Lieu & Anor v Deng & Anor [2007] NSWIRComm 72 | Case summary

Lieu & Anor v Deng & Anor [2007] NSWIRComm 72 | Case summary | Zoe

1 Paul Lieu and Landmark Enterprises Pty Ltd, a company of which Mr Lieu is a director and the controlling shareholder (who will be referred to as "Mr Lieu", "Landmark" or "the applicants" in this judgment), have commenced proceedings seeking relief under s 106 of the Industrial Relations Act 1996 ("the Act"), against Ms Margaret Deng and Dengs Investments Pty Ltd, a company of which Ms Deng is the sole director and controlling shareholder (who will be referred to as "Ms Deng", "Dengs Investments" or "the respondents" in this judgment). 2 The application, which has proceeded by way of an amended summons for relief filed during the proceedings, seeks orders in the following terms: 1. An order varying the terms of the Shareholders' Agreement and Business Sale Agreement, as each is defined below, (the "Documents") between the parties so as to give effect to the terms of the 1996 Agreement as set out below. 2. An order deleting any terms of the Documents inconsistent with the terms of the 1996 Agreement. 3. An order that the Respondents pay to the Second Applicant such amounts of money in connection with the aforesaid contracts as varied as the Commission considers just. 4. An order that the Respondents pay to the Second Applicant interest upon the amount of money ordered to paid under Order 3. 5. An order awarding costs of and incidental to these proceedings to the Applicants. 3 Mr Lieu appeared in person for the applicants for part of the proceedings. Subsequently, Mr T Saunders of counsel appeared. Mr A J Grant of counsel appeared for Ms Deng and Mr P Brand, solicitor, appeared for Dengs Investments. Background 4 In 1988 Mr Lieu travelled to China to make arrangements for his ill mother to have surgery. He stayed with Ms Deng and her family. Subsequently, in late 1988, Mr Lieu's mother, after surgery, returned to live in Australia, as did Ms Deng, who came to nurse Mrs Lieu. In 1989, at Mr Lieu's request, Ms Deng helped him clean the premises at 214 Coogee Bay Road, Coogee, New South Wales, in preparation for the opening of a new video store business, which was being established by Mr Lieu's company, Lieu Investments Pty Ltd ("Lieu Investments"). The shares in Lieu Investments were held by Mr Lieu's family company Pei Shing Pty Ltd. Mr Lieu owned all but a few shares in Pei Shing. Lieu Investments owned several video stores during its existence. The Coogee video store is at the heart of this dispute. 5 The business commenced trading on 8 January 1990. In 1992, the business moved premises to 196 Coogee Bay Road, Coogee, at which time Ms Deng began to work in the business as an unpaid bookkeeper and shop assistant. On 26 October 1992, Ms Deng commenced paid employment in the business as a bookkeeper and shop assistant. On or about April 1993, Ms Deng was promoted to Manager of the business. 6 On 5 February 1996, Big Country Developments Pty Ltd ("Big Country") the Landlord of 214 Coogee Bay Road, brought proceedings against Lieu Investments in the District Court of New South Wales, seeking the payment of unpaid rent. The proceedings were resolved on the basis of Lieu Investments paying the sum of $161,850, with $30,000 to be paid by 19 February 1996 and the balance of $131,850, no later than 6 May 1996. At about this time, Mr Lieu informed Ms Deng that he had lost the litigation brought by Big Country and asked her or her family in China to lend him some money. Ms Deng declined this request. 7 In late February 1996, Mr Lieu again approached Ms Deng and offered to sell her an interest in the business. An agreement was reached, in principle, that Ms Deng would purchase a 51 per cent interest in the video hire business located at 196 Coogee Bay Road, Coogee known as "Movie City". Ms Deng consulted a solicitor, Mr Christopher Lee and an Accountant, Mr Stephen Meade concerning the proposed transaction. Further discussions between Mr Lieu and Ms Deng occurred between late February and early March 1996. 8 On 1 March 1996, Landmark was incorporated. Dengs Investments was incorporated on 5 March 1996. The arrangement was that Dengs Investments would pay $85,000 to Lieu Investments, being 51 per cent of the value of the business and Landmark would be issued with 49 per cent of the shares in Dengs Investments. 9 Landmark was to have a right to acquire Ms Deng's 51 per cent of Dengs Investments, upon notice at a subsequent time and at an agreed price. 10 Ms Deng was to continue to work in the business as its Manager and was to be paid a salary of $35,000 per annum. Net profits of the business were to be distributed to the shareholders of Dengs Investments by way of dividends in proportion to their shareholding. These arrangements were purportedly reduced to writing in the form of the standard Law Society of New South Wales agreement for the sale of business ("the Sale of Business Agreement") and a shareholders agreement between Ms Deng and Landmark ("the Shareholders' Agreement"). Both were dated 8 March 1996. Ms Deng delivered a bank cheque in the sum of $30,000 to Mr Lieu's solicitor, Ms Anna Maria Marano of McBride Harle and Martin solicitors on 8 March 1996. On 12 March 1996, Ms Deng provided a further bank cheque in the sum of $10,000 to Ms Marano, made payable to Big Country. 11 On 21 March 1996, Big Country entered judgment in the District Court for $131,850 against Lieu Investments. On 6 May 1996, Ms Deng obtained a bank cheque in the sum of $45,000 payable to Big Country. However, Ms Deng was advised not to pay Big Country because of a claim by the (first) liquidator of Lieu Investments. 12 On 7 May 1996, Mr Lieu and Ms Deng had a disagreement concerning the payment of the balance of $45,000. Ms Deng alleges that Mr Lieu assaulted her. She called the Police. 13 On 16 May 1996, Mr Lieu attended the premises of the business and took possession of a Toyota Camry motor vehicle. 14 On 18 May 1996, Ms Deng took out an interim apprehended violence order against Mr Lieu. 15 On 30 May 1996, Lieu Investments served a statutory demand on Dengs Investments for the sum of $45,000. On 31 May 1996, Lieu Investments commenced proceedings in the Supreme Court of New South Wales Equity Division against Dengs Investments, claiming, amongst other matters, payment of the sum of $45,000. 16 In June 1996, Dengs Investments commenced proceedings in the Supreme Court of New South Wales Equity Division seeking an order that the statutory demand be set aside. An order was made to this effect. 17 On 1 August 1996, a notice of motion filed by Lieu Investments for delivery up of the business, was dismissed by Cohen J on the basis that Dengs Investments gave various undertakings including an undertaking to pay the sum of $45,000 to Lieu Investments by 9 August 1996. This amount was subsequently paid. 18 On 1 August 1997, Landmark commenced proceedings in the Supreme Court of New South Wales Equity Division against Ms Deng. 19 On 27 October 1997, the Supreme Court ordered that Lieu Investments be wound up and appointed Mr P Marsden as the (second) liquidator. 20 On 23 October 1998, a statutory demand was served on Dengs Investments by the liquidator of Lieu Investments claiming the balance due under the Sale of Business Agreement of $81,600 (less credits for debts of Lieu Investments paid by Dengs Investments). 21 In November 1998, Dengs Investments commenced proceedings in the Supreme Court of New South Wales Equity Division, seeking an order that the statutory demand be set aside. 22 On 5 February 1999, the Supreme Court proceedings were settled on the basis of consent orders which provided that the statutory demand be set aside and Dengs Investments pay Lieu Investments (in Liquidation) the sum of $38,000 forthwith. This sum was paid by Ms Deng. 23 On 8 October 1999, Landmark commenced proceedings in the Supreme Court of New South Wales Equity Division against Ms Deng and Dengs Investments. 24 On 23 April 2001, the present proceedings were commenced. The Applicants' Case 25 In essence, the applicants' case is that, in accordance with s 106(2) of the Act, at the time the contracts or arrangements were entered into, they were unfair because of the conduct of the respondents. The applicants contend that the unfairness arose because: (i) both the Shareholders Agreement and the Sale of Business Agreement did not reflect the parties intentions; (ii) the Shareholders Agreement and the Sale of Business Agreement failed to include reasonable safeguards for the interests of the applicants and are unconscionably and unfairly one-sided in favour of Ms Deng; and (iii) during the course of the arrangement, the respondents used their powers under the Shareholders' Agreement and the Sale of Business Agreement to take commercial advantage of the applicants which amount to oppressive exploitation. The exploitation is contended to be that: a) Ms Deng repaid the $85,000 purchase price to herself, with the result that Ms Deng has paid nothing for her 51 per cent of the business which was worth $166,600 on 8 March 1996; b) Ms Deng increased her remuneration from the business so as to avoid distributing any profits to Mr Lieu since 1996; c) Ms Deng distributed profits from the business to herself on a regular basis since 1996; d) Ms Deng excluded Mr Lieu from any involvement in the business and from access to any financial records of the business. Jurisdiction 26 Mr Grant contended that the Court had no jurisdiction or power to vary either the Shareholders' Agreement and/or the Sale of Business Agreement under s 106(2A) of the Act, because the Shareholders' Agreement and/or the Sale of Business Agreement do not provide for the performance of work by Mr Lieu. Counsel submitted that the Court's power is limited to circumstances where an applicant is performing work under the impugned contract or arrangement. 27 In the alternative, it was submitted that the Shareholders' Agreement and/or Sale of Business Agreement cannot be said to be a related condition or collateral arrangement and that the performance of work was not a significant purpose of the contractual arrangements between the applicants and the respondents. 28 I do not agree with counsel's contention that the Court's power is limited to where an applicant is performing work under the impugned contract or arrangement. The jurisdictional precondition that must be satisfied for the Court to have jurisdiction under s 106 is a "contract as defined in s 105" whereby "a person performs work". This section only requires a person to perform work not any particular person, and not an applicant. The Shareholders' Agreement expressly contemplated the performance of work by Ms Deng. 29 In Stevenson v Barham (1977) 136 CLR 190, the High Court of Australia considered s 88F of the Industrial Arbitration Act 1940 (NSW), a predecessor section to s 106 of the Act. Mason and Jacobs JJ stated at 201: It follows, then, that if the contract is one which leads directly to a person working in any industry it has the requisite industrial character - it is a contract "whereby a person performs work in any industry". This is the relevant jurisdictional fact which needs to be established. ... 30 Their Honours further stated at 202: We would therefore reject the appellant's submission that the contract is not one of the kind contemplated in the opening words of s. 88F (1). The share-farming agreement provided directly for the employment of the first respondent in the dairy farming or dairying industry and, in accordance with the provisions of the agreement, he performed work in that industry. This, so it seems to us, is the end of the appellant's case in this Court. ... 31 A similar argument was rejected by Schmidt J in Lieu & Anor v Deng & Anor [2001] NSWIRComm 305 where her Honour observed at [7]: [7] It is unarguable here that the agreement expressly required the performance of work by Ms Deng ... 32 And then said at [9]: [9] The section is concerned with the performance of work, not who performs it... 33 I respectfully agree with her Honour's observations. 34 I am also not disposed to counsel's submission that the Sale of Business Agreement is "not a collateral arrangement" or "related condition" to the Shareholders' Agreement. (I note counsel for Ms Deng incorrectly referred to the Shareholders' Agreement as the collateral arrangement). In my view, for the reasons that follow, the Court has jurisdiction to declare void or vary the Sale of Business Agreement under s 106(2A) of the Act. This section came into force on 9 December 2005 and applies to proceedings pending in the Court at that time. In Silbermann v One.Tel Limited (in liquidation) & anor [2005] NSWIRComm 477 Marks J observed at [13] - [15]: [13] Section 19B of the amendment act contains transitional provisions with respect to the operation of s 106(2A). That subsection is stated to apply to a contract made before the commencement of that provision and to proceedings pending in the Commission at that commencement that have not been finally determined by the Commission…".

[15] Section 106(2A) requires that if there is a related condition or collateral contract, it does not need to "relate to the performance by a person of work in an industry" so long as the contract to which it is related or collateral to satisfies the necessary requirement and "the performance of work is a significant purpose of the contractual arrangements" made by the person performing the work. 35 Section 106(2A) therefore governs these proceedings. 36 Section 106(2A) gives this Court the power to declare void or to vary any "related condition" or "collateral arrangement" to a contract whereby a person performs work in an industry, even if the related condition or collateral arrangement does not relate to the performance of work, so long as the performance of work is a significant purpose of the contractual arrangements made by the person. In Barataud v Chipperfield (No 3) [2006] NSWIRComm 249 the Full Bench stated at [35] - [36]: [35] The new s 106(2A) was referred to by the High Court in Fish , but its effect not considered. (See [45] and in footnote 69. It was also mentioned, but not dealt with, in Old UGC v Industrial Relations Commission in Court Session (2006) 80 ALJR 1018 (at [31]). [36] Section 106(2A) empowers the Commission to declare void or vary any "related condition" or "collateral arrangement" to a contract whereby a person performs work in an industry, even if the related condition or collateral arrangement does not relate to the performance of work, so long as the performance of work is a significant purpose of the contractual arrangements made by the person. In our view, this latter condition requires a factual assessment of the contractual arrangements, viewed as a whole, to determine whether the performance of work could be described as a significant purpose. In this case, we are satisfied on Mr Barataud's evidence (as discussed below), that it was. 37 Marks J considered the meaning of "collateral arrangement" in Silbermann. In that case, his Honour referred at [21] to a decision of Basten JA, with whom Mason P agreed, in Grygiel v Baine & Ors [2005] NSWCA 218 where it was held that "collateral" must be understood in the sense of "related to" or even "in addition to". In a separate judgment Bryson JA generally agreed. His Honour discussed how the terms of the collateral contract "bear" upon the operation of the terms of the other contract. Adopting the reasoning of Basten JA, Marks J held at [22] that there needs to be an "appropriate connection" between the relevant contracts or arrangements for there to be a "collateral arrangement". 38 The "appropriate connection" between the Shareholders' Agreement and the Sale of Business Agreement is demonstrated by the fact that Ms Deng required the business to be conducted by a separate company of which she would be the only director. This necessitated the sale or transfer of the business from Lieu Investments to Dengs Investments, hence the Sale of Business Agreement between Lieu Investments and Dengs Investments. Furthermore, there is an appropriate connection or relationship between the Shareholders' Agreement and the Sale of Business Agreement. Each were executed on the same day and there is a substantial overlap between the parties to the two agreements. The parties to the Sale of Business Agreement are Lieu Investments, a company owned and controlled by Mr Lieu and Dengs Investments, a company owned as to 51 per cent by Ms Deng and 49 per cent by Landmark, a company owned and controlled by Mr Lieu. 39 The parties to the shareholders agreement are Ms Deng and Landmark. The shareholders agreement governs the rights and obligations (as between each other) of the shareholders of Dengs Investments. The sole asset of Dengs Investments is the business, which was transferred to Dengs Investments pursuant to the terms of the Sale of Business Agreement. The Sale of Business Agreement was the vehicle by which a 51 per cent share of the business was sold by Mr Lieu to Ms Deng, whereas the Shareholders' Agreement was entered into for the purpose of regulating how the business would be run and be managed once 51 per cent of it was sold by Mr Lieu. 40 I find that in light of the connection between the Sale of Business Agreement and the Shareholders' Agreement, the former is a "collateral arrangement" or "related condition" to the latter. The first condition of s 106(2A) is therefore satisfied. 41 The third contention raised by Mr Grant is that even if the Sale of Business Agreement is a collateral arrangement or related condition to the Shareholders' Agreement, s 106(2A) does not apply as the performance of work by Ms Deng was for a purpose but not a significant purpose of the overall arrangement. 42 Counsel submitted that the most significant purpose was for Mr Lieu (and Lieu Investments) to resolve their pressing financial needs for funds. A second significant purpose was said to be for Ms Deng to acquire an interest in the business. A third was for Dengs Investments to acquire the business from Lieu Investments and a fourth was to regulate the dealings between Ms Deng and Landmark as shareholders in Dengs Investments. 43 Contractual arrangements may have more than one "significant purpose" and the purpose must be discerned from the evidence as to the subjective reasons for entering the arrangement. In Kennett and Anor v Mayrana Pty Ltd and Ors (No 4) [2006] NSWIRComm 357 Schmidt J stated at [83]: [83] Plainly enough, contractual arrangements may have more than one 'significant purpose'. As Callinan J concluded in South Sydney District Rugby League Football Club Ltd at [212], with Gummow J's agreement, purpose must be discerned from evidence as to subjective reasons, and in the case of a party which is not a natural person, from evidence of those people who in fact made the contractual arrangements on its behalf. This idea is taken up directly in the case of s 106(2A), where reference is made to 'the person' who made the contractual arrangements. In this case of course, the respondents have not yet led their evidence. At this stage, evidence as to purpose must therefore be found in the applicants' evidence, as well as in the documents. 44 In my view, and I find, the performance of work by Ms Deng in the video industry was (at least) a significant purpose of the arrangements entered into constituted by the Shareholders Agreement and the Sale of Business Agreement. Ms Deng was already employed in the business and she wanted to continue working in the industry and, as a condition of buying into the business, she wanted to manage the business, control the purchase of stock and keep doing the paperwork. The Shareholders' Agreement set out the terms of the arrangements between Landmark and Ms Deng in respect of her managing the business, including her responsibilities and the remuneration that she would receive. 45 In light of the findings that I have made, there is jurisdiction to vary the Shareholders' Agreement and/or the Sale of Business Agreement under s 106(1) or s 106(2A) of the Act, subject to finding unfairness. Evidence 46 In early February 1996, Mr Lieu who is a commercially sophisticated property developer, having incorporated a number of different companies, approached Ms Deng for a loan in order to finance the judgment debt owed to the landlord of his video business. She refused to lend him any money, as she was concerned about his reliability in respect of paying bills. Mr Lieu informed Ms Deng of his parlous financial position and asked her to assist his accountant in preparing sales and profit figures to show prospective buyers. 47 Subsequently Ms Deng approached Mr Lieu and expressed an interest in purchasing half the business for $85,000. Mr Lieu accepted the offer as Ms Deng had been a good manager and he thought that the business would perform better if Ms Deng had an interest in it. Ms Deng's evidence was that Mr Lieu approached her on several occasions in late February 1996 to purchase a share in the business. 48 Ms Deng's evidence is that after coming to an agreement on the purchase price of $85,000 for her 51 per cent share of the business, there was a subsequent discussion between herself and Mr Lieu, which was as follows: Ms Deng: "I will agree to buy 51 per cent of the business on conditions. I want to be the sole director of the business and I don't want you to be involved in any way. I want to manage the business, control all of the stock buying and selling, and keep doing the paperwork." Mr Lieu: "All right, but I want to be able to buy your share of the business back in 12 months. I also want to be paid dividends every couple of months." 49 Ms Deng then prepared a list of the equipment and debts of the business and what should be done with them. She also spoke to her parents in China about the money. She wrote down some points, which she wished to raise with Mr Lieu. Point 3 was in these terms: 51% share belongs to Margaret Deng 49% share belongs to Landmark Enterprises 50 Mr Lieu denied that Ms Deng did not want him to have any involvement with the business. His evidence was that he would not have agreed to the part sale if his non-involvement were a condition of sale. Mr Lieu stated that the Ms Deng had expressed her desire to be the sole director of the company, as well as being only manager of the business and have control of the day-to-day operations of the business. Mr Lieu agreed to these conditions, but requested that a buy back provision be included in the agreement to protect himself. 51 Mr Lieu stated that he agreed to a proposal from Ms Deng to engage a firm of solicitors to prepare a Sale of Business Agreement. In a subsequent conversation, Ms Deng informed Mr Lieu that she had retained an accountant, Mr Meade, to set up a new company to purchase the business from Lieu Investments and that he would be a shareholder of the new company. This was accepted by Mr Lieu. 52 Landmark was incorporated so it could receive 49 per cent of the shares in the new company, Dengs Investments. It was registered on 1 March 1996. 53 Mr Lieu's evidence is that in or about February 1996, Ms Deng organised for him to meet Mr Lee in respect of the Sale of Business Agreement. During this meeting, Mr Lieu stated that he had informed Mr Lee of the various terms and conditions that he and Ms Deng had agreed upon. These terms included: (a) the formation of a new company to own the business; (b) the purchase price of $85,000 payable by Ms Deng for her 51 per cent share of the business; (c) that Ms Deng would be the sole director and in charge of daily operations of the company; (d) the Mr Lieu is to hold 49 per cent share in the new company through Landmark; (e) that Mr Lieu will still be involved in the major decisions affecting the business and undertake the stock purchases; (f) that a buyback clause for Mr Lieu be included; (g) profit distributions. 54 After the above meeting, Mr Lieu gave evidence that there was no further contact with Mr Lee until the signing of the Sale of Business Agreement and Shareholders' Agreement on 8 March 1996. Mr Lieu did not receive a draft Sale of Business Agreement. 55 Mr Lieu contended that neither Ms Deng nor Mr Lee stated that Mr Lee was acting only on her behalf. At the time of the meeting of 8 March 1996, Mr Lieu thought that Mr Lee acted on behalf of both parties and was not asked by Mr Lee if he had independent legal advice. 56 Ms Deng denied that Mr Lee acted for all parties to the agreements. Further, it was denied that Mr Lieu had met Mr Lee prior to signing the Sale of Business Agreement in 8 March 1996. Ms Deng stated that she met Mr Lee on her own to provide instructions in respect of the Agreement. She had retained Mr Lee and Mr Meade to act only for Dengs Investments and herself and did not accept that she encouraged Mr Lieu in his belief that both were acting for all parties. 57 Mr Lee and Mr Meade were called to give evidence. Both agreed that instructions were given only by Ms Deng and that they acted only for the respondents. 58 Mr Lee stated that he received instructions from Ms Deng to act for her on 27 February 1996. On 5 March 1996, he met with Ms Deng to receive further instructions. 59 Mr Meade stated that Ms Deng would call him, from time to time, to discuss the changes to the agreements negotiated with the Mr Lieu prior to 8 March 1996. These negotiated changes were incorporated in the final agreements.

64 In cross-examination, Mr Lieu denied that he had legal representation at the time of the agreement with Ms Deng. He admitted that Ms Marano did represent him before and after the agreement in other matters. This is supported by Mr Lee's evidence that in May 1996, he met Mr Lieu with Ms Marano to discuss the lease of the business. 65 Ms Deng stated that on 7 March 1996, she received a facsimile from Mr Lee containing drafts of a Sale of Business Agreement and a Shareholders Agreement. She called Mr Lee and Mr Meade to make an appointment for 8 March 1996 to sign the agreements. 66 Ms Deng stated that on the evening of 7 March 1996, she showed the draft agreements to Mr Lieu and informed him of the appointment with Mr Lee and Mr Meade on the following day. She stated that Mr Lieu read the drafts and proposed changes to the purchase price, frequency of dividend payments, Ms Deng's right to pledge the company's credit and her salary. Her salary was to be $35,000 per annum including holiday pay and sick leave although Ms Deng originally requested $40,000. She stated that she had made notes of the discussions between the first applicant and herself concerning the provisions, which she wanted included in the Agreement. These notes were attached to Ms Deng's affidavit dated 22 July 2003. 67 In respect of the draft agreements, Mr Lieu denied what was stated by Ms Deng. During cross-examination, it was put to Mr Lieu that he had seen the draft agreements and discussed these agreements with Ms Deng prior to 8 March 1996. The alterations made to the draft agreements dated 7 March 1996 were put to him as being suggested by him to Ms Deng. His evidence was that Ms Deng did not provide him with a copy of the draft agreements prior to the meeting on 8 March 1996. Further, Mr Lieu rejected the notion that he had discussed the contents of the draft agreements with Ms Deng, or that he had seen these documents on 7 March 1996. He stated that such discussions occurred at Mr Lee's office on the following day.

The parties agree that to the extent that either of them suffers any loss in relation to loans made or credit given to the company or guarantees or security given for the benefit of the same they shall make contributions one to the other to the intent that the same are borne in the like ratios as their shareholdings in the company. 11. Either party may forthwith by notice in writing to the other determine this agreement if the other commits an act of bankruptcy or makes any arrangement or composition with his creditors or within the meaning of Part X of the Bankruptcy Act 1966 or commits a serious breach of any part of this Agreement (provided that in the case of a breach capable of remedy he shall have failed to remedy the same within 14 days of receiving notice so to do) or a persistent breach thereof. 12. Any notice requiring to be given hereunder may be given personally or may be sent by certified mail addressed to the address of the recipient as given herein (or as subsequently properly notified by one party to the other) and any notice given by post shall be deemed to have been served at the expiration of 48 hours after the same correctly addressed and prepaid shall have been posted. 13. This agreement is not personal to the parties but shall mutatis mutandis be binding upon their personal or other representatives and their permitted successors and assigns. 14. It is agreed that Landmark shall have one year from the date of this agreement the right to purchase the shareholding of Deng for $85,000.00. Should Landmark wish to purchase the Landmark shareholding of Deng after one year then Landmark shall pay to Deng an amount of 19.67% of turnover of the business being the last four (4) quarters' turnover. 15. Should Deng wish to purchase the shares of Landmark then she shall purchase the said shares for a sum of $81,600.00. 71 Mr Lieu's evidence was that he made objections to various clauses within both documents and changes were made to these documents during the meeting on 8 March 1996. He informed Mr Meade that the correct name of his company was "Landmark Enterprises" not "Lendmark" Enterprises. This was acknowledged by both Ms Deng and Mr Meade. 72 Mr Meade gave evidence that he thought that this meeting was to finalise minor details and sign the agreements. He recalled that Mr Lieu sought to dissect and renegotiate many aspects of the agreements. Further he remembered that Mr Lieu did not take time to read the agreements, but began asking questions immediately in respect of certain clauses in the agreements. 73 There was a concern raised by Mr Lieu at the meeting over the figures on the contract for sale including the valuation of the stock at $80,000. Mr Lieu stated that Mr Meade informed him that the "arrangement of figures was for accounting purposes". 74 According to Ms Deng's evidence the figures were agreed upon between the parties on the evening of 7 March 1996, and the valuation of $80,000 for stock had been provided by Mr Lieu. 75 Mr Lieu's evidence was that he did not provide stock figures to Mr Lee, Mr Meade or Ms Deng. He stated that the first time he had seen the stock figure of $80,000 was on 8 March 1996 at Mr Lee's office. 76 Further objections were raised by Mr Lieu in respect of the Shareholders' Agreement, particularly in respect of cl 6, cl 7(d), cl 7(e) and cl 15. Clause 6 was not changed, but cl 7(d) and 7(e) were deleted. Mr Lieu stated that when he challenged Mr Lee in respect of cl 15, a clause which enabled Ms Deng to buy out Mr Lieu, he was assured by Mr Lee that he would have priority in the buyout. Ms Deng could not recall that such a conversation had occurred. In addition, Mr Lieu stated that there was no agreement for Ms Deng to purchase Landmark's 49 per cent interest prior to the meeting on 8 March 1996. 77 It was put to Mr Lieu in cross-examination that as he raised objections to certain clauses in each of the Agreements, he was aware of the details in them and had read the agreements before the meeting. Mr Lieu disagreed. He stated that he picked up certain clauses based on general knowledge he had gained through property development by skimming the agreements at the meeting. 78 I prefer the evidence of Mr Lieu that he had not examined or discussed the draft Agreements with Ms Deng prior to 8 March 1996. Importantly, Mr Lieu's evidence was that if he had gone through the drafts and corrected the Agreements, he would have discovered "Landmark" was misspelt in the final agreements. This occurred in some five places. It was suggested in cross-examination that Ms Deng could have written down Landmark incorrectly on 7 March 1996 after a discussion with him. He stated that Ms Deng had spelt Landmark correctly on the draft agreements. In re-examination, Mr Lieu stated that it was unusual that if the draft Agreements with corrections were forwarded to Mr Lee, then it was inexplicable for the final Agreements to have errors in regard to the name of a shareholder throughout the entire document. 79 There is conflicting evidence as to whether there was a copy of the Articles of Association of Dengs Investments at that meeting on 8 March 1996. Mr Lieu could not recall one being present, whilst Ms Deng believed such a document was present. Mr Lee could not specifically recall that one was present at the meeting, and admitted in cross-examination that he had never seen the Articles of Association of Dengs Investments. 80 After some discussions, which resulted in alterations being made to the documents, Ms Deng informed Mr Lieu that she had only $40,000 available and that the balance of settlement monies would be paid within a week or two. Mr Lieu's evidence was that in these circumstances Mr Lee's advice was that the sale transaction was not settled as Lieu Investments was still owed $45,000. It followed that Mr Lieu still owned the entirety of the business and the profits solely belonged to him until settlement occurred. 81 Ms Deng and Mr Lee rejected Mr Lieu's evidence in respect the timing of the settlement. Ms Deng stated that the agreement was for her to pay Mr Lieu $30,000 on 8 March 1996 through his lawyer Ms Marano. She directed part payment to Ms Marano's firm.

82 Mr Lieu's evidence was that he had never mentioned or informed Ms Deng or Mr Lee that Ms Marano was acting on his behalf in this transaction, and that he was reluctant to incur further legal fees after his large litigation with his lessor, by retaining legal representation in this transaction. However, Mr Lieu admitted in cross-examination that on 8 March 1996 the first respondent paid $30,000 to Ms Marano in the form of two bank cheques. One drawn to the lessors of the video business for $17,488.70 and the other to McBride Harle and Martin for $12,511.30. Ms Marano was not called to give evidence. 83 During cross-examination Ms Deng stated that she could not recall whether the issue of who Mr Lee and Mr Meade were representing was raised at the meeting of 8 March 1996. She conceded that Mr Lee did not tell Mr Lieu in her presence that he was acting only for her. 84 An important issue is whether Mr Lieu had legal representation for the sale of the business. Mr Lieu alleges that he thought that he was represented by Mr Lee, who denies this allegation. 85 On balance, I prefer the evidence of Mr Lieu. The Sale of Business Agreement does not record a solicitor for the vendor and Mr Lee admitted that he did not send the draft Agreements to Ms Marano. If Mr Lieu was represented in this transaction, it seems to me that, in spite of the haste with which this transaction was conducted, that a prudent solicitor would have recorded the name of the vendor's solicitor on the documents and forwarded the documents to that solicitor. Further, Ms Deng was aware that Mr Lieu did not seek separate legal representation. Although Mr Lieu was incorrect in his assertion that he did not inform Ms Deng and Mr Lee of Ms Marano, it must be noted that Ms Marano acted for Ms Deng prior to this transaction and that the bank cheques provided to her were for the lease dispute, which led to this transaction. On balance, I also accept Mr Lieu's evidence that he did not wish to incur any further legal costs. I find that Mr Lieu was not represented by Ms Marano for this transaction. Events after the signing of agreements on 8 March 1996 86 Ms Deng stated that on the evening of 8 March 1996, Mr Lieu demanded that she pay another $10,000 to cover the balance that Lieu Investments owed to the lessor of the business. This was done by her on 12 March 1996. 87 On or about 14 March 1996, Ms Deng was informed by Mr Meade that Lieu Investments remained in liquidation and that the liquidator was requesting that the settlement money be paid to him.

96 Ms Deng stated that she had informed Mr Lieu that the balance of the monies would be brought by her parents from China on 20 April 1996 and provided to him. She arranged for the cheques to be drawn for the balance of settlement monies on 6 May 1996. However Mr Lee advised her against that course of action until the liquidation had been finalised. 97 According to Mr Lieu the first time he was aware that the balance of the purchase monies would be paid in April 1996 was at the 8 March 1996 meeting at Mr Lee's office. He stated that Ms Deng was aware of his urgent need for money. His evidence was that if he had been aware that Ms Deng would not have been able to pay him the full purchase price at the time of settlement, he would have obtained the funds from other sources. 98 On or about 31 May 1996, Mr Lieu commenced proceedings through his solicitors, McBride Harle & Martin, in the Equity Division of the Supreme Court of New South Wales against Dengs Investments to recover the remaining $45,000 owed to Lieu Investments. These proceedings were resolved through an undertaking by Dengs Investments to provide the following: (i) To pay Lieu Investments by 9 August 1996 a bank cheque in the sum of $45,000. (ii) To keep proper accounts of the business and to have accounts taken from 8 March 1996 (iii) Not to dispose of any of the assets, cash and other takings of the business otherwise than in the ordinary course of business (iv) To deliver to the plaintiff weekly a summary of the cash receipts and expenditure of the business. (v) To pay the plaintiff's costs of this application. 99 Subsequently, Ms Deng paid the balance of $45,000 on or about 9 August 1996. 100 Mr Lieu was cross-examined in respect of whether Dengs Investments made an application for security of costs against Lieu Investments in the Supreme Court proceedings. He stated that he could not remember. 101 Mr Lee stated that on or about 10 May 1996, he forwarded to Mr Lieu's solicitors a copy of the memorandum and the Articles of Association for Dengs Investments, as well as a copy of the Sale of Business Agreement and the Shareholders' Agreement. Car Lease 102 Prior to the sale of business, a Toyota Camry was leased by Lieu Investments from Esanda Finance. As part of the sale, Dengs Investments was to take over the lease from Lieu Investments from 8 March 1996 (see Item T of the Sale of Business Agreement). 103 Mr Lieu stated that despite his numerous requests through Mr Lee to arrange for the transfer of lease, Ms Deng refused to arrange for Dengs Investments to take over the lease, even though she had the use of the car. In May 1996, Mr Lieu came into the video store and asked Ms Deng for the keys to the car. Ms Deng handed the keys over to Mr Lieu.

110 Mr Lieu's evidence is that the money he had taken from the business was used to pay the bills of the business. These bills were for the leasing of equipment and stock purchases. No documents were tendered to support these statements. Ms Deng rejected Mr Lieu's contention. She could not recall him paying any company invoices for stock purchases after the signing of the Sale of Business Agreement. Accounts for Stock Owned by Lieu Investments at the Time of Sale 111 Ms Deng stated that under the Sale of Business Agreement, Lieu Investments was to pay all of the debts of the business up until 8 March 1996. She contended that Lieu Investments failed to cover its stock bills and Dengs Investments had to pay outstanding accounts, which totalled $35,625.54. 112 Mr Lieu stated that Ms Deng did not notify him of any debts due and payable by Lieu Investments that were associated with the business after 8 March 1996. His evidence is that he only became aware of these alleged debts in August 1996 during the Supreme Court proceedings against Dengs Investments to recover the $45,000 owed to Lieu Investments. 113 Ms Deng denied this accusation. She stated that in several conversations before and after 8 March 1996 she notified him that as part of the sale terms, all bills prior to 8 March 1996 were payable by Lieu Investments. Such requests were initially rebuffed by Mr Lieu and then subsequently ignored. Accounts were paid to video suppliers by Dengs Investments to ensure a continued supply of stock and to ensure the ongoing operation of business. 114 Ms Deng admitted in cross-examination that after 8 March 1996 she had drawn bank cheques from the Lieu Investments account to pay these accounts. Although at this time she was no longer an employee of Lieu Investments, she was still a director of Lieu Investments, she believed as the accounts belonged to Lieu Investments it was liable for their payment and so she took steps to have them paid. However, Mr Lieu cancelled these cheques a few days later and Ms Deng stated that Dengs Investments paid for these accounts.

117 During cross-examination, and after examining the statutory demand from the liquidator of Lieu Investments dated 19 October 1998, Ms Deng admitted that the debts owed by Lieu Investments to Dengs Investments was $26,942.59 and not $35,625.54. Liquidation of Lieu Investments 118 Ms Deng stated in cross-examination that she was not aware that Lieu Investments was in liquidation prior to signing the contract to purchase the business. Further, she could not recall whether Mr Lee had informed her that he had conducted a company search of Lieu Investments on 6 March 1996 and found the company to be in liquidation. 119 When Ms Deng was asked whether Mr Lee or Mr Meade mentioned the status of Lieu Investments during the meeting of 8 March 1996, she replied that neither had done so. Her recollection was that she had first been informed of the liquidation of Lieu Investments during the following week by Mr Meade. He was informed of the liquidation by the liquidator of Lieu Investments. He referred her to Mr Lee for legal advice. 120 Mr Lee advised Ms Deng to wait until the matter was clarified and not to pay the remaining $45,000 to Lieu Investments. This was the initial reason given for the respondents not paying the $45,000 to Lieu Investments. Later Mr Lee advised her not to pay the balance of the purchase price as Dengs Investments had paid the outstanding accounts of Lieu Investments incurred prior to the sale of business. 121 On 27 October 1997, the Supreme Court of New South Wales ordered that Lieu Investments be wound up and appointed Mr Peter Marsden as the liquidator. On or about 19 October 1998, the liquidator served a statutory demand on Dengs Investments. The Schedule to the Statutory Demand claimed $81,600, less accounts paid by the debtor on behalf of the creditor of $26,942.59, less legal costs of $6,056.40 ($32,998.99) leaving a balance of $48,601. Dengs Investments subsequently commenced proceedings seeking an order that the statutory demand be set aside. 122 On 5 February 1999, those proceedings were settled on terms that Dengs Investments pay the liquidator the sum of $38,000 in full and final settlement of his claims. 123 Mr Meade stated that the liquidator was able to demand the balance of $81,600 from the respondents as the liquidator had that right under the Sale of Business Agreement. According to Mr Meade, the Sale of Business Agreement provided that Dengs Investments still owed Lieu Investments $81,600 for the balance of the purchase price. Financial records of the Business and Dividends 124 During the financial year ended 30 June 1995, Mr Lieu calculated that the business had a total turnover of approximately $433,000 and generated annual profits of $113,000. These figures were calculated from a cashbook, which was annexed to Mr Lieu's affidavit dated 28 February 2003. This profit figure was challenged by Ms Deng. She calculated the company's profits for that period at $32,423.71. 125 Annual operating profits after tax for Lieu Investments was reported to the Australian Securities and Investments Commission ("ASIC"). There was also a draft profit and loss statement for the financial year ended 30 June 1996 annexed to Mr Lieu's affidavit in the Supreme Court proceedings. The profits of Lieu Investments, reported to ASIC and the Supreme Court, were as follows: (a) 1992 - $41,963 (b) 1993 - $42,449 (c) 1994 - $15,347 (d) 1995 - $15,508.50 (e) 1996 - $33,231.74

128 Audits demanded by Landmark were not supplied by the respondents. Ms Deng denied that there was an agreement between the parties that Dengs Investments' accounts would be audited or that the respondents owed any duty to Mr Lieu to provide him with audited accounts. Mr Meade forwarded a letter to Mr Lieu on 16 April 1999 which stated: "... There is no such requirement under the Corporations law for a private company to provide an audit. An exception might be when agreed to by the majority of the shareholders, you might need to propose a motion to the directors. Any report, of course, would be at your own expense and the likely cost is $4,000." 129 During cross-examination, Mr Lieu acknowledged that the above letter was a response to the letter of demand for audits. However, he disagreed with the contents of Mr Meade's letter. He stated that he informed Mr Meade his former lawyer had informed him that under the Corporations Law he did not have to pay for an audit; a majority of shareholders need not agree for an audit to be undertaken and a minority shareholder with two per cent of company shares could demand an audit. He confirmed that he never received an audit from the respondents. 130 Ms Deng's evidence in cross-examination was that when she received the letters, she had passed them onto Mr Meade who told her that he would deal with them. He informed her that he did have contact with Mr Lieu and that he had told him that auditors are not required for a small company. He also advised any audit would be at Mr Lieu's own expense. She acknowledged that she accepted Mr Meade's advice in respect of supplying annual audits. Ms Deng was questioned whether she had asked Mr Meade what s 134, s 314, s 315, s 316 and s 293 of the Corporations Act 2001 meant in terms of its obligations to provide annual audits to which she responded that she had not. 131 Ms Deng gave evidence that she understood her obligations as the sole manager of the business and the sole director of Dengs Investments. In addition, she stated that she was aware of her obligations in respect of requests for financial statements; annual general meetings; appointment of an auditor and payment of dividends to Mr Lieu, all of which were raised in the letters of demand from Mr Lieu. These letters were passed on to Mr Meade, who, she believed "would do the right thing". She stated that she exercised her discretion by not holding a shareholders meeting. 132 Ms Deng accepted that as part of the undertaking given to the Supreme Court, she had to deliver to Lieu Investments on a weekly basis, a sales summary of the business, as well as cash receipts and expenditures. Her evidence was that a prior request from Lieu Investments would be necessary for these documents to be provided. Ms Deng could not remember whether there had been such a request from Lieu Investment, nor could she remember whether these documents were sent to Lieu Investments on a weekly basis. However, the first respondent believed that she had fully complied with the undertaking to the Court to the best of her ability.

135 It was Mr Meade's evidence that Mr Lieu visited him in 1999 at his office and requested recent copies of financial reports and a copy of Dengs Investments' Articles of Association. These were provided to him. 136 On or about 5 November 1997, Mr Meade prepared a letter setting out the dividends of Dengs Investments and sent it to Ms Deng to sign and forward to Mr Lieu. His evidence was that the letter was forwarded to Mr Lieu. 137 Financial statements of Dengs Investments were attached to the affidavits of Ms Deng tendered to the court. These statements covered the period from the financial year ending on 30 June 1996 to the financial year ending on 30 June 2005. The parties agreed that no dividends were distributed to the applicants. Summaries of financial statements and reasons for non-distribution of dividends are as follows: (a) For the year ending 30 June 1996, Dengs Investments made an after tax profit of $10,700.04. This amount was available for dividend distribution, and a dividend was declared as payable to Landmark in the sum of $5,243.16. However, no dividend was paid to Landmark as advance drawings made by Mr Lieu exceeded this sum. (b) For the year ending 30 June 1997, Dengs Investments' after tax profit was $10,049.84. A dividend of $4,924.40 was declared to Landmark. Again, no dividend was distributed to Landmark, as advance cash drawings and the value of videotapes removed from the store exceeded this amount. Ms Deng stated in cross-examination that Dengs Investments did not pay any dividends after declaring dividends in 1996 and 1997. (c) For the year ending 30 June 1998, Dengs Investments made a loss of $1,508.45. Hence, no dividend was declared for that year. (d) For the year ending 30 June 1999, Dengs Investments after tax profit was $5,258.68. For the year ending 30 June 2000, Dengs Investments made an after tax profit of $1,990.83. No dividends were declared for these financial years on the advice of Mr Meade, despite small profits. He advised for the profits to be accumulated to finance renovations, as by 1999 the premises of the business required renovation through wear and tear. (e) For the year ending 30 June 2001, Dengs Investments made a loss of $2,435.04. No dividend was declared for that year. (f) For the year ending 30 June 2002, Dengs Investments' after tax profit was $2,286.76. No dividend was declared for that year. Ms Deng stated that these earnings were retained as a consequence of the uncertain economic climate at that time. (g) For the year ending 30 June 2003, Dengs Investments' after tax profit was $10,401.71. No dividends were declared for that year. There was no explanation as to why the dividends were not declared. (h) For the year ending 30 June 2004, Dengs Investments had made an after tax profit of $10,462.96. Dividends were not declared for that year. The profits were retained for legal costs pending the Supreme Court proceedings and these proceedings. For the financial year ending 30 June 2005, there were no profits. 138 According to Ms Deng, the business was not booming and it did not improve after the purchase. The expenses of the business had increased significantly and the sales fluctuated year to year. Earnings of First Respondent 139 Ms Deng gave evidence that between the financial years ended 30 June 1996 and 30 June 2005, that she received salary payments from Dengs Investments as follows: (a) 1996 - $10,671 (b) 1997 - $35,444 (c) 1998 - $37,200 (d) 1999 - $43,700 (e) 2000 - $43,800 (f) 2001 - $53,000 (g) 2002 - $51,900 (h) 2003 - $50,000 (i) 2004 - $49,400 (j) 2005 - $49,400 140 Ms Deng gave evidence in cross-examination that since she bought into the business in 1996, her sources of money were from the business and from family members. At present she receives $1,478 net per fortnight. She recalled receiving $25,000 from her brother in the last 12 months, but could not recall the amounts received from the other members of her family.

143 Ms Deng could not recall how the purchase price was calculated. Her evidence was that the figure was based on the fact that if $85,000 was 51 per cent of the purchase price, 49 per cent would be $81,600, payable by Landmark to Lieu Investments for that shareholding. The total of these sums equals the purchase price of $166,600. Ms Deng in cross-examination gave evidence that Landmark should pay for 49 per cent of shareholding in Dengs Investments. However, she stated that it was an issue between Landmark and Lieu Investments. 144 Mr Lieu disagreed with Ms Deng, stating that there was no agreement with her that Landmark would pay anyone for its 49 per cent shareholding in Dengs Investments. Mr Lee and Mr Meade supported Mr Lieu's evidence. Both stated in cross-examination that they thought Mr Lieu would not have to pay any party to retain 49 per cent of the business. Mr Meade further stated that Landmark would not have to pay for its 49 per cent share of the business. 145 The parties agreed that at the time of the signing the Agreements the balance of $81,600, of which $38,000 was paid to the liquidator of Lieu Investments, would not have to be paid by the respondents on completion. 146 During cross-examination, Mr Lieu was shown a document titled "Certification of copy of report of affairs" which was filed on 30 April 1999 with ASIC on behalf of Lieu Investments for the purposes of its liquidation. Under the heading "Sundry Debtors" Mr Lieu wrote that Dengs Investments was a debtor which owed $81,000 to Lieu Investments. Under the subheading of "explanation of deficiency" he wrote "in dispute". He admitted that he had informed Lieu Investments' liquidator that Dengs Investments owed the company $81,000 under the contract. 147 However, later in cross-examination Mr Lieu's evidence was that the $81,600 was for accounting purposes only and it was never part of the Agreement. The balance referred to in the Sale of Business Agreement was what he understood to be the notional value of Landmark's share in the business. He explained that was the reason why he did not undertake legal action for that amount, despite advice from his legal representative.

148 Clause 30 of the Sale of Business Agreement was another issue in dispute. The clause provided: 30. As to the balance of purchase price of $81,600 such sum shall remain outstanding to the vendor until the Vendor gives the Purchaser six (6) months' notice in writing requiring payment of same. 149 Mr Lieu could not recall any discussion about cl 30 of the Sale of Business Agreement at the meeting on 8 March 1996. He stated that it was his understanding that Dengs Investments would not have to pay additional monies to Lieu Investments other than for the 51 per cent of the business. It was his belief that $85,000 was for Ms Deng to purchase her 51 per cent of the business and that he would retain the balance of the shares in the business through the Landmark's shareholding in Dengs Investments. 150 Mr Meade's evidence was that Mr Lieu asked questions in respect of cl 30, but he could not recall the particulars of these questions. During cross-examination, neither Mr Lee nor Mr Meade could recall when this clause was inserted in the agreement and at whose suggestion. 151 Mr Lee accepted that cl 30 and cl 4 of the Sale of Business Agreement were inconsistent. Clause 4 provided: The balance of the price asset out in H(a)(iii) of the Particulars together with the sum to be paid for the stock-in-trade shall be paid in cash or by bank cheque on completion to the Vendors' solicitor named in E of the Particulars or, if there is no solicitor named, as the Vendors may direct in writing. 152 Mr Lee agreed that cl 4 had the effect that the balance of $81,600 would be paid on completion. This contradicted cl 30 which stated that the balance would remain outstanding until the vendor gave notice for its payment. He conceded that this was a mistake. Mr Lee also agreed that cl 4 stated that stock in trade was to be paid on completion. He accepted that the Sale of Business Agreement effectively required a total payment of $166,000 plus stock in trade of $80,000. However, as far as he was aware the parties did not intend a separate payment for stock in trade. 153 Mr Lieu could not recall that there was any discussion about cl 30. This conflicted with Ms Deng's evidence. She stated that there was a discussion over cl 30 between Mr Lieu and Mr Lee. 154 Ms Deng's evidence in cross-examination was that cl 30 of the Sale of Business Agreement was not in the draft agreement provided to her on 7 March 1996. She did not ask for it to be included and she could not recall who asked for its insertion. Ms Deng thought that its effect was that if Lieu Investments asked for the balance of the purchase price, it was required to give Dengs Investments six months notice. 155 She gave evidence that Landmark would have to pay for the 49 per cent of shares when Lieu Investments asked for the balance from Dengs Investments. Dengs Investments would subsequently ask for the balance from Landmark. Later in cross-examination, she did concede that there was nothing in the Shareholders' Agreement or her notes that required Landmark to pay anyone for its 49 per cent. In addition, she was taken to an ASIC search for Dengs Investments. She acknowledged that there was nothing outstanding in respect of the shares issued by it.

Consideration 174 Central to the respective cases is whether the Shareholders' Agreement and the Sale of Business Agreement reflected the intentions of the parties and whether the contractual arrangements were unfair from their inception in that they failed to include certain basic protections for Mr Lieu and Landmark. It will also be necessary to determine whether the contractual arrangements subsequently became unfair by reason of the conduct of the respondents after 8 March 1996. 175 In determining whether the arrangement was unfair, the Court will exercise, as was stated in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89, "... common sense and a sense of justice." 176 In Davies & Anor v General Transport Development Pty Ltd & Ors [1967] AR (NSW) 371, Sheldon J expressed the approach the Court should take as follows (at 374): ... To determine this, (whether a contract or arrangement is unfair, or harsh or unconscionable) requires no more than the common sense approach characteristic of the ordinary juryman and this cannot be communicated indeed it may be clouded by an analysis of decided cases even where there is some analogy in the facts. It is a plain matter of morals not law. ... 177 These observations have been the foundation upon which members of this Court have proceeded to determine applications brought under s 106 and its predecessors. 178 The evidence is conflicting as to what transpired at the meeting between Mr Lieu and Ms Deng on 7 March 1996. Ms Deng's evidence is that she discussed the two draft agreements with Mr Lieu on 7 March 1996. Mr Lieu denied that any such meeting took place. This is but one example of evidentiary conflict. In this regard, I have to state that neither witness presented as completely reliable and truthful. I formed the view that the evidence of Mr Lieu tended towards exaggeration, possibly caused by feelings of bitterness and hostility, perhaps justified, towards to Ms Deng and that the vagueness and evasiveness shown at times by Ms Deng in answer to questions were not entirely due to the difficulty of recalling events that happened as long as 10 years ago. Be that as it may, the way in which I have concluded this matter should be disposed of largely obviates the necessity of ruling, in cases of conflict, where I consider the truth lies. As McHugh J noted in Longman v The Queen (1989) 168 CLR 79 at 107 - 108: The fallibility of human recollection and the effect of imagination, emotion, prejudice and suggestion on the capacity to "remember" is well documented. The longer the period between an "event" and its recall, the greater the margin for error. Interference with a person's ability to "remember" may also arise from talking or reading about or experiencing other events of a similar nature or from the person's own thinking or recalling. Recollection of events which occurred in childhood is particularly susceptible to error and is also subject to the possibility that it may not even be genuine. ... 179 The evidence discloses that the essential terms of the 1996 Agreements were that Mr Lieu would procure the sale of a 51 per cent interest in the business to Ms Deng for $85,000; Mr Lieu, through Landmark would retain ownership of the remaining 49 per cent interest in the business; the transaction would be structured as a purchase by Dengs Investments of the business from Lieu Investments, with the shares in Dengs Investments being held as to 51 per cent by Ms Deng and as to 49 per cent by Mr Lieu, or a company controlled by him, that company being Landmark; Mr Lieu's purchase right of Ms Deng's shares in the business would at all times have priority over Mr Lieu's purchase rights of the remaining shares in the business so that Landmark would always have a preferential right to acquire Ms Deng's shareholding in Dengs Investments. This was the understanding of both Mr Lee and Mr Meade. 180 Subject to any acquisition by Landmark of Ms Deng's shareholding in Dengs Investments, or vice versa, the business would be managed by Ms Deng, who would be employed by Dengs Investments. She would receive a salary of $35,000 per annum (or such other sum as may be agreed by Landmark) and would devote herself fulltime to the interest of Dengs Investments and use her best endeavours to promote the interests and welfare of Dengs Investments. The profits of the business would then, subject to any contrary agreement between Landmark and Dengs Investments, be paid to Ms Deng and Landmark by way of dividends on the shares in Dengs Investments, such payments to be made every two months. 181 It was claimed by the applicants that it was a term of the alleged prior oral agreement that Landmark would not have to make any payment for its 49 per cent shareholding in Dengs Investments. Ms Deng complained that this allegation was made for the first time with the filing of the amended summons during the proceedings and that Mr Lieu adduced no evidence to support this claim. This is hardly surprising because, at the time of the sale of part of the business by Mr Lieu to Ms Deng in 1996, Mr Lieu owned 100 per cent of the business (through his company Lieu Investments). Ms Deng and Mr Lieu agreed that she would pay him $85,000 for the 51 per cent share in the business. It is inconceivable that Mr Lieu would have to pay any money to retain his 49 per cent interest in the business which he already owned. In my view, this part of the claim does not establish any basis for unfairness. It was not suggested that Dengs Investments called upon Landmark to pay for its 49 per cent shareholding and the evidence is that Landmark never made any payment. Payment for Stock 182 The applicants claim an alleged prior oral agreement concerning payment for stock. They contended Dengs Investments would be liable to pay any amounts outstanding as at 8 March 1996 in respect of any stock of the business supplied to the business prior to 8 March 1996 and from which the business derived rental income on or after 8 March 1996. Ms Deng denied this was a term of the agreement. Her evidence was that Mr Lieu was responsible for accounts for stock up to 8 March 1996. 183 It is not possible to resolve the two competing versions. Mr Lieu and Ms Deng appear to have recollected the conversations as accurately as they could. Their evidence is given 10 years after the event, albeit, with the help of written agreements and some notes. I therefore do not propose to have regard to the conflicting versions about this matter but to proceed on the basis of what is contained in the agreements. 184 This claim was also raised for the first time in the amended summons. The applicants did not adduce any evidence to support such an agreement. Clause 2 of the Sale of Business Agreement provided that the business' stock was purchased as part of the purchase of the business, and it was given an estimated value of $80,000, which was, of course, included in the total sale price of $166,600. 185 Clause 15 and cl 16 of the Sale of Business Agreement provided that Lieu Investments, as vendor of the business, had paid for the stock as at 8 March 1996. The evidence is that this was not the case and Lieu Investments had outstanding accounts for stock totalling $26,942.59 which subsequently had to be paid and was in fact paid by Ms Deng. Mr Lieu claimed that he used money that he took from the business after 8 March 1996 to pay such accounts. 186 I find that the parties agreement was therefore, that in the usual way, Dengs Investments (as purchaser of the stock) would own and be entitled to derive rental income from the business stock after 8 March 1996, because it had purchased (and therefore owned) it. 187 In my view, there is nothing unfair about Lieu Investments being required to discharge all debts and liabilities prior to the sale of the business. It is an entirely routine and usual term, which appeared in the then current standard Sale of Business Agreement form for New South Wales and accords with the general principle that a vendor of a business should discharge debts of the business it has previously incurred before selling the business to a purchaser. I find that Lieu Investments sold the stock to Dengs Investments. No unfairness arises in respect of this part of the claim. Clause 30 of the Sale of Business Agreement 188 Clause 30 of the Sale of Business Agreement is as follows: As to the balance of purchase price of $81,600 such sum shall remain outstanding to the vendor until the Vendor gives the Purchaser six (6) months' notice in writing requiring payment of same. 189 In respect of the balance ($81,600), it is claimed that it was a term of the alleged prior oral agreement that the balance of the purchase price of $81,600 would not in fact be payable by Dengs Investments. Once again, this claim is raised for the first time in the amended summons. The applicants did not call any evidence of an agreement between Mr Lieu and Ms Deng to this effect. Clause 30 of the Sale of Business Agreement did not appear in the draft Sale of Business Agreement of 7 March 1996. It only appears in the final Sale of Business Agreement dated 8 March 1996. The evidence of Ms Deng, Mr Lee and Mr Meade is that Mr Lieu discussed cl 30 at the meeting on 8 March 1996. 190 On balance, and I find, the likelihood is that cl 30 was inserted at the meeting on 8 March 1996. Mr Lieu's evidence is that he does not recall any discussion regarding cl 30 at this meeting. I prefer the evidence of Ms Deng and Messrs Lee and Meade that cl 30 was discussed. However, cl 30 is inconsistent with cl 4 of the Sale of Business Agreement, which requires payment on completion. None of the witnesses who attended the meeting on 8 March 1996 could recall whose idea it was to include cl 30, or why it was included in the Sale of Business Agreement. The applicants contend that the $81,600 simply represented the notional value of the 49 per cent share of the business retained by Mr Lieu. 191 The respondents contend that the adverse consequences of cl 30 being included in the Sale of Business Agreement have been that Dengs Investments, of which Mr Lieu, through Landmark, is a 49 per cent shareholder, had to pay the liquidator the sum of $38,000, as a result of Mr Marsden, the liquidator, seeking the payment of $81,600, as representing a debt to Lieu Investments (in liquidation). Dengs Investments paid the amount claimed, less allowances for the amount of $26,942.59 paid by Ms Deng on behalf of the creditor (Lieu Investments) and $6,056.40, being legal costs, leaving a balance of $48,601. A settlement was reached with the liquidator whereby Dengs Investments paid $38,000. The applicants' contention is that as this amount was never intended to be paid by Dengs Investments, its payment has reduced the dividends or profit of Dengs Investments by $38,000. 192 The uncontested evidence is that Ms Deng and Dengs Investments paid the sum of $38,000 (less accounts paid by the debtor (Ms Deng) on behalf of the creditor (Lieu Investments)) to Mr Marsden, the liquidator, in good faith and on the basis that cl 30 was enforceable in accordance with its terms. Neither Mr Lieu nor Landmark made any complaint at the time about the payment. Assuming that cl 30 was enforceable, it was to Mr Lieu's benefit that Dengs Investments paid the claim pressed by the liquidator. 193 It was submitted on behalf of the applicants that the solicitor who drafted the agreements made an error in their drafting of the arrangements. Instead of providing for the consideration for the 49 per cent of the business to be paid by the issue of 49 per cent of the shares in Dengs Investments to Landmark, they provided instead for Dengs Investments, having paid $85,000, to have to pay a further $81,600 for the business. That was not the intention of either party. The error on the part of the solicitor for Ms Deng had adverse consequences for the respondents because Lieu Investments subsequently went into liquidation and the liquidator, no doubt, relying on the terms of the agreement drafted by Ms Deng's solicitor made a demand for the payment of the $81,600. 194 In my view, to vary cl 30 now would be unfair to Ms Deng and Dengs Investments for a commercial decision taken on 5 February 1999 in the face of a claim from the liquidator on behalf of Lieu Investments (in liquidation). As will emerge later in these reasons, in light of Ms Deng reimbursing herself $85,000 from Dengs Investments, the final result of the transaction was that Dengs Investments paid $81,600 for the purchase of 51 per cent of the shares in Dengs Investments. 195 I therefore decline to exercise my discretion under s 106 to vary cl 30 of the agreement. Nor do I find any unfairness through its operation. The $85,000 Repaid to Ms Deng by Dengs Investments 196 The applicants claim that the contract or arrangements between the parties became subsequently unfair by reason of the conduct of the respondents since 8 March 1996. The applicants contend that the payment of $85,000 from the bank account of Dengs Investments into Ms Deng's personal account is an example of how the arrangement operated unfairly. 197 It will be recalled that Ms Deng's evidence was that she agreed to, and did pay the applicants $85,000 for her 51 per cent share in the business (via her 51 per cent shareholding in Dengs Investments). There was no agreement, either written or oral, between Ms Deng, nor Dengs Investments and the applicants that Ms Deng's payment of $85,000 be characterised as a loan from her to either the applicants or Dengs Investments. Ms Deng agreed, in cross-examination, that there was nothing in the Shareholders' Agreement or the Sale of Business Agreement that refers to a loan in connection with her purchase of her share of the business. 198 Furthermore, there was nothing in the notes taken by Ms Deng, Mr Meade or Mr Lee in relation to any loan. The word "loan" is not recorded in any of the notes taken by the parties to the transaction, nor does it appear in the Sale of Business Agreement or the Shareholders Agreement or in any affidavit or other document filed by the respondents in the Court. 199 Ms Deng also agreed on four separate occasions, during cross-examination, that she did not expect to be repaid the $85,000 unless she sold her 51 per cent shareholding in Dengs Investments. The evidence of Mr Lee in cross-examination was that, so far as he understood it, the $85,000 was not a loan from Ms Deng to Dengs Investments and that Ms Deng would only be entitled to the $85,000 to be repaid if she subsequently sold her 51 per cent shareholding in Dengs Investments. Mr Meade in cross-examination, also agreed that it was his understanding at the time that Ms Deng purchased her 51 per cent share of the business that the payment by Ms Deng was not a loan to any party. 200 Notwithstanding the agreement between the parties, Ms Deng caused Dengs Investments to pay back to her the purchase price of $85,000. Ms Deng caused Dengs Investments to deposit the amount into a term deposit account. This account had been created with funds drawn from the bank account of Dengs Investments on or about 8 March 2000. These monies were ultimately deposited into her personal bank account on or about 30 November 2001. The sum of $85,000 was kept by Ms Deng. Ms Deng agreed that she had not sold her shares in Dengs Investments. She also agreed that she had effectively paid nothing for her 51 per cent ownership in the business. Furthermore, Ms Deng agreed that the payment to her of $85,000 from the account of Dengs Investments and the creation of the charge were "important financial matters in relation to the affairs of Dengs Investments", yet she did not tell Mr Lieu about either of them. 201 There is no reference to this payment in any of the respondents' affidavit material, or supporting documentation. Upon evidence of this payment being revealed to Ms Deng during cross-examination, Ms Deng gave the following evidence: Q. And you said to his Honour earlier that at the time you entered into this transaction, you didn't expect that you would have the $85,000 repaid to you unless you sold your shares. Do you remember giving that evidence?

A. I was confused when you asked the question. 202 The evidence that the $85,000 was a loan is directly inconsistent with the evidence given, on four separate occasions, by Ms Deng in cross-examination, that she did not expect to have the $85,000 repaid to her unless she sold her part of the business. Notwithstanding the fact that Ms Deng still owns 51 per cent of the business, she has used her powers under the Shareholders' Agreement to repay the $85,000 purchase price to herself and kept the fact from Mr Lieu until this hearing. 49 per cent of this amount belonged Landmark. 203 The respondents complained that there was no affidavit evidence or pleading by the applicants of this allegation and that the $85,000 was a loan which Ms Deng was entitled to repay to herself. 204 The applicants were unable to file any affidavit evidence in relation to the $85,000 payment because Ms Deng had kept secret the fact that she repaid that money to herself. The answer to this complaint is that it was not until Ms Deng's bank statements were put to her in cross-examination that she had no option but to concede that the money had been transferred out of the Dengs Investments bank account into her own bank account. 205 This is not a Court of strict pleadings: Gough & Gilmour Holdings Pty Ltd & Ors v Caterpillar of Australia Ltd (No 13) [2003] NSWIRComm 26 at [25]; Burgess v Mount Thorley Operations Pty Ltd (2003) 132 IR 400 at [98]. It is appropriate for pleadings to be amended, as has occurred in this case, once evidence emerges during the course of the proceedings that necessitates an amendments to a claim: see Burgess v Mount Thorley at [91] - [92]. 206 This Court is not bound to observe the rules of law governing the admissibility of evidence (s 163 of the Act). As Sheldon J observed in Davies v General Transport Development Pty Ltd at 374: But the fact that this is not a court of pleading and is not "bound to observe the rules of law governing the admissibility of evidence" (s.83) is a real advantage in this class of case where it is better to have all the cards on the table (even if some don't matter) than to lack vital ones because of difficulties of proof. At times, too, a judicious relaxation of the rules relating to hearsay can help to unravel the truth. 207 I find the contract or arrangement has therefore operated unfairly in respect to the repayment of the purchase price to Ms Deng. The contract is varied accordingly to provide that in circumstances where Ms Deng is paid $85,000 from the business, Landmark will be paid 49 per cent of this amount. Furthermore, the consequence of the repayment of the purchase price means that Dengs Investments paid only $81,600 for 51 per cent of the business. The agreement was that 51 per cent would cost $85,000. Lieu Investments is entitled to the balance of $3,400. I find that the arrangements have operated unfairly to the extent that Lieu Investments did not receive the agreed purchase price for 51 per cent of the business. The contract is varied to provide that Dengs Investments pay Lieu Investments the sum of $3,400, representing the balance of the purchase price. Reduction in the Value of Landmark Shareholding 208 A further ground of unfairness relied upon by the applicants is that there was a reduction in the value of Landmark's shareholding in Dengs Investments. This ground of unfairness was not pleaded in the amended summons, nor was there any affidavit evidence directed towards it. The basis for the contention appears to be that if the purchase price of 51 per cent of the shares is treated as a loan in Dengs Investments accounts, this increased the liabilities of Dengs Investments in the period 8 March 1996 to 30 June 1996, which in turn diluted the value of Landmark 49 per cent shareholding in Dengs Investments from $81,600 to $2,218. 209 The accounting evidence was that the value of Landmark and Ms Deng's shareholding in Dengs Investments have declined in value over the nine year period from 1996 to 2005. Increased rentals have affected the business which has contributed to a decline in the value of a share in the business. Both shareholders have suffered a decline in the value of their shareholdings. I do not find that the decline in the value of the shares in Dengs Investments gives rise to an unfairness that requires the Court to further vary the arrangements in light of the variations that I propose to make. Ms Deng's Remuneration 210 It was common ground that, consistent with the arrangements, Landmark was entitled to 49 per cent of the profits of the business from 8 March 1996. No profits have been paid to the applicants since 8 March 1996. 211 It was also common ground that in March 1996, Ms Deng and Mr Lieu negotiated a salary of $35,000 for Ms Deng to work in the business. The evidence discloses that Ms Deng has been remunerated well in excess of $35,000 per annum for her work in the business. Between 1998 and 2006, Ms Deng received between $9,946 and $22,240 per year in excess of her agreed salary. By receiving additional remuneration, Ms Deng has diverted funds that would have been distributed to her and Landmark as profit. 212 The Shareholders' Agreement dealt with the parties rights in this regard. Clause 7(j), cl 7(k) and cl 7(l) provided as follows: 7. Without the consent of the other party, Deng shall have sole authority to: ... (j) The payment of any remuneration or salary to a director or officer of the company (including remuneration for services). Such salary to Deng shall be $35,000.00 per annum inclusive of holiday pay and sick leave. (k) Hiring or dismissal of staff and general salary reviews. (l) The grant of any pension annuity or other allowance or the authorisation of any similar payment as is authorised by the articles of association of the company. ... 213 Mr Grant contends that cl 7(j) gave Ms Deng the power to determine an increase in salary. In my view, on a proper construction of 7(i) alone, Ms Deng had the power to determine her salary. When cl 7(j) is read with cl 7(k) and cl 7(l), the power to grant salary increases is clear. Counsel contended that the increases in Ms Deng's salary over a period of 10 years were reasonable in the circumstances. The increases in salary above the agreed $35,000 varied from 28 per cent in 1998; approximately 45 per cent in 1999 - 2000; 63 per cent in 2001; 60 per cent in 2002 and approximately 53 - 55 per cent in 2003 - 2005. and 28 per cent in 2006. The increased payments to Ms Deng's salary were extracted from financial information provided to Mr Dolman. 214 Mr Grant contended that no weight should be given to Mr Dolman's evidence so far as his expert opinion was based on assumed or accepted facts, they must be identified or proven in some other way so as to establish that they form a proper foundation for the opinion. Reliance was placed on Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 743 - 744: 215 One of the difficulties in determining the various issues in this case was the lack of company records. Although Ms Deng gave an undertaking to the Supreme Court that she would deliver to Mr Lieu on a weekly basis a summary of the cash receipts and expenditure of the business, such documentation was only provided on one occasion and that was to the Supreme Court. It is not at all clear from reading Mr Dolman's report that he is expressing an expert accounting opinion in undertaking the task of setting out the overpayments received by Ms Deng. In any event, Mr Dolman was not required for cross-examination by either of the respondents. Once again, I propose to deal with this evidence by applying s 163 of the Act and the observations of Sheldon J in Davies referred to earlier in these reasons. 216 Both parties were in agreement that remuneration of $35,000 to Ms Deng as the Manager of the business was reasonable remuneration in 1996. It would seem to me to be unfair, regardless of the provisions of the agreement to find that Ms Deng's remuneration could never be increased. However, the increases in remuneration that Ms Deng awarded herself range from between 28 per cent to 63 per cent above her agreed salary of $35,000. I have decided that it would have been appropriate to allow an average of a four per cent increase per annum. On Ms Deng's remuneration, this results in Ms Deng receiving approximately $71,900 on top of such increase in salary. 49 per cent of $71,900 is $35,231, which I find should have been distributed to Landmark as profit. I find that the arrangement has operated unfairly in such profit not being distributed to Landmark. I propose to vary the arrangement to reflect this finding. Ms Deng's Motor Vehicle Expenses 217 Ms Deng was also remunerated by the business with the use of a motor vehicle for her personal use at a cost of in excess of $22,000 per annum. Her evidence was that five to 10 per cent of her use of the motor vehicle was for personal activities and 90 to 95 per cent was for business activities. Mr Dolman, in his report, set out the motor vehicle expenses for the years 1997 through to 2005. In respect of the 2006 year, the applicants claim an average of the previous three years, being $8,900. The total motor vehicle expenses between 1997 and 2006 amount to $114,759. The personal component calculated on the basis of 10 per cent, amounts to $11,475.90. 49 per cent entitlement of Landmark is $5,623.19. For the reasons stated earlier, I propose to rely upon the evidence of Mr Dolman. I find that the arrangement has operated unfairly to the extent that Landmark has not been distributed profits amounting to $5,623.19. Non Payment of Dividends 218 This ground of unfairness was that there had not been any distributions of net profits of the business to Landmark whether by dividends or otherwise. 219 It was common ground that since March 1996 no dividends had been paid to Landmark. In 1996 and 1997, dividends were declared. However, cash and the value of stock taken by Mr Lieu from the Coogee store were treated as advanced drawings and set off against these dividends. As the value of the drawings was greater, no dividends were actually paid to Landmark. 220 In the years 1998 and 2001, on the company's evidence it suffered losses and no dividends were declared. In the remaining years, negligible profits were made: in 1999 - $5,258.68; in 2000 - $1,990.83; in 2002 - $2,286.76; in 2003 - $10,401.71; in 2004 - $10,462.76 and in 2005 there were no profits. Based on advice, such profits were retained as the company's financial position had been adversely affected by substantial rent increases for the Coogee property, maintenance, repairs and also the legal costs of litigation brought by Mr Lieu against Dengs Investments. Curiously, the 2002 Balance Sheet for Dengs Investments, which was annexed to Ms Deng's affidavit of 17 November 2004 shows dividends payable to Landmark as $3,875.61. This amount is not included in the Balance Sheet for 2003 or the Balance Sheet for 2004. No explanation was provided in respect of this amount. Mr Grant contends that the articles of association authorised Ms Deng to take such decisions regarding dividends. With the exception of 1996 and 1997, Ms Deng did not receive any dividends. 221 In the circumstances, I am not persuaded, despite the provisions of the Shareholders' Agreement, that there has been any unfairness in respect of the failure to distribute the profits, such as they were, to the shareholders as opposed to such profits being retained in the business. Mr Lieu's Priority Right 222 It was contended that the Shareholders' Agreement was inconsistent with the parties intentions in that it did not give effect to Mr Lieu a priority right to purchase Ms Deng's shares in Dengs Investments over Ms Dengs right to purchase Landmark shares in Dengs Investments. Mr Meade's evidence was that Mr Lieu wanted his right to have priority and Ms Deng was prepared to agree to that. Mr Lee's evidence was to the same effect. Ms Deng could not recall Mr Meade saying at the meeting on 8 March 1996 that she did not have the right to purchase Landmark's 49 per cent shareholding but she did understand that Mr Lieu wanted the right to buy her shares in Dengs Investments. 223 I find that to the extent that the Shareholders' Agreement does not give Mr Lieu a priority right, it is unfair and the agreement is varied accordingly. General Allegations of Unfairness 224 It was also submitted, on behalf of the applicants, that the respective Agreements were unconscionably and unfairly one-sided in favour of Ms Deng. The Agreements were drafted by Ms Deng's solicitor, Mr Lee. Mr Lieu chose not to obtain independent legal advice. It was contended that Mr Lieu entered into the agreements under financial pressure. The evidence was that Mr Lieu was a commercially sophisticated property developer, who had incorporated a number of different companies for different purposes. Landmark was specifically incorporated so it could receive 49 per cent of the shares in Dengs Investments. 225 There is no doubt that there were differences in the bargaining of positions of the parties. Mr Lieu, because of the financial pressures that he was under, needed to find a buyer for the business. It does not necessarily follow that he was in an unequal bargaining position to Ms Deng. I do not propose to interfere with the arrangements on this basis. 226 The applicants contended that the Shareholders' Agreement was unfair because it failed firstly to include reasonable safeguards for the applicants to be supplied with the financial and management information of Dengs Investments; secondly, for the appointment of Mr Lieu as a director of Dengs Investments and thirdly for the periodic audit of financial books and records of Dengs Investments. The Corporations Act makes specific provision for each of these matters complained of and the appropriate remedies are available to the applicants under that legislation. 227 For example, s 293 of the Corporations Act requires a small proprietary company to prepare accounts and appoint an auditor if a shareholder/s, holding at least five per cent of voting shares makes a request for accounts to be prepared, or an auditor appointed. (See also s 292(2) and s 294). Furthermore, the Court was informed that Ms Deng had provided undertakings to the Supreme Court to provide, on a weekly basis, sales summaries of the business, as well as cash receipts and expenditure. If such undertakings have not been adhered to, it is a serious matter. It is appropriate that any failure to comply with statutory obligations or undertakings given to the Supreme Court is addressed by the applicants before the appropriate court. I do not propose to exercise my discretion in these circumstances to vary the Agreements to deal with the alleged unfairness arising from the failure by Ms Deng to comply with the Corporations Act or undertakings given to the Supreme Court. 228 The applicants also contended that the arrangements were unfair because Mr Lieu was excluded from the business. I have some reservations in respect of whether such a condition is fair. If the applicants were provided with financial and management information on a regular basis, then no unfairness may arise. On the other hand, if they were not, then exclusion from the business may be unfair. However, the evidence is that Ms Deng had little confidence in Mr Lieu's ability to run the business and pay his creditors. His behaviour in attending the business and removing cash and videos was hardly in keeping with the general standards expected of a businessman. This condition was regarded by Ms Deng as an important factor in her decision to purchase 51 per cent of the business. Mr Lieu contends that he would not have sold the business if this were a condition. I prefer the evidence of Ms Deng in respect of this issue. Mr Lieu, under substantial financial pressure may have had little choice but to agree with this condition and I find he did so agree. Even if Mr Lieu had some reservations, he has entered into a bargain which included this condition, which I do not propose to vary. Conclusion 229 The determination of whether the contracts or arrangements were unfair at their inception and/or became unfair during their operation, is a matter to be decided upon the examination of the facts of this particular case. In reaching the conclusions that the contracts or arrangements are unfair, I have been mindful of the approach applied by this Court and its predecessors referred to earlier in these reasons. 230 Upon a consideration of all of the material before the Court, I have formed the view that the Shareholders' Agreement and the Sale of Business Agreement were unfair at their inception and/or became unfair due to the respondents' conduct in repaying $85,000 to Ms Deng, increasing the remuneration of Ms Deng, and not distributing profits to the shareholders. 231 The contractual arrangements entered into between the parties in March 1996 to the extent that I have found unfairness by reason of the conduct of the respondents, as set out in these reasons, shall be varied in accordance with s 106(2) and s 106(2A) of the Act. The applicants, in such circumstances, are entitled to a declaration that the Shareholders' Agreement and the Sale of Business Agreement were unfair, harsh and unconscionable. 232 It follows from the findings of unfairness that I have made that the arrangements will be varied to provide that the applicants receive 49 per cent of the $85,000 repaid to Ms Deng, being $41,650, $35,231 representing salary overpayments made to Ms Deng, $5,623.19 representing a 10 per cent share of the motor vehicle expenses and $3,400 representing the balance of the purchase price. The sum of these amounts total $85,904.19. Costs 233 The first respondent asked that the question of costs be reserved. The parties have liberty to approach my associate to obtain a suitable time to deal with this question. ORDERS 234 The Court makes the following orders: 1. Ms Margaret Deng is to pay Landmark Enterprises Pty Ltd the sum of $85,904.19. 2. Interest shall be payable upon the amount in order 1 in accordance with Sch 5 of the Uniform Civil Procedure Rules 2005. Interest shall be payable from the date of the filing of the summons for relief being 14 October 2004. 3. The applicants are to file and serve Short Minutes of Order within 14 days reflecting the orders made in this judgment. 4. The terms of the Shareholders' Agreement between Landmark Enterprises Pty Ltd and Margaret Deng dated 8 March 1996 shall be varied so as to give Landmark Enterprises Pty Ltd a priority right to purchase Margaret Deng's shares in Dengs Investments Pty Ltd over Margaret Deng's right to purchase Landmark Enterprises Pty Ltd shares in Dengs Investments Pty Ltd.

Lieu & Anor v Deng & Anor

At a glance

Court

Decision date

Before

Source

Judgment (126 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (11)

Cited By (2)