzie's account of the 27 August 2018 conversation, I do not accept that the understanding to which she deposed was based on any such conversation.
The fact is that she knew of and agreed to the use of Shield Resources' and Shield Hardwood's funds to improve the Chinchilla Property. The result has not been shown to be so commercially unfair to amount to oppression.
Even if I were persuaded that, despite these matters, the circumstances constituted oppressive conduct by Thomas in relation to either Shield Resources or Shield Hardwood, I cannot see how that could compel a conclusion that Thomas Gem Stone transfer the Chinchilla Property to Shield Resources.
As Mr Kelly and Mr Maroya submitted, at the most what might be called for is an account by Thomas Gem Stone to Shield Resources and Shield Hardwood for such benefit as Thomas Gem Stone may have gained by reason of this expenditure. Any such account would have to take into account the benefit that Shield Hardwood has had from its use of those facilities and of the property generally.
In any event, this is not the relief sought.
[42]
Standing
For completeness, I will deal with the submission made by Mr Kelly and Mr Maroya that the Plaintiffs had no standing to bring the claim concerning the Chinchilla Property because the claims were for the benefit of Shield Resources and NewCo, and that the Plaintiffs have not sought or obtained leave under s 237 of the Act to bring a derivative claim.
In response, Mr Elliott and Mr Goodyear pointed to authorities to the effect that the court's powers under s 233 of the Act are wide enough to vindicate a company's punitive claim.
Thus in Lukaszewicz v Polish Club Ltd, [59] Black J said: [60]
"I proceed on the basis that the applicant in an oppression claim can bring a claim for breach of general law and statutory duties owed to a company, without necessarily seeking a separate order for leave to bring a statutory derivative action under s 237 of [the Act], although such a claim could only extend to loss which the company had suffered and not loss that the shareholder had suffered personally." [61]
In view of the conclusions to which I have come, this point does not arise.
[43]
Conclusion as to the Chinchilla Property
The Plaintiffs' claims in relation to the Chinchilla Property fail.
[44]
Alleged oppression - alleged serious mismanagement of the sawmill construction
[45]
The pleaded case
The Plaintiffs make the following allegations on this subject in their Amended Commercial List Statement:
"[U]nbeknownst to Suzie and Robin at the time [when Thomas insisted on retaining a majority share], the one job that Thomas was undertaking and which he said he was the only one qualified to undertake, namely the management of the construction of the sawmill factory and facilities at the Nangwarry Property, was being grossly mismanaged by Thomas, and in a way that would subsequently necessitate the closure of the site, the issue of prohibition orders by government agencies, substantial and costly remediation works and consequential delays in the progress of the business …
… Thomas assumed complete control of the management of the construction activities at the Nangwarry Property on the basis of statements that he was the only one who had the skills to do so, when in fact he did not have the skills that were required, and then mismanaged that project in the manner described above, with the consequences there stated."
[46]
What happened
Thomas said that the purpose of setting up Shield Holdings South Australia was to set up a timber milling and manufacturing facility in South Australia similar to the one that he had set up in China. He said that he designed and ordered the plant and equipment and supervised the installation and testing of the production line, and that by early October 2023, the production line was mostly assembled and had been successfully tested.
Thomas said that, on 5 October 2023, he met with Suzie and Robin. He said the meeting was tense and that Suzie said words to the effect, "Have you changed your mind? Can we go ahead with the restructure?" Thomas said that he replied, "No, I do not want to go ahead. I started these companies and I am not going to be pushed out of management."
Thomas said that he and Suzie have not had a polite conversation with each other about any of the affairs of the Shield Group companies since that occasion.
What Thomas apparently did not know was that between 28 September 2023 and 3 October 2023, Kevin, ostensibly in his capacity as "WHS Officer" of Shield Holdings South Australia, had conducted an "inspection" of the site at the Nangwarry Property.
Kevin produced a "Nangwarry WHS Initial Report" on 4 October 2023. That document contained, under the heading "Executive Summary":
"As the company WHS officer … I first visited Nangwarry from 28th September to 3rd October 2023. My purpose was to prepare the site for EXPORT DAFF Audit on 11 October and conduct a preliminary site inspection for WHS on the works being undertaken since February 2023.
For those unfamiliar with my background, I am also a former Officer in the Royal Australian Engineers (RAE), a military officer operating within 35 Field Squadron of Engineers located in Mount Isa Queensland, attached to the 11 Brigade, Operational Defence Force (OBD) at Townsville. I speak with some expertise with the comments I am about to make in this report.
My executive summary from my initial WHS inspections is that the SHIELD Nangwarry site is 100% 'Tofu Dregs' [62] construction. The workmanship is beyond words for negligent disregard for safety civil construction standards. This is placing our project at serious risks of catastrophic failures.
My report provides photographic evidence of poorly executed site build that breaches Australian Standards and WHS Codes of Practices. This is likely to be re-affirmed by Tonkins Engineering inspections shortly.
SHIELD is breaching WHS Codes of Practise [sic] at Nangwarry and is now at risk of being shut down by Safe Work SA should they inspect our facility. This is how serious this is.
Our project at Nangwarry needs to be halted immediately and a professional leadership skillset engaged to take over. This project is beyond the skillset of MD Thomas Feng YE, and this report is evidence of that. Unless a change in skillsets is made, this project is doomed to a short life and all Shareholders will loose [sic] significantly. The risk of legal litigation with all Directors is real." (Emphasis in original.)
[47]
Thomas locked out of the Nangwarry Property
On 10 November 2023, Suzie conducted a "site visit" of the Nangwarry Property. She concluded that Thomas had not taken steps to remedy the concerns identified in Kevin's 4 October 2023 report.
On 13 November 2023, Suzie closed the Nangwarry Property to Thomas and his workers and called in the local police to remove those workers and to shut them out of the site.
Suzie sent an email to staff that she allowed to remain onsite at the Nangwarry Property, and to staff at the Bordertown and Chinchilla facilities, stating "Thomas Ye or his associates are not allowed to enter any company facilities".
Thomas remains locked out of the Nangwarry Property and has, in effect, been excluded from the management of the Shield Group.
As of today, Suzie continues to run Shield Hardwood's hardwood log export business and Shield Resources' softwood export business.
[48]
Events in early 2024
On 11 January 2024 Kevin, writing as Chief Operating Officer and WHS Officer of Shield Holdings South Australia, wrote to SafeWork SA lodging a "complaint" against Thomas.
Under the heading "Summary", Kevin concluded:
"SHIELD has invested significant capital into their Nangwarry site. Capital that was invested after Feng YE (Thomas) persuaded the Board over several years that he had the expertise and knowledge to build and operate sawmill facilities.
The evidence uncovered in September 2023 during the Initial WHS Audit dated 4 October 2023 and Supplementary WHS Audit dated 19 Dec 2023, proved that Thomas Feng YE did not have the claimed expertise or knowledge but has now also placed the SHIELD company at serious risks due to the reckless conduct of his workmanship. Resulting in a 12-month setback of commencing operations and a significant loss of capital funding resulting from his reckless conduct and damages.
SHIELD shareholders are pursuing other legal actions against Feng YE (Thomas) through the Federal Court under [the Act], resulting from his claims. In the interim, the shareholders also need to have Feng Ye (Thomas) prosecuted by Safe Work S.A. for the serious matters being presented. People's lives are at risk and the site is now closed until qualified electrical and civil engineers are engaged to remedy the works so SHIELD can enter production in a manner that meets Safe Work S.A. and SHIELD's safety standards. We seek and look forward to your support." (Emphasis added.)
Thus, in the context of what Kevin stated were soon to be commenced proceedings in the Federal Court, he asserted that the "shareholders", obviously Suzie and Robin, "need[ed] to have [Thomas] prosecuted".
Kevin gave this evidence about that matter:
"Q. You're aware that the Federal Court proceedings were commenced on 15 January 2024, some five days after this letter? Yes?
A. Yes.
Q. In the letter you say, 'In the interim, the shareholders also need to have Feng Ye prosecuted by SafeWork South Australia.' On what basis do you say that the shareholders need to have Mr Ye prosecuted?
A. On the basis that there's been reckless conduct. There's - on the basis that lives are at risk. On the basis that, in addition to whatever court proceedings were being managed by the CEO, my responsibility laid in the regulatory requirements of the company, and to have SafeWork South Australia investigate what had happened and do their business as a regulatory body, to investigate the damages. Now, remembering that SafeWork did go there and they and seven prohibition letters were issued as a result of their findings from this letter. So, Mr Kelly, I put it to you that my actions saved lives, that I saved lives. What I've uncovered has saved lives --
Q. You're deluding yourself, sir. You are deluding yourself?
A. Well, let's just look at what's happened, right? People's lives have been saved. My job as a work health safety officer - chief operations officer is to protect our people and assets. What I uncovered in my 4 October report were findings that were going to cause death to workers. It wasn't a matter of --
HIS HONOUR
Q. But by 10 January, Thomas was locked out of the site, wasn't he?
A. I'm talking October. He was locked out on 13 November, your Honour.
Q. You're being asked questions about a letter you wrote to SafeWork South Australia on 10 January. By then, Thomas had been locked out, hadn't he, for months?
A. So, your Honour, my report was conducted --
Q. Is that right?
A. -- on 4th - sorry?
Q. He'd been locked out since mid-November?
A. Correct. But my report was done on 4 October."
[49]
Was there mismanagement?
Mr Kelly and Mr Maroya accepted that:
"… the company failed to obtain all necessary local government approvals when it came to providing accommodation for workers on site and that the quality of onsite accommodation for overseas workers was not up to local standards."
I think Mr Kelly and Mr Maroya understated matters somewhat when they submitted:
"At its highest, the hypothetical bystander may see Thomas as having imported some work practices from the People's Republic of China and applied those practices in rural South Australia with qualified success. Cultural and legal problems were incurred in relation to some of the work that was done - such as the installation of non-conforming Chinese style toilet facilities, and the use of electricians who are not licensed in [South Australia]." (Emphasis added.)
But the tone adopted by Kevin in his 4 October 2023 report, and in his subsequent acrimonious email exchange with Thomas, suggests that he was highly motivated to paint Thomas's activities in relation to the Nangwarry Property in the worst possible light.
I think it unlikely to be a coincidence that Kevin's initial inspection of the site took place between 28 September 2023 and 3 October 2023, at precisely the same time as the ultimate disintegration of the relations between his wife Suzie, and Thomas.
As Mr Kelly and Mr Maroya pointed out, Suzie did not feel the need to cause the site conditions at the Nangwarry Property to be investigated prior to the end of September 2023, by which time her relationship with Thomas had broken down.
Suzie's evidence was that she first became concerned about the Nangwarry site conditions at the Nangwarry Property when she heard of complaints that workers from China were living on the site. Suzie assisted the workers in question in coming to Australia by facilitating their visa applications. Suzie was familiar with the site and responsible for obtaining the necessary approvals. She was also one of the two directors of Shield Holdings South Australia and, as Mr Kelly and Mr Maroya have submitted, was no less responsible for managerial oversight of the business and affairs of Shield Holdings South Australia than was Thomas.
[50]
Oppressive conduct by Thomas?
Poor management in and of itself is not a ground for the statutory oppression remedy. [63]
Mr Elliott and Mr Goodyear submitted that mismanagement "may form part of a broader case, as it does here," because:
"Thomas' conduct at the Nangwarry Property was also contrary to the interests of members of Shield Holdings South Australia (as owner of the Nangwarry Property) as a whole, and of members of Shield Resources (as operator of the softwood log export business that uses in part the Nangwarry Property) as a whole. That is because his conduct put those companies in trouble with the regulators and at risk of suffering serious reputational damage and, potentially, of litigation should any safety issues result in serious injury or death."
I do not accept that submission. Thomas may well have been guilty of poor management oversight at the Nangwarry Property, but I cannot see how this could constitute conduct of the affairs of the relevant company, Shield Holdings South Australia.
In any event, Thomas's conduct in relation to the management of the Nangwarry Property needs to be seen in the context of Suzie's decision to lock him out of the site on 15 November 2023 and thereafter exclude him from all management roles in the Shield Group.
[51]
Oppressive conduct by Suzie, Robin and Kevin?
It is common ground that wrongful exclusion from management may be a form of oppression. [64]
As I have said above, [65] on 13 November 2023 Suzie wrote to the staff at the Nangwarry, Chinchilla and Bordertown facilities. Suzie wrote:
"Dear All,
I would like to inform you that I am currently having dispute with Thomas Ye (Feng Ye). Thomas has breached the shareholder agreement and breached his duty as Director of Shield business. In order to protect Shield's interests, I have to take actions against him.
The business operation will continue as normal. But Thomas Ye or his associates are not allowed to enter any company facilities including Bordertown Intermodal Terminal, Chinchilla Hardwood Export Facility and Nangwarry Timber Processing and Export Facility.
It is unfortunate that Thomas could not honour his commitment and would not act as director under Australian law. As shareholder and director of Shield business, I do have obligations to stop his destructive behaviour and protect our assets and employees.
I will send further notice if things are changing.
Regards,
Suzie Li
Chief Executive Officer."
Thereafter, Suzie and Robin have been conducting the business and affairs of Shield Holdings South Australia, and indeed all the other companies in the Shield Group.
There is no controversy about this. Thus, in their opening written submissions Mr Elliott and Mr Goodyear said:
"… the practical reality is that Suzie, Robin and Kevin have, together, been conducting the operations of the business of the Shield Group, and providing it with the financial support and directorship that it requires."
Since Thomas was locked out of the Nangwarry Property, there has not been any meeting of directors of any other company in the Shield Group.
In those circumstances, I see substance in the submissions by Mr Kelly and Mr Maroya:
"The plaintiffs have not established any oppression of Mana Assets by Thomas or Thomas Gem Stone in relation to Shield Holdings South Australia. The boot is on the other foot. The evidence establishes that Suzie and Mana Assets have conducted the business and affairs of the company in a manner that is oppressive to Thomas Gem Stone by locking Thomas out of the Nangwarry site on 14 November 2023 and thereafter excluding him from participation in the business and affairs of the company, including the conduct and funding of the works on that site."
[52]
Alleged oppression - attempts to remove or diminish Suzie
Suzie and Robin contend that Thomas has sought to diminish their roles in the Shield Group by:
1. causing Thomas Gem Stone to exercise its 64% majority voting rights at the meeting of shareholders of Shield Holdings Australia of 12 September 2023, to which I have referred, to cause his wife and two family members to be appointed directors of Shield Holdings Australia;
2. to convene the board meeting of Shield Holdings Australia on 29 September 2023 that Suzie be removed as Chief Executive Officer and that he be appointed in her place; and
3. to call proposed shareholders meetings of Shield Holdings South Australia on 13 November 2023, 15 December 2023 and 21 March 2024 to consider a proposal that Suzie be removed as director of that company; none of the meetings proceeded.
As I have said, there was no dispute before me that exclusion of a member from management might constitute commercially unfair conduct amounting to oppression.
[53]
The 12 September 2023 meeting
I have set out the circumstances of the 12 September 2023 meeting above.
Suzie's evidence concerning this meeting was:
"On 12 September 2023, I attended the Shield Holdings Australia meeting in person, and voted against the appointment … of Thomas' sister-in-law (Lili Guan) and niece (Waner Zhangguan). Over my objection, they were voted in as directors, as recorded in the minutes of meeting from that day … I asked what qualifications or expertise the proposed new directors would be bringing, but Thomas just said they were being appointed and there was nothing I could do about it."
The meeting minutes to which Suzie referred were in the following terms and suggest that, at the time, the debate was as to whether the proposed additional directors had "proven timber industry experience and skills":
Director Nominee Feng YE Xuxu LI Xiaosi Chaney QIAN MEMO Result
Ying Guan YES YES NO [Robin] did not approve Ying GUAN, because she is short of proven timber industry experience and skills. 84% vote YES passed
Lili Guan YES NO NO [Suzie] did not approve Lili GUAN because did not know any his/her background information, and even do not know him/her. 64% vote YES passed
[Robin] did not approve Lili GUAN, because she is short of proven timber industry experience and skills.
Waner Zhangguan YES NO NO [Suzie] did not approve Waner Zhangguan because did not know any his/her background information, and even do not know him/her/ 64% vote YES passed
[Robin] did not approve Waner Zhangguan, because she is short of proven timber industry experience and skills.
[54]
The complaint is put more widely in the Plaintiffs' Amended Commercial List Statement as follows:
"The proposed new directors, and each of them, did not have the qualifications, skills or experience to be a director of Shield Holdings Australia.
Further, the new directors were appointed by Thomas in order to obtain effective complete control of the management of Shield Holdings Australia, and through it, its subsidiaries, and to effectively render Suzie's and Robin's directorships of the company nugatory.
By so acting, Thomas was departing from what had been agreed between the shareholders (through discussion between Thomas, Suzie and Robin) at the time of the establishment of Shield Holdings Australia, namely that as a result of their respective shareholdings and the financial assistance and labours that they had provided either directly or through Suzie and Robin, the affairs of the company and its subsidiaries would be directed by a board of Shield Holdings Australia comprising an appointee of each shareholder (being Thomas, Suzie and Robin)."
In relation to the question of the qualifications of the new directors, Mr Kelly and Mr Maroya submitted:
"There is no such thing as a necessary qualification, skill or type of experience that a person must have before he or she is appointed as a director of Holdings; nor was any such thing put to Thomas in cross-examination, or proven not to have existed in each of the persons concerned; nor would the Court countenance the making of an order that they or any of them be removed as a director without them having been joined as a party to the proceedings."
However that may be, it does seem obvious that Thomas's intention was to cause family members to be appointed to the board of Shield Holdings Australia so that, with Thomas, they could out-vote Suzie and Robin.
That was conduct which is capable of being oppressive to Suzie and Robin.
The Plaintiffs seek an order rescinding the 12 September 2023 resolution. There is no dispute that the Court has the power to do this. [66]
Were the events of 12 September 2023 to be viewed in isolation, a basis may be seen to exist to make such an order.
But the relevant context here is that the relationship between the parties was unravelling, as events I have outlined make clear, and whether an order should be made to rescind this particular resolution must be seen in that wider context.
[55]
The 29 September 2023 meeting
I have set out the circumstances of this meeting above.
No resolution was passed, and the Plaintiffs seek no relief in relation to this meeting.
[56]
The proposed resolutions to remove Suzie as a director of Shield Holdings South Australia
By the time Thomas gave the notices to convene the shareholders meetings of Shield Holdings South Australia on 13 November 2023, 15 December 2023 and 21 March 2024, the relationship between the parties had come to an end.
Thomas explained his position as follows:
"The view I took was that the relationship between Suzie and myself, and through each of us, our shareholding entities (Thomas Gem Stone and Mana Assets) had broken-down to a point at which there is no way we could work together as directors of SHSA and it was in the best interests of SHSA for one of us to go. As I saw it, I was the majority shareholder and it was my responsibility to put a functioning board of directors in place, otherwise the business and affairs of the company, including the installation and commissioning of the production line and other facilities at Nangwarry, would be paralysed."
Further, as Mr Kelly and Mr Maroya submitted, the position had deteriorated by 21 March 2024:
"[T]he relationship between Suzie and Thomas had irretrievably broken down. Thomas had not only been locked out of the Nangwarry site since 14 November 2023 but Suzie and her husband had done their level best to have Thomas prosecuted by Safe Work SA. They also commenced the Federal Court Proceedings against him, in which they made serious allegations of misleading and deceptive conduct and sought, amongst other things, an order that Suzie have 95% of the share capital of Shield Holdings South Australia for nil consideration and Awake the other 5%, shutting him out of the company completely. Suzie and Thomas were no longer on speaking terms. With the breakdown of the relationship. Shield Holdings South Australia was left without a functioning board of directors."
None of the meetings that Thomas sought to convene came to pass. Thomas's attempts to convene the meetings came at a time when the relationship between the parties had unravelled. I do not see them as adding anything to the Plaintiffs' case.
[57]
Alleged oppression - "misappropriation" of funds
In their closing written submissions, Mr Elliott and Mr Goodyear used the heading "misappropriation of funds" in relation to this alleged species of oppression and submitted:
"The misappropriation of funds, or at the very least the unequal and unwarranted diversion of company funds into one's own pocket, is commercially unfair and oppressive: see, e.g., Cowling v Mekken; [67] BAM Property Group Pty Ltd as trustee for BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd. [68] "
However, in closing oral submissions, Mr Elliott said:
"The next species of misconduct is the, we have called it, perhaps, inappropriately in our written submissions misappropriation of funds. It's, perhaps, better described in the text of our submissions as the taking of funds from the business in a way that resulted in an unfair and unequal distribution and that's the language that we press as it appears in para 218 of our written submissions. We don't need to put it as high as misappropriation and if your Honour has para 218, the submissions there, we are content to proceed on the basis that the submission is put by reference to an unequal and unwarranted diversion of the company's funds into Thomas' pocket."
The Plaintiffs point to withdrawals from the bank accounts of a number of the Shield Group companies and, in their Amended Commercial List Statement assert, without particularisation, that all of these funds were withdrawn by Thomas from those accounts "for his benefit".
The basis upon which these allegations were made appears to be no more than that Suzie did not authorise the payments.
[58]
Overdrawing Shield Resources' running account
In relation to Shield Resources, the Plaintiffs allege that Thomas advanced identified sums to Shield Resources and made identified withdrawals, all said to be "for his benefit", the Plaintiffs seek an order that Thomas "repay" the difference.
The cross-examination of Thomas focused on the largest of withdrawals, namely an amount of $370,030 made from the Shield Resources account on 22 March 2018.
Mr Elliott's cross-examination of Thomas about this was as follows:
"Q. Do you see further down the page on 22 March, there's a withdrawal from a branch at Eastwood? That's a branch that you would go to?
A. INTERPRETER: Should be.
Q. You withdrew $370,030?
A. INTERPRETER: Yes, that's what I did transfer.
Q. What did you do with that money?
A. INTERPRETER: I have another statement to show that is the payment I paid to overseas business partner. His name is Liang Jie Chen.
Q. A business partner of yours?
A. INTERPRETER: That's the company's business partner.
Q. What partnership existed?
A. INTERPRETER: This is just the normal business practice between us. It is between Liang Jie Chen and I. I have the evidence to prove that a business partnership. I have the statement as well.
Q. I'm not asking for documents. I want the witness to describe the nature of the partnership that existed with this person?
A. INTERPRETER: Mr Ye is asking, which year is it related?
Q. 2018.
A. INTERPRETER: So, because it happened a long time ago, I can't remember which project it is related, but in my company's [ledger], [69] I can find the transfer of the money and there's a note on it."
Mr Elliott and Mr Goodyear describe this explanation as "unsatisfactory". It is true that Thomas was not able to give a detailed account of this withdrawal. However, I am not prepared to draw the inference that the funds were misapplied as was implicitly suggested in Mr Elliott's and Mr Goodyear's submissions.
Further, as Mr Kelly and Mr Maroya pointed out, the figures in the tables in the Plaintiffs' Amended Commercial List Statement setting out the relevant deposits and withdrawals from the Shield Resources account are inconsistent with a document that Robin prepared on 25 September 2023 called "Thomas Loan Summary". In that document, different figures are shown as having been advanced and withdrawn by Thomas and a "debit balance" of $120,819.31 is shown; compared to the "debit balance" of $440,596 alleged in the Amended Commercial List Statement. It is not possible to reconcile the two because Robin's document does not contain dates and details of individual entries.
[59]
"Various ad-hoc withdrawals"
In their closing written submissions, Mr Elliott and Mr Goodyear submitted that Suzie had identified a number of transactions from various Shield Group accounts that occurred in October and November 2023, being "the period during which the relationship with Thomas imploded", which Suzie did not authorise.
In his affidavit, Thomas admitted the withdrawals but said that "each of the said payments was for business purposes and within my authority, as Managing Director, to make".
Mr Elliott and Mr Goodyear submitted:
"That is unpersuasive, given the lack of any detail one might expect to be given if there were any truth to the matter."
Mr Elliott and Mr Goodyear continued:
"The lack of force in Thomas's contention as to the purposes of the expenditure is perhaps best displayed by the fact that he also alleges that if the transactions were not otherwise authorised, the [Commercial List Response] filed by him itself apparently 'ratifies the authority of Thomas to make the said payments'."
Mr Elliott and Mr Goodyear were referring to this passage in Thomas's Commercial List Response:
"Further and in the alternative, to any extent that may be necessary, Shield Resources, Shield Formply, Shield Equipment Qld, [70] Shield Holdings South Australia and Shield Timber SA hereby ratifies the authority of Thomas to make the said payments."
I have not been invited to make any finding about the effect of this purported ratification.
The point for present purposes is that what I have set out above comprises the totality of the submissions made on behalf of the Plaintiffs in relation to what was initially described as Thomas's "misappropriation" of funds.
I am not prepared to make any such finding based on those submissions. In particular, the mere fact that the withdrawals were made in October and November 2023 is not a sufficient basis for me to make such a finding.
I turn to the particular withdrawals complained of.
[60]
Withdrawals from account of Shield Resources
The Plaintiffs allege two unauthorised withdrawals from the Shield Resources account.
The first is the withdrawal of $132,000 made on 2 October 2023. The transaction description on the relevant bank account is "Shield Formply Australia ply".
Mr Elliott put to Thomas in cross-examination that the purpose of this transfer was to allow Shield Formply to make monthly payments to Judo Bank. Judo Bank had advanced funds in relation to the Nangwarry Property.
The cross-examination was:
"Q. Yes. Earlier on in 2023 you transferred $132,000 from Shield Resources to Shield Formply. Correct?
A. INTERPRETER: Please give me the exact date of that transfer.
Q. Do you remember doing that or not, in 2023?
A. INTERPRETER: I'm not a computer, I can't.
Q. Does that mean you don't remember transferring $132,000 from Shield Resources to Shield Formply late last year?
A. INTERPRETER: If I did that transfer that should have been reflected in the bank statement.
Q. So you don't remember?
A. INTERPRETER: That's correct.
Q. Can I just show you this document. Do you see here, Mr Ye, a bank statement for Shield Formply with Westpac for September, October 2023. You can see on 2 October a sum of $132,000 coming into Shield Formply from Shield Resources.
A. INTERPRETER: Yes. I did that."
As Mr Kelly and Mr Maroya submitted:
"It was not put to Thomas that the purpose of the transfer was in any way improper, still less that he intended to take the $132,000 for himself or for the benefit of others and thereby misappropriated the $132,000; it was a straight-forward inter-company loan transaction which involved no element of commercial unfairness ..."
I accept that submission.
The second allegedly unauthorised withdrawal was one made on 28 November 2023 for $10,000 with the transaction description on the relevant bank account "Shield Timber SA Pty Ltd".
Thomas was not cross-examined about this transaction. Self-evidently, the payment was for the benefit of Shield Timber SA.
[61]
Withdrawals from account of Shield Equipment Qld
The plaintiffs allege two unauthorised withdrawals by Thomas from the Shield Equipment Qld account.
They are withdrawals on 13 and 18 November 2023 for $1,200 and $750. Both withdrawals have the transaction description on the relevant bank account "Shield Tim[b]er SA".
These entries appear to record a transfer of funds from the account of Shield Equipment Qld to the account of Shield Timber SA.
No doubt Shield Equipment Qld is entitled to a credit for the sum, $1,950, on its intercompany account with Shield Timber SA.
However, I see no basis to conclude that Thomas has misappropriated these funds.
[62]
Withdrawals from account of Shield Timber SA
The Plaintiffs allege two unauthorised withdrawals from this account.
The first is a withdrawal on 20 November 2023 for $1,300 with the transaction description on the relevant bank account as "Pymt Shield For". This is evidently an intercompany loan by Shield Timber SA to Shield Formply.
The second withdrawal is on 28 November 2023 for $10,000 with the description in the relevant bank account "Feng Ye Ye claim nangwarry Ye claim nangwarry". Shield Timber SA is the manager of the sawmill business at the Nangwarry Property. This withdrawal was made after Thomas had been locked out of the Nangwarry Property but appears to be a notation of payment of a claim for expenses related to the Nangwarry Property.
Thomas was not asked any questions about this in cross-examination. In those circumstances, I cannot see how I can conclude that this is an inappropriate diversion of Shield Timber SA's funds.
The balance of the Plaintiffs' claims in relation to Shield Timber SA relate to debit card transactions totalling $1,536 that Suzie has listed in a paragraph in her affidavit. Mr Elliott and Mr Goodyear directed no submissions to these amounts and I do not propose to make any findings about them.
[63]
Withdrawal from account of Shield Holdings South Australia
The cheque in question here was for the princely sum of $100 and drawn on 20 November 2023 with the transaction description in the relevant bank account "Shield Formply Australia Pty Ltd 18 Nov 2023".
The entry appears to comprise a payment from Shield Holdings South Australia to Shield Formply; that is, in effect, an intercompany loan.
Mr Elliott and Mr Goodyear did not suggest otherwise in their written submissions.
The fact that the Plaintiffs sought recovery from Thomas of $100 in the context of litigation of this magnitude suggests that there has been a loss of perspective on Suzie's and Robin's part.
[64]
Withdrawal from account of Shield Formply
Suzie deposed that:
"Robin said that he had seen that Thomas appeared to have transferred a sum of over $100,000 from Shield Resources to Shield Formply, but since that transfer, Thomas appeared to have transferred significant amounts of that out of Shield Formply for Thomas's personal use …"
Suzie said that Robin said the result was that "there was not much left to cover ongoing mortgage payments to Judo Bank". I return to Judo Bank below. [71]
Four particular cheques are identified as being unauthorised withdrawals made by Thomas from Shield Formply for his own benefit.
The first cheque was drawn on 18 November 2023 for $200,000 with the description "Return loan".
There are three credit entries in the same bank statement for $25,000, $75,000 and $100,000, recording that a total of $200,000 was advanced to Shield Formply by a company called Dora Investments Pty Ltd between 11 November 2023 and 17 November 2023.
Thomas gave this evidence about that matter:
"Q. Staying with page 147, you can see there are a number of credit entries between 11 November and 17 November?
A. INTERPRETER: Yes.
Q. And deposits made by Dora Investment?
A. INTERPRETER: Yes.
Q. And who is that - who or what is that, Dora Investment?
A. INTERPRETER: That money was transferred from my friend. It's a short term loan by a few times, because at the beginning, in order to repay the loan from [Judo] Bank, I asked my friend to lend me $200,000, and later I found we had fund to repay that loan, so I returned the money back to my friend.
Q. Didn't you take $200,000 out of this account on 18 November?
A. INTERPRETER: Yes. That's the amount my friend injected to us, but later we didn't use that fund. That's why I returned that fund to my friend."
This evidence shows that Dora Investments made a short term loan to Shield Formply that Thomas caused to be repaid by the cheque in question.
The second cheque was drawn on 25 November 2023 for $10,000 with the description in the bank statement "Transfer To Feng Ye Ye Claiming".
Mr Kelly and Mr Maroya submitted that the entry in the bank statement showed that this was a claim by Thomas for refund of expenses incurred by him on behalf of the company.
There is no direct evidence to support that submission. However, the bank entry shows that Thomas made no attempt to disguise the nature of the payment. Further, there is a similar entry for $37,989.57 in the same bank account for 13 December 2023 using the words "Transfer To Feng Ye ye claim nangwarry" about which no complaint is made.
[65]
Conclusion in relation to the "misappropriation" claim
The Plaintiffs have failed to establish that any of these payments was improperly applied by Thomas for his own benefit.
[66]
Alleged oppression - refusing to pay Judo Bank loan
As I have set out above, Shield Formply borrowed $4.8 million from Judo Bank to finance the South Australian softwood timber export business being conducted by Shield Timber SA on the Nangwarry Property, which is owned by Shield Holdings South Australia.
In their closing submissions, Mr Elliott and Mr Goodyear said:
"In exercising his 70% control of Shield Formply, Thomas has had that company refuse to make the monthly payments due under the Judo Bank Loan Agreement … putting Shield Formply at risk of default."
As I have said, Suzie has given personal guarantees and a mortgage over her properties to secure the Judo Bank loan.
Mr Elliott and Mr Goodyear continued:
"Thus, Thomas' approach of letting Shield Formply ignore its repayment obligations has forced Suzie to step in to cover the Judo Bank Loan Agreement payments, which she has done in an attempt to prevent Judo Bank enforcing securities against her. To avoid that risk, Suzie has (via Mana Assets) paid Shield Formply's monthly repayments (of $47,036) to Judo Bank …
The above conduct has seen the affairs of Shield Formply conducted in a manner that is contrary to the interests of Shield Formply's members as a whole, because Shield Formply is being put at risk of defaulting on the Judo Bank Loan Agreement, and it is also oppressive to Suzie and Robin, both in their capacities as members of Shield Formply, but also in their capacities as providers of security under the Judo Bank Loan Agreement ... Accordingly, an order is sought pursuant to [the Act] s 233 that Shield Formply restore the amounts that have been paid by Mana Assets to cover the Judo Bank Loan Agreement payments, namely the $235,180.05 paid."
The difficulty I see with this submission is that my attention has not been directed to any evidence to show that Thomas has "refused" to cause Shield Formply to make the relevant monthly payments.
Indeed, my attention was not drawn to any evidence showing in what circumstances Shield Formply has failed to make payments to Judo Bank.
If Suzie, as guarantor, has discharged Shield Formply's guarantee then she is no doubt entitled to claim indemnity from Shield Formply and contribution from her co-sureties.
Whether Suzie's company, Mana Assets, would have the same entitlements was a matter not explored at the hearing.
[67]
Alleged oppression - refusing to repay borrowings and salaries
Finally, Mr Elliott and Mr Goodyear submitted:
"In exercising their control of the Shield Group, Thomas and Thomas Gem Stone have had various Shield Group entities borrow money without repaying it, thereby exposing those entities to claims by lenders - not only the plaintiff lenders in these proceedings, but external lenders such as Mr Zhong, which has led to Court proceedings, and a judgment debt, against Shield Resources …
Finally, Shield Resources and Shield Intermodal did not pay, and continue not to pay, employees amounts owed to them, thereby exposing them to claims by them, as is again evident from these proceedings."
These submissions were not developed further.
[68]
Conclusion on oppression
I have found that, for the most part, Suzie's and Robin's claims that they had been oppressed by Thomas have not been made out.
I have found that the passage of the 12 September 2023 resolution appointing Thomas's family members to the board of Shield Holdings Australia was oppressive, albeit without any practical consequences, since no resolution was passed by that board.
On the other hand, it is obvious that Suzie's and Robin's conduct in excluding Thomas from all involvement in the companies of which he is the majority shareholder and in their assumption of the sole control of the Shield Group since November 2023 was oppressive of Thomas.
[69]
Whether the companies in the Shield Group should be wound up in any event
But, as I have said, [72] the wider background is that:
1. the relationship between these parties has broken down irretrievably;
2. there is no functional board of any of the companies in the Shield Group; and
3. the principal trading company in the Shield Group, Shield Resources, is in a parlous financial position, if not actually insolvent.
In these circumstances, there can be no point in these companies continuing to trade. For them to continue to trade would carry the risk, if not the certainty, of one or more of them incurring liabilities while unable to meet them.
I repeat this passage from Mr Elliott's and Mr Goodyear's final submissions:
"There is no question that the relations between Thomas, Suzie and Robin have completely broken down. They cannot continue in business together, and absent some other order better suited to address the present circumstances and rights of the respective parties, the appropriate order would appear to be one for the winding up of all companies in the Group."
Later, Mr Elliott and Mr Goodyear submitted:
"Therefore, if the relationship between them has broken down to a degree to justify winding up on the 'just and equitable' ground, then it would do so for all companies - not just Shield Resources."
In closing oral submissions, Mr Kelly submitted that all companies in the Shield Group should be wound up, apart from Shield Holdings South Australia, which he said "might be one exception" to the winding up of all companies in the Shield Group.
In that regard, Mr Kelly submitted:
"As your Honour appreciates, we, Thomas Gem Stone in particular, claims that it has been oppressed because it has been deprived of a functioning, working board and a functioning, working manager, Thomas having been shut out, locked out, et cetera. But we have to acknowledge that Thomas Gem Stone does have available to it, the power under article 25 of the constitution of that company to move for the removal of Suzie as a director, which it has put in train in order to establish a workable board. In cases where there is an available means for the oppression to be cured by the party who is oppressed, that can be a powerful discretionary ground not to make the order. Your Honour has seen in our submissions, we respectfully submit that in the case of [Shield Holdings South Australia], the claim should simply be dismissed so as to permit the company to call a meeting and constitute a new board."
[70]
The loan claims
In view of that conclusion, it will likely be for the liquidator of the companies in the Shield Group to adjudicate on the remaining issues.
However, I will deal with them briefly.
Each of Suzie, Mana Assets, and Robin allege that they have advanced funds to various of the Shield Group companies.
Thomas did not dispute the fact that loans had been made.
However, Mr Kelly and Mr Maroya submitted:
"… the accounting in this evidence in this matter is very unsatisfactory. Although it cannot be doubted that [Shield] Resources, for example, is heavily in debt, the Plaintiffs have asserted but not proved the unpaid loans for which they seek judgment against an assortment of [the Shield Group companies]."
[71]
Suzie's loan claims
Suzie claims that she is owed:
1. $752,589.97 by Shield Resources;
2. $49,500 by Shield Holdings South Australia;
3. $78,000 by Shield Hardwood;
4. $200,000 by Shield Formply; and
5. $90,000 by Shield Timber SA.
The evidence on which Suzie relies comprises schedules set out in one of her affidavits of the advances allegedly made to each of these companies, together with "repayments" to Suzie from Shield Resources. The schedules have been annotated to cross-reference the relevant bank statements.
Many, but not all, of those entries in the bank statements refer to a "shareholder loan".
On 25 September 2023, Robin sent Suzie and Thomas documents called "loan transaction summary" in relation to each of them. I have referred to the "Thomas loan summary" above. [73]
The "loan transaction summary" concerning Suzie was entitled "Suzie Loan Transaction" and recorded, under the heading "Deposit to SR" a total amount of $1,955,940.27 and, under the heading "loan payback from SR" a total of $1,209,834.23 leaving a "remaining balance" of $746,106.04.
Although both these columns refer to "SR", [74] the loans in relation to the deposits include "cash deposit", "cash deposit to Suzie" and "cash deposit to Suzie (from Vcoco)".
Other notes make reference to "SH", which Robin confirmed was a reference to Shield Hardwood. Those notes include "Suzie directly deposit to SH account" and "Michael Ma Shasong Sun deposit to SH".
Still other notes make reference to "Holdings account", which I infer to be a reference to Shield Holdings South Australia. Those notes include "Deposit to Holdings account" and "to holdings account".
Robin's covering email said:
"There might be errors in the attached spreadsheets, but happy to cross-check with individual records at any time."
Those "individual records", whatever they may be, are not before me.
Suzie replied to Robin on 29 September 2023:
"I can confirm my shareholder loan transactions are matching my banking records. I confirm my shareholder loan to Shield at today is AU$746,106.04."
The figure in Suzie's email is the "remaining balance" figure in Robin's "loan transaction summary".
It is true that this figure is close to the figure that Suzie claims is now due to her from Shield Resources: $752,589.97.
[72]
Robin's loan claims
Robin claims to be owed the following amounts:
1. $2,360,082.54 as well as US$1,600,793 from Shield Resources;
2. $82,300 from Shield Holdings South Australia;
3. $197,392.62 as well as US$1,392,033.14 from Shield Hardwood;
4. $132,300 from Shield Formply;
5. $58,000 from Shield Timber SA;
6. $93,355 from Shield Equipment;
7. $111,775 from Shield Intermodal;
8. $162,508 from Shield Construction Material Group Pty Ltd, the thirteenth defendant ("Shield Construction Material");
9. $60,650 from Shield Biomass Energy Pty Ltd, the eleventh defendant ("Shield Biomass Energy"); and
10. $109,030 from Oz Plantation and Hewer Pty Ltd, the fourteenth defendant ("Oz Plantation").
These amounts total $3,367,394.16 and US$2,992,826.14.
In Robin's 25 September 2023 "loan transaction summary", in respect of his own position, he said that the "remaining balance" due to him was $1,347,184.62.
Robin repeated that figure as being the amount due to him in his 6 October 2023 document.
It appears that a reason the amount that Robin now claims is a much greater figure is his contention that, arising from Suzie's 29 September 2023 instruction that he assume personal responsibility for funds "sourced by" him, he has, in the circumstances I have discussed above, [76] assumed responsibility for the "$8 or $9 million" that his "friends" had advanced for the purposes of the Shield Group.
As I have said, in support of this contention, Robin produced a series of letters, all dated 2 May 2024, by a number of persons with Chinese names which purport to be an assignment of those persons' entitlements against various Shield Group companies to Robin. None of those persons was called.
In that uncertain state of affairs, although I am satisfied that one or more of the Shield Group companies is indebted to Robin, I cannot form any view about what the level of that debt might be.
[73]
Mana Assets' loan claims
Mana Assets contends that it is owed the following amounts:
1. $545,930 by Shield Resources;
2. $56,800 by Shield Holdings South Australia;
3. $285,850 by Shield Hardwood;
4. $85,100 by Shield Timber South Australia;
5. $22,500 by Shield Equipment; and
6. $321,976 by Shield Intermodal.
The total amount sought by Mana Assets is thus $1,403,256.
Suzie's evidence in relation to these loans is a total set out by reference to pages in the relevant bank statements with the dates and amounts of the payment. Each of those payments are simply described as "transfer".
In his 6 October 2023 document titled "Shield Debt Amounts as of 6 October 2023", Robin did not include any amount as being owing to Mana Assets.
Nonetheless, it does appear from the entries in the bank statements that monies were advanced by Mana Assets as Suzie contends.
Mana Assets also seeks to recover from Shield Equipment a debt that it contends was assigned to it by Tongling Ruihong International Trading Co Ltd, a company associated with Robin's nephew.
Mr Kelly and Mr Maroya accepted that the evidence appeared to show that Mana Assets was entitled to recover this sum but submitted that Shield Equipment is in no position to pay the amount in question. The amount was US$908,396.17, which converts to $1,392,835.
[74]
The salary claims
There is now no dispute about Suzie's, Robin's and Kevin's entitlement to the salary and superannuation entitlements for which they contend.
Thus Mr Kelly and Mr Maroya accepted that "the Court may well find that the above entitlements" [77] are payable, but Mr Kelly and Mr Maroya did not suggest there was any other dispute than the quantum of the amounts claimed.
Shield Resources was the relevant employer until 23 April 2023 after which the employment contracts were novated to Shield Intermodal.
Mr Kelly and Mr Maroya added that neither Shield Resources nor Shield Intermodal had the financial capacity to pay these amounts.
[75]
Conclusion
I will give the parties time to consider these reasons before considering further what orders should now be made.
[76]
Endnotes
The figure determined by the Plaintiffs' expert as the value of the shares in these companies.
Zhong v Shield Resources Pty Ltd [2023] NSWSC 1611.
From [180].
At [23].
From [124].
Section 95A(1) of the Act.
Section 95A(2) of the Act.
[2024] NSWSC 34.
Citing Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213; [2001] NSWSC 621 at [33] (Palmer J); Australian Securities and Investments Commission v Plymin (No 1) (2003) 175 FLR 124; [2003] VSC 123 at [370]ff, affirmed in Elliott v Australian Securities and Investments Commission (2004) 10 VR 369; [2004] VSCA 54 and see In the matter of Swan Services Pty Limited (in liq) [2016] NSWSC 1724 at [136]ff; SX Projects Pty Ltd (in liq) v Battaglia [2018] NSWSC 1830 at [20]ff (Black J) and In the matter of Bias Boating Pty Limited (receivers and manager appointed) (in liquidation) [2018] NSWSC 1977 at [4]ff and In the matter of Custom Bus Australia Pty Limited (in liq) [2021] NSWSC 1036 at [33]ff.
In the matter of Pacific Plumbing Group Pty Ltd (in liq) (supra) at [3]-[4].
Supra at [34]-[35].
Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (supra) at [54] (Palmer J); White Constructions (ACT) Pty Ltd (in liq) v White (2004) 49 ACSR 220; [2004] NSWSC 71 at [289] (McDougall J); Lewis (as liquidator of Doran Constructions Pty Ltd (in liq)) v Doran (2005) 219 ALR 555; [2005] NSWCA 243 at [103] (Giles JA, Hodgson and McColl JJA agreeing); Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd (2011) 248 FLR 384; [2011] NSWSC 186 at [48]-[49] (Ward J, as the President then was).
Lewis (as liquidator of Doran Constructions Pty Ltd) v Doran (supra) at [109]-[112]; International Cat Manufacturing (in liq) v Rodrick [2013] QCA 372 at [102]-[105] (Morrison JA, Holmes and Gotterson JJA agreeing); First Strategic Development Corporation Ltd (in liq) v Chan [2014] QSC 60 at [67]-[69] (Philip McMurdo J).
From [70].
Zhong v Shield Resources Pty Ltd (supra); referred to at [27] above.
ASIC, Regulatory Guide 217, "Duty to prevent insolvent trading".
It was Thomas who established the business conducted under the name Shield.
Thomas has been a permanent resident of Australia since 2003 and an Australian citizen since 2005. He is not proficient in the English language but fluent in Mandarin. He gave his evidence before me through an interpreter.
Suzie has been since July 2016, and is, employed as the Chief Executive Officer of the Shield Group. She holds, either personally or through one of her companies, including Mana Assets Management Pty Ltd, the fourth plaintiff ("Mana Assets"), shares in each company. She is also a director of most of the companies in the Shield Group. Suzie holds a Bachelor of Commercial Law from the China University of Politics and Law, a Graduate Certificate of International Business from the University of Wollongong and a Master of Commerce from the University of Sydney. Suzie has lived in Australia since she emigrated from China in 2000. In 2007 and 2010, Suzie established businesses, separate from the Shield Group, providing migration advice services. Suzie is bilingually fluent in both spoken and written English and Mandarin.
Kevin is Suzie's husband. Kevin contends that he is the Chief Operating Officer and Workplace Health & Safety Officer of the Shield Group. He played the role of Chief Operating Officer in the Shield Group from at least October 2022 to early 2024.
Robin has been since 2017, and is, employed as the Chief Financial Officer of the Shield Group and holds, through his company, XCQ Holdings Pty Ltd, the fifth plaintiff ("XCQ Holdings"), shares in Shield Holdings Australia. He is also a director of that company and certain other companies in the Shield Group. Robin is a qualified accountant. He holds a Diploma in Accounting from Chang Chun Finance College in China. He worked in China as an accountant up to 2008. He immigrated to Australia in 2008 and has worked as an accountant here since then. Robin is also bilingually fluent in both spoken and written English and Mandarin.
Each of these individuals presented as being confident of the importance of their contribution to the fortunes of the Shield Group and, as between Thomas on the one hand and Suzie, Kevin, and Robin on the other, dismissive of the contributions of the other. Much was said during submissions about the credit of each of these individuals and how they presented when giving their evidence. For the most part, I am able to resolve the disputes between them and determine the outcome of the proceedings without reference to such matters.
Suzie, Robin and Kevin seek judgment against Shield Resources and Shield Intermodal for unpaid salary and superannuation.
Suzie, her associated company, and Robin seek judgment against a number of Shield Group companies in respect of funds advanced by way of loan.
The terms of the Facility Agreement are extraordinarily generous; a five year $12 million loan without security and, absent a contrary decision by the lenders, interest free.
Mr Elliott and Mr Goodyear submitted that, in his cross-examination of Suzie, Mr Kelly SC, who appeared with Mr Maroya for the Defendants, did not put to Suzie that the 1 June 2024 Facility Agreement was not a genuine document, nor that it did not reflect an actual agreement made between Mana Assets and the named lenders.
Mr Elliott and Mr Goodyear submitted that it was only in relation to the question of the lenders showing their bank statements to Suzie that any challenge about the 1 June 2024 Facility Agreement was made; when Mr Kelly asked Suzie "[a]re you sure you're not making this up as you go along?", in response to which Suzie said, "I'm not making it up".
However, a fair reading of Mr Kelly's cross-examination of Suzie as a whole on this topic makes clear that, in asking the rhetorical question set out in the preceding paragraph, he was seeking to cast doubt on all of Suzie's evidence about the 1 June 2024 facility; including whether the Facility Agreement truly reflected an agreement by the putative lenders to make the advance described in the document.
Although those lenders were apparently present in Sydney and available to give evidence confirming their preparedness to make the advance, they were not called, from which state of affairs I draw the inference that they were not able to give evidence supportive of the Plaintiffs' case.
That does not, of course, prove that the Facility Agreement is a sham but, overall, I entertain grave disquiet as to its true status.
I think Mr Kelly and Mr Maroya put the matter fairly when they submitted:
"Indeed, there is an open question whether '[Mr Huang and Ms Zhaou]' have $12 million available to lend to Mana Assets, and whether the $12 Million facility is a real transaction. On the face of the facility agreement, which is dated 1 June 2024 (and which appears to have been brought into existence for the purpose of these proceedings) the facility is extraordinary. It is improbable in the extreme that anyone would lend $12 million without any form of security, even so much as a personal guarantee, to a company like Mana Assets, for the purpose of funding the business and operations of the Shield Group. A loan of $12 million without security is most unusual. A loan agreement which does not give an address for the putative lender or indicate how and where payments of interest or repayment of the loan is to take place, calls the veracity of the transaction into question."
Suzie said that Mana Assets will advance the $12 million it borrows from these lenders to Shield Resources, albeit conditionally, as I discuss below. [15]
I understand from this evidence, and in particular the passages that I have emphasised, that Suzie's position is that she would be prepared to cause Mana Assets to advance funds to Shield Resources if, but only if, she is successful in these proceedings in obtaining an order for the compulsory transfer by Thomas of his shares in the Shield Group in general, and Shield Resources in particular.
On the other hand, Mr Kershaw assumed that the $12 million referred to in the 1 June 2024 Facility Agreement was available to Shield Resources and that the employee entitlements of Suzie, Kevin, Robin and Thomas, asserted to be in the order of some $3.1 million in total, were not due and payable.
Mr Kershaw stated that he had not been provided with all the information necessary for him to express an opinion as to whether Shield Resources was solvent. Included in the missing information to which Mr Kershaw referred were finalised and signed financial statements for FY23, management accounts for FY24, integrated financial forecast models for FY25 to FY29 and management's underlying calculations and assumptions to support these forecasts.
On that basis, Mr Kershaw reached these somewhat tentative conclusions:
"… there is not sufficient evidence to provide a concluded opinion that Shield Resources is insolvent. Based on my review of the limited information available and my instructed assumptions, in my opinion it is likely that Shield Resources is solvent.
… my opinion of solvency is not a concluded one. However, in my opinion it is not appropriate to conclude that Shield Resources is insolvent without further investigation and information.
… the cashflow test is the primary test of solvency, in accordance with the definition of solvency under the [Act]. … I have not been provided with all of the information necessary for me to form a concluded opinion on Shield Resources' solvency.
… the records available are not adequate to form a concluded opinion on Shield Resources' solvency at this time… based on my review of the limited information available and my instructed assumptions, it is likely Shield Resources is solvent under the cash flow test.
… I have not been provided with all of the information necessary [to] form a concluded opinion on the solvency of Shield Resources. Based on the limited information available to me and my instructed assumptions, there is an indication that it is likely Shield Resources is solvent." (Emphasis added.)
Robin then gave evidence that what was evidently proposed was a change whereby the Shield companies were no longer liable to the original investors, Robin's "friends", but would be liable to Robin.
Thus, he gave this evidence:
"Q. So this is something that Suzie was telling you, I suggest? That is, henceforth, you will be personally liable to the third parties and the companies that will be liable to you. Is that right?
A. I think so, because I will be liable for those fund to - for the lenders, then I should chase up the - chase up the repayment from Shield.
Q. So between yourself and Suzie, you were agreeing to change the arrangement which was already in place?
A. I don't think that's the agreement between me and Suzie, because Suzie sent that email, I have thought about it, then from perspective, look, I borrowed money from my friends to Shield, then as a - as a trusted person, I have to stand up and say, 'Look, I give the commitment to my friends. That's what I'm thinking at that point in time.'
Q. What about the company, sir?
A. I - then the company will be liable to me.
Q. That's something that you and Suzie agreed amongst yourselves on this occasion, correct?
A. Yes, and send - send the email to all the people ask for confirmation, then from my personal - I agree this mechanism.
Q. But you're not suggesting that Thomas, for example, agreed with this change in the arrangements that were in place.
A. Look, at that point in time, I don't know what - what Thomas thoughts (as said). I don't know. That's a reason I replied, still waiting for the confirmation from other parties such as Thomas and Emma and the - and the case as well.
HIS HONOUR
Q. Before this the companies were liable to your friends, and after this the companies would be liable to you?
A. Yeah."
Robin produced a series of letters, all dated 2 May 2024, by a number of persons with Chinese names which purport to be an assignment of those persons' entitlements against various companies in the Shield Group to Robin.
None of those persons was called.
Otherwise, as Mr Kelly and Mr Maroya pointed out in their closing submissions, Suzie and Robin have led no evidence to prove the existence or terms of any particular loan by any particular investor to any particular company in the Shield Group so as to establish any underlying indebtedness capable of being assigned or otherwise dealt with by way of the arrangement that Robin described.
Thomas gave this evidence:
"On 3 October 2023, I received a telephone call from Suzie in which she said words to the effect: 'We have to get the restructure back on the rails' and 'Vcoco is too good an opportunity to miss'. I said words to the effect: 'Who are these people? I have never met them. Do they even exist?' Suzie said words to the effect: 'You have to keep out of it, Thomas. They are Robin's investors.' I said words to the effect: 'I am not going to be pushed out.' We spoke for several hours. The conversation went around and around and did not result in any agreement except that I would think about it and we would have another meeting."
And further:
"Robin and I have developed what I consider to be a robust plan for the Business, which includes our proposed customers, timber products for export, and sources of funding. In due course, our objective is also to build up an Australian customer base. As part of that objective, I have started to speak to potential customers in Australia and in the PRC.
Based on those discussions and my experience in running the Business as CEO, I am confident about our ability to source clients for all of the Shield Group's products, to complete construction of the sawmill at the Nangwarry Property and successfully grow the Business."
Similarly, Robin has deposed:
"If Suzie and I were allowed to buy out Thomas's interest in the Shield Group Companies, I would continue in my role as CFO and to source funding and investment necessary for the Shield Group to succeed, with the objective of making the Business profitable and enable Suzie and I to be repaid our loans and unpaid salaries. I would not seek repayment of those amounts until the Business had the necessary investment and cash flow for this to happen."
As Mr Kelly and Mr Maroya pointed out, there is no evidence before me about the content of the "robust plan" that Suzie said she and Robin had "developed". There is no evidence of any cash flow projections or other business plan information that might cast light on whether the "plan" is viable.
And the "plan" must depend on Mana Assets drawing down the funding referred to in the 1 June 2024 Facility Agreement. Further, assuming the lenders to Mana Assets did charge interest at the rate specified in the Facility Agreement, 10% per annum, it is not clear how Shield Resources could service such interest: $1.2 million annually. [20]
Suzie's and Robin's "plan" thus raises the spectre, assuming the establishment of oppressive conduct by Thomas and the transfer by him to them of his shareholding in the Shield Group, of them causing the members of the Shield Group to trade and incur debts in circumstances where those companies are actually insolvent, or where there are reasonable grounds to suspect that the companies are, or would become, insolvent. This would be in breach of their duty under s 588G of the Act.
The Court could not, obviously, give its imprimatur to such a state of affairs.
It is well settled that the expression "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" is a compound expression and is concerned with "commercial unfairness". [35]
Unfairness, for the purpose of s 232, is "assessed by reference to whether 'objectively in the eyes of a commercial bystander, there has been unfairness, namely, conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair'." [36]
Further, "one must take all the matters alleged together and remember that each case must be decided on its own facts because there is no such thing as oppression in a vacuum". [37]
Thomas agreed that there would be some kind of restructure.
Thus, he gave this evidence in cross-examination:
"Q. In essence, what you discussed with them was an arrangement under which there would be a division of rewards from the business in the future to be determined, having regard to each party's contributions to the business; correct?
A. INTERPRETER: No. It's based on the shares.
Q. That there would be a redistribution of shares at a later time as part of a restructure. Correct?
INTERPRETER: I beg your pardon?
Q. There would be a redistribution of shares at a later time in the context of a restructure. Correct?
A. INTERPRETER: Yes."
And:
"Q. On your own evidence, Mr Ye, on your own evidence, you accept that shares in companies were issued to these people in recognition of the work they performed.
A. INTERPRETER: Yes.
Q. There's no question, is there, that you had conversations with Suzie and Robin about giving them shares in recognition for contributions they made?
A. INTERPRETER: Yes.
Q. And conversations in which you said that there would be allocation of shares on a fair basis to reflect contributions to the company?
A. INTERPRETER: That's not based on their request. Actually, that's me who took the initiative to give this - I told them, based on their contribution to the company, also based on my judgment, I would - I will give them shares. We never had a formal meeting to discuss about it. That's out of my own personal promise to them."
Thomas did cause Suzie's shareholding in Shield Resources, at first through Phoenix Group Australia and then Mana Assets, to be increased from 4% to 6% in 2019 and then to 30% in 2022. As I have said, the latter increase was evidently a response to the role that Suzie played in procuring funding for the refinancing of the purchase by Shield Holdings South Australia of the Nangwarry Property, including offering her home as security and providing a guarantee for the relevant indebtedness.
Suzie, through Mana Assets, also holds 30% of the shares in Shield Holdings South Australia.
Suzie said that there were further discussions in September 2022. Suzie described these discussions as "the beginning of a restructuring".
Suzie said:
"At one point towards the end of a conversation that we had around this time (September 2022), Thomas said that whatever we ended up negotiating for the Restructure, it would be a good idea that the restructuring documents showed that he was a majority owner (ie held more shares than Robin and me combined) because he said that would be best for attracting investors."
Suzie said that she was not "happy with this suggestion", but that:
"… because Thomas had promised that I would receive more shares in the Shield Group when we restructured the Business, I continued to work with Thomas to develop and grow the Business and thought that the best time to discuss who would receive what shares was when further funding had been obtained."
The "two documents" to which Thomas referred in the final words of this message were a draft Securityholders' Deed and draft Deed to Establish a "Shield Holdings Australia Trust". The effect of these documents was to divide ownership of the Shield Group 50:30:20 between Thomas, Suzie and Robin.
Suzie deposed:
"Shortly after 9 May 2023, Thomas said he did not agree with the proposed 50/30/20 ownership split for the Shield Group, as he said he insisted that he required a majority shareholding because he was the founder of the Business and had put in a lot of money over the time of the Business. He also said that as Robin and I were only employees, we should only receive a minority shareholding."
On 12 July 2023, Thomas, Suzie and Robin, by their companies, Thomas Gem Stone, Mana Assets, and XCQ Holdings, signed a number of documents including a Shield Holdings Australia Trust Deed and a Securityholders' Deed which had the effect that the shares in Shield Holdings Australia, and the units in the Shield Holdings Australia Trust, [40] were held in proportions 64:20:16 for Thomas, Suzie and Robin respectively. [41]
Thus, the parties did "sit down and agree" on a redistribution of shares in the Shield Group.
Suzie's and Robin's real complaint appears to be that they were somehow "coerced" by Thomas into coming to this agreement.
It seems probable that Thomas, perhaps angrily, insisted that he retain a majority interest in the Shield Group. And assuming that he made the threats to which Suzie deposed, this would likely have been a concern to Suzie and Robin, as they had guaranteed and provided security for the finance over the Nangwarry Property and were vulnerable should the lender seek to exercise its powers over that security.
But as Mr Kelly and Mr Maroya pointed out, Suzie and Robin are both highly qualified and experienced business people. Each of Thomas, Suzie and Robin had a high opinion of the worth of their own contribution to the Shield Group. Each was entitled to, and did seek to, drive a hard bargain when it came to negotiating the 64:20:16 split reflected in the Shield Holdings Australia Trust Deed. There was some hard bargaining. The parties came to an agreement.
In any event, the unstated premise of Suzie's and Robin's complaint about being "coerced" into agreeing to that bargain was that it was somehow a bad bargain. It was doubtless less favourable to Suzie and Robin than the 50:30:20 split that they proposed. It involved some dilution of Thomas's equity in the Shield Group. But the evidence does not enable me to conclude that a 64:20:16 split was not in range of what was "fair". The result has not been shown to be so commercially unfair to amount to oppression.
To a large extent, the Plaintiffs' case concerning the Chinchilla Property depends on this alleged conversation.
Suzie made no note of it.
In this context it has been held that:
"Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence." [47]
Faced with this conflict in the evidence, it is necessary to look at such objectively established matters as might cast light on the probability of what was said in the August 2018 conversation.
It is also necessary to bear in mind the observations of McLelland CJ in Eq in Watson v Foxman: [48]
"… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience."
In oral closing submissions, Mr Elliott submitted that Thomas had used the word loan "secretly" and that "he wants to call it a loan".
But what else could the transfers referred to at [192] above be? No-one suggests the transfers constituted gifts. On Suzie's account of her 27 August 2018 conversation with Thomas, he told her that "the Chinchilla Property was going to be paid for using Shield Resources' funds". [49] Thus, on her own evidence, she and Thomas did "talk about there being a 'loan' for the benefit of Thomas Gem Stone". Small wonder that Thomas caused his bank to describe the larger transfer as a "loan".
The funds used by Shield Resources to make these advances to Thomas Gem Stone were sourced from the loan made to Shield Resources by Mr Zhong, to whom I have already referred, of $1,151,645.06 pursuant to a loan agreement made on 18 September 2018. That amount was transferred to Shield Resources by Mr Zhong on 21 September 2018. It was Mr Zhong who obtained the judgment on 18 December 2023, to which I have already referred. [50]
On 12 December 2018, Thomas Gem Stone became the registered proprietor of the Chinchilla Property.
On 8 August 2019, Thomas Gem Stone transferred $470,000 to Shield Resources. The credit entry in Shield Resources' account reads "Feng Ye Loan Ye Ft". The source of these funds was Thomas's family trust, of which Thomas Gem Stone was then trustee.
It is common ground that there was a running account in place between Thomas Gem Stone and Shield Resources. The payment by Thomas Gem Stone of $470,000 appears to represent the repayment by Thomas Gem Stone of the amounts advanced to it by Shield Resources on 17 September 2018 and 27 November 2018: $19,000 and $416,584.48 respectively, a total of $435,584.48. The difference of $34,415.52 may constitute a payment on account interest.
That the payment on 8 August 2019 was intended by Thomas to be a repayment of the loan is confirmed by Thomas's use of the descriptor "loan" in relation to the deposit to the Shield Resources account.
The relationship between Suzie and Thomas was, at this time, harmonious. Therefore, there was no reason for Thomas to seek to disguise the true nature of the August 2019 payment.
Mr Elliott put to Thomas in cross-examination that the purpose of the 8 August 2019 transfer of funds to Shield Resources was to fund a payment of $500,100 made from the Shield Resources account a few days later. That may be so, and it may explain why Thomas chose to cause the payment to be made when he did. But as Mr Kelly and Mr Maroya submitted, it is irrelevant. The payment must be seen as being credited to the running account between the two companies. How Shield Resources chose to apply the funds has no bearing on the state of that account. Mr Elliott did not otherwise challenge Thomas about this payment.
I find that the 8 August 2019 payment represented repayment by Thomas Gem Stone of the advances made to it by Shield Resources.
Therefore, by 8 August 2019, Thomas Gem Stone had itself funded the purchase of the Chinchilla Property.
There is no evidence to the provenance of this document save that it was prepared by Mr Smith. There is thus no evidence as to who it was that suggested that the Chinchilla Property might be transferred to "Shield QLD Investment Pty Ltd". But it must have been one or more of Thomas, Suzie and Robin. Thus, each must have been alive to the possibility of the Chinchilla Property being transferred from Thomas Gem Stone to a Shield Group entity as a part of the restructure discussions.
There is also no evidence that this document was ever executed. That is perhaps because no investor was located that was prepared to subscribe for the contemplated $5.5 million units.
Mr Elliott and Mr Goodyear placed emphasis on this evidence Thomas gave concerning that document:
"Q. This is one of the documents that you reviewed with your wife?
A. INTERPRETER: My wife read the document.
Q. If you go to p 859, you'll see at the top of the page it's a schedule that's headed 'conditions precedent'. You will see down in item 7, that a company called Shield Queensland Assets would be established. In item 8, the Chinchilla property would be transferred to that company. That was something that you had no difficulty with?
A. INTERPRETER: That's correct.
Q. It's consistent with what you had discussed and agreed with Suzie and Robin in 2018; correct?
A. INTERPRETER: That's incorrect because in 2018 I have never thought about restructure which will occur in 2023. That's incorrect." (Emphasis added.)
The passage I have emphasised shows that Thomas was agreeable, at least in principle, to the Chinchilla Property being transferred to Shield Assets QLD, and thus into the Shield Group. It also shows that the possible fate of the Chinchilla Property was a matter very much on the table during the restructure discussions.
In about May 2023 Robin circulated a proposed "Structure Diagram", as attached. Annexure 3 - Proposed Structure Diagram May 2023
That document referred to, amongst other companies, "Shield QLD Assets Pty Ltd ATF Shield Assets Unit Trust". It was described as a "Property Holding QLD" company.
In September 2023, after Thomas, Robin and Suzie had executed the Trust Deed and Security Holders Deed on 12 July 2023, Robin circulated a further structure diagram, attached. Annexure 4 - Proposed Structure Diagram September 2023
This document referred to, amongst other companies, "Shield Assets QLD Pty Ltd ATF Shield Assets QLD Trust" and described it as "Holding Property: 195 Auburn Road Chinchilla QLD 4413".
By then, Shield Assets QLD had been incorporated as a wholly owned subsidiary of Shield Investments QLD. This occurred on 19 July 2023.
Thomas referred to these documents in his affidavit and commented:
"When I saw the September Diagram it appeared to me that the restructure that was now proposed had changed in a way in which shareholder and board control of the Shield group of companies would now be taken away from me and be passed to Suzie and Robin."
It is not clear to me how Thomas could have seen the September diagram as having this effect because, by September 2023, he, Suzie and Robin had executed the 12 July 2023 documents giving Thomas a majority interest in Shield Holdings Australia and thus of all the other companies in the diagram.
Thomas did not say in his affidavit that he saw any difficulty with the Chinchilla Property ultimately being transferred to Shield Assets QLD.
Thomas gave this evidence concerning those diagrams:
"Q. In the same volume, would you go please to p 1225? Now, this is a structure diagram that you were shown in 2023; correct?
A. INTERPRETER: There are two versions. I'm not sure if this is the first version or second one. I want to have a look of the evidence attached to my own affidavit.
Q. I'll show you the other one.
A. WITNESS: Thank you.
Q. Volume 3 of part B, p 1931. You saw each of these documents in 2023, didn't you?
A. INTERPRETER: Yes.
Q. One in about May and one in about September, correct?
A. INTERPRETER: Yes.
Q. Is the one at p 1225, the one you saw in May?
A. INTERPRETER: Yes.
Q. You saw that there was to be a holding company at the top of the page?
A. INTERPRETER: Yes.
Q. Underneath the holding company, there would be South Australian companies on one side, and Queensland companies on the other side.
A. INTERPRETER: Yes. That's all prepared by Robin and Suzie.
Q. You will see that on the Queensland side, there was a company called Shield Queensland Assets?
A. INTERPRETER: Yes.
Q. That would be the property holding company?
A. INTERPRETER: Let me explain.
Q. No, no, please. You saw that from this diagram that the Shield Queensland Assets company would be a property holding company. Did you see that or not?
A. INTERPRETER: Yes.
Q. You discussed with Robin and Suzie, that the Chinchilla property would be transferred into that company; correct?
A. INTERPRETER: We didn't have such a discussion.
Q. You discussed it again in September 2023; didn't you?
A. INTERPRETER: Yes.
Q. By using the [September diagram]; correct?
A. INTERPRETER: Yes.
Q. You can see on the right-hand side of the page, the Queensland side of the page, Shield Assets Queensland, can't you?
A. INTERPRETER: Yes.
Q. It was going to hold the Chinchilla property; correct?
A. INTERPRETER: Let me explain that.
Q. No. You saw from this document that it recorded that Shield Assets would hold the Chinchilla property?
A. INTERPRETER: Yes.
Q. You had discussed and agreed with Robin and Suzie, that the Chinchilla property would be transferred to that company; correct?
A. INTERPRETER: I just want to let you know all the establishments of these companies are illegal. I have never signed the document. They have never notified me. Please check the asset registration, there was no - and my name was not there." (Emphasis added.)
The passages I have emphasised suggest that Thomas did have a discussion with Suzie and Robin in September 2023 about the subject of the Chinchilla Property being transferred to Shield Assets QLD.
The fact that Robin circulated the two diagrams, the first referring to "Shield QLD Assets Pty Limited" with the descriptor "Property Holding QLD", obviously a reference to the Chinchilla Property, and the second making specific reference to the Chinchilla Property, and correctly naming the by then incorporated Shield Assets QLD as "holding" that property, shows the possible fate of the Chinchilla Property was front of mind to both Robin and Suzie during the restructure discussions.
Arising from these matters, Suzie and Robin seek an order that Thomas and Thomas Gem Stone sign all documents and take all actions necessary to register NewCo and transfer the title of the Chinchilla Property to NewCo.
The restructuring agreed in 2023 for the "whole Shield Group" was that agreed for Shield Holdings Australia: 64% for Thomas through Thomas Gem Stone, 20% for Suzie through Mana Assets, and 16% for Robin through XCQ Holdings: not 69.5% for Thomas Gem Stone, 30% for Mana Assets and 0.5% for Awake, as is claimed in the Amended Summons.
Assuming it was permissible for Suzie and Robin to depart from their pleaded case, and that urged by their counsel in final submissions, there is a wider problem.
Suzie said that it was agreed as part of the 27 August 2018 conversation that, once NewCo was established, the Chinchilla Property would then be transferred to it. This is reflected in the allegation in the Amended Commercial List Statement set out above that NewCo would have the same shareholding as Shield Resources "as part of the proposed restructuring", and that the Chinchilla Property would then be transferred to NewCo: that is, also "as a part of the proposed restructuring".
But during the 2023 restructuring negotiations, Suzie did not act as if she understood this was the agreement. There was a proposal, evidently made in the context of a hoped for $5.5 million investment by a third party, that the Chinchilla Property be transferred to Shield Assets QLD. For some reason, not explained in the evidence, that proposal did not proceed. There is no suggestion in the evidence that Suzie put forward any other proposal whereby the Chinchilla Property would be transferred to NewCo as part of the restructure. And Suzie and Robin eventually agreed to the restructure reflected in the 23 July 2023 documents without insisting on any arrangement relating to the Chinchilla Property.
It is not to the point that Suzie and Robin contend they were "coerced" into agreeing to the 12 July 2023 arrangements. The point is that, so far as the evidence reveals, they did not insist that a transfer of the Chinchilla Property to NewCo should form any part of the arrangements, despite the fact that, as I have explained, the topic was on the table for discussion.
It appears that Shield Assets QLD was incorporated for the purpose of being the transferee of the Chinchilla Property. Indeed, in the second corporate chart referred to above, which was prepared on behalf of Plaintiffs, Shield Assets QLD is described as having been "incorporated to hold and manage Chinchilla property".
But it was not to be and, as I have said, Mr Elliott eschewed in terms the proposition that Shield Assets QLD could be NewCo.
If Suzie had, in August 2018, received an assurance from Thomas that the Chinchilla Property would be transferred to NewCo established for that purpose, and having a shareholding "in the same proportion as agreed in due course for the whole Shield Group", surely the time to insist that such assurance be honoured would have been during the 2023 restructure discussions.
In fact, Suzie did not make any assertion concerning the Chinchilla Property until the commencement of the Federal Court proceedings in February 2024.
Mr Kelly asked Suzie about this:
"Q. … what's your explanation for nothing ever being raised by way of complaint by you between 2018 and 2024?
A. Well, why would I make complaint if Thomas always said he's going to transfer the property to Shield Group, as agreed?"
The answer to Suzie's rhetorical question is that if, as she asserted, Thomas had "always said he's going to transfer the [Chinchilla] Property to Shield Group", the obvious time to raise the issue was during the 2023 restructure discussions at which time the "proportions … for the whole Shield Group" were agreed, to adopt the words that she contends Thomas used in August 2018.
But, although the Chinchilla Property was referred to in those negotiations in the circumstances I have described, Suzie and Robin ultimately settled the restructure absent any provision for the Chinchilla Property.
In those circumstances I do not have an "actual persuasion" [58] that the arrangements between Suzie and Thomas in August 2018 concerning the Chinchilla Property could have been as Suzie has deposed.
In his report, Kevin identified:
1. a number of burst or damaged sewer pipes leaking raw sewage;
2. an oil spillage that had occurred in July 2023 in respect of which clean-up operations commenced the day following the spillage and lasted three weeks;
3. "concerns" about two identified items of electrical work, the photographs of which appear to show loose wiring;
4. inadequate anchoring of an accommodation precinct and an absence of drainage or sewage pipes in relation to that precinct;
5. inadequately secured milling platforms;
6. inadequate safety barriers to a saw dust extraction trench; and
7. a poorly repaired security fence.
That report provoked the following fiery email exchange.
First, Kevin circulated his 4 October 2023 "Report" and stated:
"I am aware a meeting is planned this afternoon or tomorrow with Directors to discuss a number of matters affecting all of us as Shareholders.
This Report is my initial WHS Findings at Nangwarry and is critical for ALL Shareholders to understand we have some serious issues at Nangwarry that need to be addressed in addition to your other matters.
If you don't like reading - there's lots of pictures to support the findings. This is real, this is the truth.
This affects ALL of us. So the time to work together is NOW or we're all screwed.
In your courts now."
Thomas replied in two separate emails which, together, said:
"Exactly bullshit."
And:
"No investigation, no right of speech. Hollow words easily lead to unnecessary misunderstandings and feuds. You wasted both your and our time and spent the company's funds on useless things. All you have said, is under MY control, and is known by your wife. Please see to it that you only focus on your duties and leave what is outside your control alone."
Kevin responded:
"Thomas,
Your forget I'm the company WHS officer …
It is my duty to investigate and oversee all matters related to WHS and safety where ever I visit at all our facilities.
My primary role is to protect the company and all our assets which includes people and property.
Now that I've raised this report to the Directors you have a legal obligation to have it tabled at your next Directors meeting.
Failure to do so places you in contempt as a company Director and questions your suitability to be a MD.
It questions your worthiness to be such.
I am acting within the limits of law.
Perhaps you may want to remember I was also a former Constable of Police in the Qld Police Service and as such investigated criminal incidents. I know what it means to investigate incidents or potential incidents.
As the company WHS Officer and COO I am again reminding you as the MD that my report identifies issues I have found and you are legally obligated as a Company Director to table them at your meeting.
Secondly, you don't frighten me or think your words intimidate me. I'm not one of your workers.
I've spent 5yrs cleaning up your messes from Shield Formply and I'm used to it and expect it from you.
What you now need to do is face the truth and either be a true man and MD and decide we need to fix this. OR
Deny the truth and try and speak false words to intimidate me which won't work.
Truth is truth.
My report is the truth. Take it or leave it.
But the other Shareholders and Fund Providers should know what you've been doing with our funding. And decide if we should continue proceedings or change the leadership and project team.
I am a shareholder and don't like what I'm seeing."
Kevin later emailed:
"If you think nothing is wrong or out of place at Nangwarry I'll contact Safework SA to come and do a free consultative visit.
They do that.
They can send out their WHS Safe Work inspectors and go over every thing you're doing at Nangwarry and give us a free report.
I know how much you love free stuff so why don't I call them to come and visit us at Nangwarry?
Of course the downside is, if they find anything they'll shut down the site until it's fixed. At least that way you get a 3rd opinion on top of Tonkins Engineers next week as well.
Just a suggestion. What do you think? Should I contact them. Let me know."
Thomas replied:
"Up to u."
A short time later, on 6 October 2023, the Building Surveyor from the Wattle Range Council wrote to Suzie:
"Council has received a call from the Country Fire Service (CFS) this afternoon after they were contacted regarding persons living in one of the buildings on site at Lot 10, Bednall Dr, Nangwarry. The CFS also visited the site today and confirmed this was the case and provided Council with photos taken at the time of the site inspection …
Council does not currently have any other development applications apart from the current development application for workers accommodation (as noted above). At this time there are no approvals for persons to be living on site and assume these persons will be residing in the workers accommodation, once this has been approved by Council and all documentation has been received by Council on completion of works, to issue a certificate of occupancy to occupy these buildings (legally).
At this time, you are currently in breach of the Development Act without first obtaining development approval for the use of this building for accommodation. There are also safety concerns with fire safety and the building being appropriate for use as accommodation.
Council now respectfully ask that you cease occupation of this building immediately until such a time a development application is lodged with Council and approval is granted, for use of this building for accommodation."
On 19 October 2023, Wattle Range Council sent Shield Holdings South Australia an "Enforcement Notice" requiring it to cease any further development work at the Nangwarry Property.
This evidently prompted the following email from Kevin to Thomas:
"Well done Thomas,
Real true leadership on full display here and now because of your illegal actions you have place[d] the whole project at Nangwarry at risk. Well done idiot.
And let's make this 100% known to all parties to stop your 'school girl gossiping behaviour' because that's who you are, a stupid school girl who likes to spread lies and stories about other people. Yes we know what you do. Everyone in the Chinese community knows all about your lies and false stories which is why you can't get anyone to support you or finance you.
That as per the letter, it was the CFS that did the discovery of your illegal activities and not me. So, you can STOP spreading your bullshit lies about me saying it was me that told council. You don't even have the balls to ask me, but instead like to whisper behind everyone's back like the brainless fool you are.
Not one single braincell in your head.
So, for your sake you better comply with the council direction and have stopped your illegal works."
Thus, by the time Kevin wrote this letter urging SafeWork Australia to prosecute Thomas, Thomas was no longer in a position to rectify any shortcomings that may have existed on the Nangwarry Property, nor to engage in any further acts or omissions that might have warranted regulatory intervention.
On 15 January 2024, Suzie, Kevin, Robin and their associated companies commenced proceedings in the Federal Court of Australia against Thomas, Thomas Gem Stone, and various Shield Group companies, making allegations to similar effect to those made in these proceedings.
Although Suzie in those proceedings swore a 32 page affidavit with 177 paragraphs, and containing numerous criticisms of Thomas, all that she said about the above matters was to refer to the 19 October 2023 Council "Enforcement Notice" and to say that Shield Holdings South Australia was "not fined by the Wattle Range Council", and:
"That said, in my view, the issuance of the enforcement notice had the potential to damage the goodwill and relationship between myself and Shield [Holdings South Australia] (on the one hand) and the Wattle Range Council (on the other)".
Three days later, on 18 January 2024, an inspector pursuant to the Work Health and Safety Act 2012 (SA) issued a "Prohibition Notice" to Shield Holdings South Australia requiring that certain of the activities at the Nangwarry Property, including the operation of a "green sawing line machine", cease. This notice was issued based on an inspection of the site on 18 January 2024, more than two months after Thomas had been excluded from the site.
Sometime later, and in circumstances unexplained in the evidence, Suzie, Kevin and Robin discontinued the Federal Court proceedings.
The proceedings in this Court were commenced on 4 April 2024.
Further, there is no evidence that the board of Shield Holdings Australia, as constituted by members of Thomas's family, ever passed a resolution.
I find this a further reason to not accept the burden of the Plaintiffs' case, namely that Thomas has converted company funds for his own use by conducting the "running account".
I accept Mr Kelly's and Mr Maroya's submission that the two entries "are consistent with the existence of a practice in which claims for expenses were noted when transfers took place".
In these circumstances, I see no basis to find that the transfer was made for Thomas's benefit.
The third cheque was drawn on 12 December 2023 in the sum of $239,852.54 with the description in the bank statement "WDL Branch St Ives". The only submission that Mr Elliott and Mr Goodyear made about this was to note that "St Ives is the suburb where Thomas lives".
That submission does not take account of this evidence that Mr Elliott elicited from Thomas in cross-examination:
"Q. You can see on 12 December a transfer into Shield Formply of $340,000 from Australian Wood Wholesalers?
A. INTERPRETER: Yes.
Q. What was that for?
A. INTERPRETER: This is regarding a specific project. We bought timber from China and imported it to Australia. That's the payment we need to pay for that goods. In total, that's seven containers.
Q. Do you see on 12 December an entry where $239,852.54 is taken out of the account?
A. INTERPRETER: Yes.
Q. You withdrew that money, didn't you?
A. INTERPRETER: Yes, that's for the payment for the goods."
That evidence shows that Australian Wood Wholesalers, evidently a customer of Shield Formply, paid $340,000 as payment for product and that a payment was then made by Shield Formply in the amount of $239,852.54 for the product.
The final withdrawal was made on 19 December 2023 for $100,000 with the description "Refund loan".
Mr Elliott cross-examined Thomas about this in this passage of evidence:
"Q. On 19 December 2023 you took out another $100,000, didn't you?
A. INTERPRETER: Yes.
Q. You see by the start of November 2023, your relationship with Suzie and Robin had turned very bad, hadn't it?
A. INTERPRETER: Could you repeat the date again.
Q. By the start of November 2023?
A. INTERPRETER: Our relations have been turning bad since 2022 when they start to produce the Nangwarry property.
Q. You had a terrible relationship with Suzie and Robin by the start of November 2023, correct?
A. INTERPRETER: Our relations have been bad before that date you mentioned.
Q. You had an argument with Suzie and Robin at the end of September 2023, didn't you?
A. INTERPRETER: Yes.
Q. You had tried to remove Suzie as the CEO, correct?
A. INTERPRETER: Yes.
Q. She had refused; correct?
A. INTERPRETER: Yes. That's the company's restructure.
Q. You had received a report from Kevin in relation to the Nangwarry property; correct?
A. INTERPRETER: Yes.
Q. You were very angry about it, weren't you? It's a simple question?
A. INTERPRETER: Yes.
Q. You tried to remove Suzie as a director as well, didn't you?
A. INTERPRETER: Yes, because our relation had been so bad we couldn't even work together.
Q. What you tried to do after the relationship fell part in late 2023 was get as much money out of Shield Formply as you could?
A. INTERPRETER: That's incorrect.
Q. You had spoken with Suzie and Robin about a restructure during 2023?
A. INTERPRETER: If my memory is correct, only when I received a notice of restructure on 22 May 2023 I - as the first time I learnt about the issue of restructure.
Q. In mid 2023, you knew that Robin and Suzie were saying that they should own 50% of the Shield companies?
A. INTERPRETER: Yes. At that time, I was very angry. They just did all that. They just want to steal the company from me with - yeah, with some bad intention.
Q. You were angry that they were now asking you to honour the promises that you had always made; correct?
A. INTERPRETER: No.
Q. But you were very angry?
A. INTERPRETER: I have the record for that.
Q. But you were very angry?
A. INTERPRETER: Yes.
Q. You told them that if that was their position, you would walk away from the Shield Group?
A. INTERPRETER: That's nonsense.
Q. You told them that you were the only one that could complete the construction of the sawmill in South Australia, didn't you?
A. INTERPRETER: Yes.
Q. You said unless they agreed to your shareholding proposal, you would walk away; correct?
A. INTERPRETER: That's nonsense. I'm the owner of the company. I don't have a reason to walk away.
Q. You had not mortgaged any of your own property in order to get the money to buy the Nangwarry property?
A. INTERPRETER: That was guaranteed by both my personal guarantee and also the Chinchilla property as the guarantee.
Q. That's the property that had been purchased for the Shield Group; correct?
A. INTERPRETER: That's nonsense."
In this wide ranging cross-examination, Mr Elliott did not put to Thomas that the $100,000 was not used to repay a loan, as the entry in the bank statement suggests. As Mr Kelly and Mr Maroya submitted, what the cross-examination did confirm was that the relationship of trust and confidence between the parties had broken down, but without establishing any basis to impugn the integrity of the $100,000 withdrawal.
I do not accept that submission.
The appropriate course is for orders to be made for all companies in the Shield Group to be wound up.
I shall however defer making those orders to give the parties an opportunity to consider whether some alternative arrangement can be arrived at.
But that does not take into account the further sums that Suzie contends are due to her from the other Shield Group companies to which I have referred.
The total of these amounts is $1,170,089.97.
On 6 October 2023, Robin sent Suzie and Thomas the document to which I have referred above. [75] That document recorded, under the heading "Shield Debt Amounts as of 6 October 2023", that the amount of "Suzie's Loan" was $746,106.04.
In this uncertain state of affairs, I am not prepared myself to conduct an analysis of the bank statements to which Suzie has referred in her evidence.
I am satisfied that Suzie is owed a considerable sum by one or more members of the Shield Group but am not able to determine that figure.
In view of my overall conclusion as to the appropriate manner in which these proceedings should be disposed of, I do not propose to consider the matter further.
Mr Zhong, to whom I have referred above: see [27].
At [124] below.
See cl 9.3 of the 1 June 2024 Facility Agreement set out at [54] above.
Adopting my summary in Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133 at [22]; cited with approval in Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168 at [74] (Gleeson and Adamson JJA, Griffiths AJA).
Wayde v NSW Rugby League Ltd (1985) 180 CLR 459 at 472-473 (Brennan J, as his Honour then was); [1985] HCA 68; Re Quest Exploration Pty Ltd (1992) 6 ACSR 659 at 669 (Mackenzie J).
Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; [2008] NSWCA 95 at [362] (Young CJ in Eq); Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495 at [84] (White J, as his Honour then was).
Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [49] (Barrett J).
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [176] (Gummow, Hayne, Heydon and Kiefel JJ).
Campbell v Backoffice Investments Pty Ltd (supra) at [185] (Basten JA).
Patterson v Humfrey [2014] WASC 446 at [52]-[53] (Le Miere J).
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97 at [159] (Spigelman CJ).
Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd (2004) ALR 136; [2004] FCAFC 153 at [70] (Wilcox, Marshall and Jacobson JJ) citing United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514; [2003] NSWSC 910 at [34]-[38] (Campbell J).
Re Enterprise Gold Mines NL (1991) 3 ACSR 531; (1991) 9 ACLC 168 at 174 (Murray J); United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (supra) at [26] (Campbell J) citing Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 742 (Young J, as his Honour then was); [1998] NSWSC 413.
Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342 at [125] (Barrett J).
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (supra) at 742 (Young J, as his Honour then was).
Re a company; ex parte Shooter (No 2) [1991] BCLC 267; [1991] BCC 44 (Harman J); Re Brenfield Squash Racquets Club Ltd [1996] 2 BCLC 184 (Rattee J).
Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd (supra) at [71] (Wilcox, Marshall and Jacobson JJ).
Joint v Stephens [2008] VSCA 210 at [134] (Nettle, Ashley and Neave JJA); BAM Property Group Pty Ltd as trustee for the BAM Property Trust v Imoda Group Holdings Pty Ltd [2019] FCA 1192 at [49] (Derrington J).
Campbell v BackOffice Investments Pty Ltd (supra) at [181] (Basten JA) citing Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704 (Young J).
Lucy v Lomas [2002] NSWSC 448 at [45] (Young CJ in Eq).
The pleading refers to "Thomas", but this is obviously an error.
At the Nangwarry Property.
Of which Shield Holdings Australia is trustee.
The actual number of units agreed was 576 for Thomas, 180 for Suzie, and 144 for Robin.
From [339].
See [155] above.
See [160]-[165] above.
French v Smith; French v Quarry Quip Engineering Pty Ltd [2004] VSCA 207 at [62] (Charles and Chernov JJA and Harper AJA).
See [16] above.
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] (Hammerschlag J, as his Honour then was); see also Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; [1938] HCA 34; Helton v Allen (1940) 63 CLR 691 at 712; [1940] HCA 20.
(1995) 49 NSWLR 315 at 319.
See [182] above.
See [27] and [70] above.
According to the Plaintiffs' expert valuer, Mr Loverdale.
At [38] and [142].
At [146] above.
See [3] above.
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.
See [25]-[26] above. At one point, in circumstances unexplained in the evidence, Thomas Gem Stone's shareholding was 69%, and then became 69.5%.
The words used in the Amended Commercial List Statement: see [242] above.
See [186] above.
[2019] NSWSC 446.
At [271].
Citing Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (supra); LPD Holdings (Aust) Pty Ltd v Phillips (2013) 281 FLR 227; [2013] QSC 225 at [53] (McCurdo J, as his Honour then was); In the matter of JGS Investment Holdings Pty Ltd [2014] NSWSC 1532 (Black J); Taxa Australia Pty Ltd v Wang [2016] NSWSC 1913 at [23] (Black J).
"'Tofu Dregs' (the pieces left over after making tofu) is a metaphor term used in China for construction that is shoddy workmanship and a poorly executed project." This footnote appeared in the report.
Ananda Marga Pracaraka Samgha Ltd v Tomas (No 6) (2013) 300 ALR 492 at 556; [2013] FCA 284 at [417] (Dodds-Streeton J); Bideena Pty Ltd as trustee for Bideena Pty Ltd Superannuation (2016) 334 ALR 146 at 156; [2016] NSWSC 735 at [57] (Sackar J).
Campbell v Backoffice Investments Pty Ltd (supra) at [175]-[176] (Gummow, Hayne, Heydon, Kiefel JJ).
At [310].
For example, see Food Improvers Pty Ltd v BGR Corporation Pty Ltd (No 4) [2007] FCA 220 at [10] (Rares J).
[2015] VSC 196 at [156]-[161] (Randall AsJ).
Supra at [83]-[84] (Derrington J).
The transcript reads "larger" but this is evidently an error.
The ninth defendant in these proceedings, ("Shield Equipment Qld").
At [418].
At [20] above.
At [366].
Presumably, a reference to Shield Resources.
At [84].
See [98]-[101].
Those set out in Robin's 6 October 2023 document.
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Decision last updated: 18 September 2024