Plaintiff/Defendant by counterclaim v Defendants/Plaintiffs by counterclaim

2 When the proceeding was commenced in May 2023, Mr Cheung sought relief for oppression under ss 232 and 233 of the Corporations Act 2001 (Cth) ('Act') including a buyout order in relation to his shareholding. Alternatively he sought an order for the winding up of the company under ss 461 and 462 of the Act. By the second day of the trial, it was apparent that these claims could not succeed, and they were dismissed by consent. This left two further claims recently made by Mr Cheung to be determined on a future occasion, and the claims brought against him by the company in its counterclaim filed on 17 April 2024. In these reasons, I am solely concerned with claims brought in the counterclaim.

3 In the counterclaim, the company claimed repayment by Mr Cheung of various sums paid to him at his own direction over the period from 2017 to 2021. The claims pursued at trial by the company were a claim for the repayment of amounts of $3,600 per month from January 2018 until May 2021 (inclusive) ('wages claim') paid by bank authority into his account, and a claim for $178,000 paid by cheque on 31 March 2021. It was not disputed by Mr Cheung that the payments were made by the company to him. However, he claimed that the payments of $3,600 per month to him over the period from January 2018 until May 2021 were wages authorised by Mr Hu and Mr Liu, and that the payment of $178,000 on 31 March 2021 to himself was reimbursement for money which he had spent on the company's behalf.

4 In addition to the wages claim, Mr Cheung sought to support 18 expense items ('expenses claim') which he said he personally paid for the company.

(a) $53.94 for office stationery on 22 January 2020;

(b) $3,002.95 for stationery and postage sundries in the calendar year 2020 including $1,598.00 for a coffee machine;

(c) $7,064.25 on 18 February 2020 to WorkSafe Victoria for WorkCover Insurance;

(d) $330.00 on 20 February 2020 to R B Waste Consulting Service;

(e) $3,267.00 on 21 February 2020 to O'Brien Traffic;

(f) $182.35 in telephone expenses on 30 March 2020;

(g) $14,423.00 on 28 April 2020 to the Australian Tax Office;

(h) $265.00 on or about 26 June 2020 to the Australian Securities and Investments Commission;

(i) $347.00 on or about 26 June 2020 to the Australian Securities and Investments Commission;

(j) $30,094.46 on 29 June 2020 to the company by a bank cheque said to support its payment of interest owing to Westpac;

(k) $4,072.75 on 17 July 2020 to the City of Melbourne (in relation to planning permit application TP-2017-395/A);

(l) a further $722.80 on 4 August 2020 to the City of Melbourne;

(m) $3,300.00 on 16 December 2020 to the Territorial Lease and Mortgage Service Pty Ltd (trading as 'AAA' Money);

(n) $2,795.32 on 29 January 2021 to Gadens Lawyers;

(o) $984.50 on 27 February 2021 to Traffix Group Pty Ltd;

(p) $5,500.00 on 27 February 2021 to Charter Keck Cramer Pty Ltd;

(q) $7,761.60 on 27 March 2021 to Fulcrum Urban Planning Pty Ltd; and

(r) $7,524.00 on 26 March 2021 to Gerald Lau & Associates.

6 The counterclaim was founded on the duties that a director owes to a corporation. The company alleged that Mr Cheung owed it the following duties under the Act and in equity:

(a) a duty of care and diligence (s 180);

(b) a duty to exercise his powers and discharge his duties in good faith in the best interests of the company (s 181(1)(a));

(c) a duty to exercise his powers and discharge his duties for a proper purpose in good faith in the best interests of the company (s 181(1)(b));

(d) a duty not to improperly use his position to gain advantage for himself or others (s 182(1)(a));

(e) a duty not to improperly use his position to the detriment of the company (s 182(1)(b)); and

(f) a fiduciary duty not to put his interests before that of the company.

7 There was no dispute as to the existence of these duties.[2] However, Mr Cheung denied that he acted in breach of his duties when he received the payments of $3,600 per month after January 2018, and wrote himself a cheque for $178,000 on 31 March 2021.

8 In 2011, Mr Cheung incorporated the company with Mr Liu as the other director and shareholder. Mr Hu became a shareholder and director in 2014. The three were good friends and golfing acquaintances.

9 At the time the company bought the property, Mr Hu held about 42% of the shares in the company. Mr Cheung and Mr Liu held about 29% each.

10 In about May 2016, the three shareholders made additional capital contributions to the company towards the purchase of the property in the following amounts:

(a) Mr Hu - $5 million;

(b) Mr Cheung - $600,000; and

(c) Mr Liu - $600,000.

11 Following those contributions, the shareholdings became:

(a) Mr Hu - 80.64%;

(b) Mr Cheung - 9.67%; and

(c) Mr Liu - 9.67%.

12 In June 2016, Westpac Banking Corporation ('Westpac') approved a loan of $4.7 million to the company for a term of one year, and at an interest rate of 3.85% per annum secured by a mortgage over the property and other security. The loan financed part of the purchase of the property.

13 Over the period from January 2018 until May 2021, the company paid Mr Cheung $3,600 per month from its bank account.

14 In July 2020, the company and its directors entered into a deed of forbearance with Westpac. Westpac agreed to postpone enforcement of its rights and to extend the term of the facility until 31 December 2020.

15 On 31 March 2021, Mr Hu and Mr Liu signed a deed of variation and extended their personal guarantees with Westpac. Mr Cheung did not do so. On the same day, he withdrew $178,000 from the company's bank account.

16 At a shareholder's meeting on 20 April 2021, Messrs Hu and Liu voted to remove Mr Cheung as a director of the company. Mr Cheung did not attend the meeting.

17 In and subsequent to April 2021, the parties engaged in contested legal proceedings in the Supreme Court of Queensland, the County Court of Victoria, and in the Federal Circuit and Family Court of Australia.

18 On 8 June 2021, Mr Hu paid Westpac $4,687,082.22 to discharge the company's liability to Westpac and became fully subrogated to Westpac's rights against the company under a deed of subrogation and assignment.

19 On 22 May 2023, Mr Cheung issued this proceeding against the company and Mr Hu.

20 The company's constitution ('constitution') incorporates a number of replaceable rules. They include:

Arrangement of business

(i) The business of a company is to be managed by or under the direction of the directors.

(1) The directors of a company are to be paid the remuneration that the company determines by resolution.

(2) The company may also pay the directors travelling and other expenses that they property incur:

...

(i) in connection with the company's business.

14. Calling directors' meetings

A directors' meeting may be called by a director giving reasonable notice individually to every other director.

21 The constitution vests the management of the company in its board of directors. It does not authorise an individual director to unilaterally enter into contracts on behalf of the company.

22 A company may enter into a contract directly or through the act of an agent. A board of directors of a corporation such as the company may confer actual authority on an agent to exercise any power which it itself may exercise. The Act provides that the board may confer actual authority to exercise any of its powers on a managing director or delegate.[3]

23 Mr Cheung makes no allegation of agency, and none is pleaded.

24 The Board makes decisions by passing resolutions. This can be done by circulating resolutions or by voting at a directors' meeting.[4] A directors' meeting may be convened by a director giving reasonable notice individually to every other director.[5]

25 In the absence of actual delegation under ss 198C and 198D of the Act, an individual director is empowered only to join in the collective exercise of corporate power by the board of directors. An individual director does not have authority by reason of that office to bind the company in contract.

26 In Northside Developments Pty Ltd v Registrar-General, Dawson J said:

[T]he position of director does not carry with it any ostensible authority to act on behalf of the company. Directors can act only collectively as a board and the function of an individual director is to participate in decisions of the board. In the absence of some representation made by the company, a director has no ostensible authority to bind it.[6]

27 Mr Cheung makes no allegation that the board of the company provided him with any express or implied authority to incur expenditure on behalf of the company.

Even before Mr Hu was an 80.64% controlling shareholder, but definitely in the period since that time, any decision involving [the company] required Mr Hu's consent. Nothing could be approved unless Mr Hu agreed to it.[7]

In accordance with our agreement made on 26 February 2014, as directors we all made decisions about the business together[8]

30 As a result, Mr Cheung needs to show that he acted with the authority of the board of directors if he is to substantiate his wages or expenses claims.

31 Mr Cheung alleges that the payments of $3,600 each between January 2018 and May 2021 (inclusive) were wages paid to him which were authorised by Mr Hu and Mr Liu.[9] He maintained this position in his witness statement and oral evidence.

32 In closing submissions, Mr Cheung sought leave to amend his defence to remove the reference to wages, but nonetheless continue to allege that the payments of $3,600 each made between January 2018 and May 2021 (inclusive) were authorised by Mr Hu and Mr Liu. However, such an amendment if allowed makes no difference to the outcome, as there is no evidence that a board meeting was ever called or convened to authorise the continuation of payments after January 2018. It makes no difference that the bank authority may have been signed by two directors, as neither director was authorised by a meeting of the board of directors to do so.

33 It would appear from a completed bank form dated 21 August 2017 ('bank authority') produced with Mr Cheung's closing submissions that the payments of $3,600 made to Mr Cheung after 1 January 2018 were paid by automated funds transfer into Mr Cheung's account under an authority signed by Mr Cheung and Mr Liu. However, production of the bank authority makes no difference to the outcome.

34 This is because the board resolution authorising the making of payments to Mr Cheung is the board minute for its meeting on 18 February 2017 ('board minute'). When translated, the minute states in part:

[Mr Cheung]'s nominal salary would be paid from 30 June 2016 to 31 December 2017 to cover all of his expenses. If the current project would be completed ahead of schedule, the company would hold a separate meeting to discuss this matter. The nominal salary paid prior to 30 June 2016 would be offset from the distributed profit to [Mr Cheung].

35 There is no board resolution authorising the payment of remuneration to Mr Cheung after 31 December 2017. No board meeting was ever convened to consider whether monthly payments of $3,600 to Mr Cheung after 31 December 2017 should be authorised.

36 Mr Hu said in his witness statement that Mr Cheung was authorised by the board minute to receive monthly payments of $3,600 from 30 June 2016 until 31 December 2017, but not after this date. He said that he only became aware that the payments had continued when he was investigating Mr Cheung's conduct in 2021.

37 Mr Hu described the payments to Mr Cheung prior to 31 December 2017 as compensation and not salary. He said that in February 2017 it was expected that the project would be completed by 31 December 2017. He said that there was no agreement between the directors other than the agreement in the board minute.

38 Mr Hu said that the payments of $3,600 continued after 31 December 2017 in accordance with the bank authority but without his knowledge. He said that he did not look at the bank statements and records, but trusted Mr Cheung.

39 Neither Mr Cheung or Mr Liu suggested in their evidence that their execution of the bank authority was authorised by a resolution of the board of directors or was discussed at a directors' meeting. Mr Liu said that the project belonged to the three directors who decided to carry on the project a lot longer than they originally anticipated. He said that neither he nor Mr Hu were paid for their work or contribution to the project.

40 I accept the evidence of Mr Hu as the best evidence as to the arrangements made with Mr Cheung for the payment of $3,600 per month from 30 June 2016 to 31 December 2017, and find that there was no agreement by the company for the payment of $3,600 per month to Mr Cheung after 31 December 2017 for the following reasons:

(a) The board minute clearly authorises payments of $3,600 per month from 30 June 2016 to 31 December 2017, but not beyond. It describes the payment as a 'nominal salary' which Mr Hu also described as 'compensation'.

(b) No later board resolution exists giving authority for monthly payments to be made to Mr Cheung after 31 December 2017.

(c) It was not suggested that any director called a board meeting to seek approval to continue the payments to Mr Cheung after 31 December 2017.

(d) Mr Cheung was unable to give evidence of any specific conversation or document whereby Mr Hu was informed of, or agreed to support the payments after 31 December 2017.

(e) Mr Cheung's evidence that he was paid wages is plainly inconsistent with the board minute which states that the payments are to be made to Mr Cheung to cover all of his expenses.

(f) Mr Cheung's claim that he was paid a salary is also inconsistent with the statement in the board minute that the nominal salary paid prior to 30 June 2016 would be offset from the distributed profit to Mr Cheung.

(g) Mr Hu was the clearest and most reliable witness and his evidence is consistent with the board minute and absence of a subsequent board meeting to authorise the payment of remuneration to Mr Cheung.

(h) The evidence given by Mr Cheung and Mr Liu as to how they came to sign the bank authority when they had no authority from the board of directors to do so is incomplete, confusing and unreliable.

41 In their reply and defence to counterclaim,[10] the company and Mr Hu denied Mr Cheung's allegations and said that Mr Cheung is estopped from asserting an entitlement to wages from the company as he was determined not to be an employee of the company in Cheung (No 3).[11]

42 In Cheung (No 3),[12] Mr Cheung brought a claim in the Federal Circuit and Family Court that he was an employee of the company, and that the company was in breach of the terms of his employment agreement. He claimed that the company agreed to pay him an annual salary of $150,000 plus superannuation. He alleged that the company had paid him a gross salary of only $53,076 which was said to equate to $3,600 net per month.

43 In his reasons for decision, Judge Champion extensively reviewed the evidence and documents before him. He particularly noted the board minute made no mention of an employment agreement and recorded an arrangement inconsistent with Mr Cheung's case.[13] He found that the company paid the nominal salary to Mr Cheung as a director for the purpose of covering his expenses and not by way of remuneration to him as an employee. He concluded that there was no employment relationship between Mr Cheung and the company.

44 I agree with these reasons which are in general accord with my own conclusions.

45 In Blair v Curran, Dixon J described the defence of issue estoppel in these terms:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared.[14]

46 Mr Cheung is precluded from relitigating any matter previously litigated and decided against him.[15]

47 Review of the reasons of Judge Champion shows that his Honour decided in the proceeding before him (among other things) that:

(a) the better view was that the company paid the nominal salary to Mr Cheung as a director to cover his expenses and not by way of remuneration to him as an employee;

(b) Mr Cheung had not proved that he was an employee on terms other than those that he pleaded; and

(c) because the threshold issue of employment has not been proved, the reasonable notice claim had not been proved.[16]

48 Given these express findings of fact, and that the current proceeding involves the same parties, Mr Cheung is precluded by way of issue estoppel from claiming that the monthly payments of $3,600 between January 2018 and May 2021 (inclusive) were wages paid to him. The payments could not have that character because Mr Cheung was not a company employee.

49 The result is that the wages claim as advanced by Mr Cheung must fail. He has not shown that he was authorised to receive amounts of $3,600 per month from the company over the period from January 2018 until May 2021 (inclusive). The monies he received must be repaid to the company.

50 During the hearing, counsel for the Mr Cheung submitted that he too relied on issue estoppel as to Mr Cheung's claim for $3,600 per month. I reject the submission as issue estoppel applies only as to fundamental or cardinal issues determined by the court and not to evidentiary facts.[17] In the event, no defence of issue estoppel was pleaded by Mr Cheung.

51 In closing submissions, Mr Cheung relied on Judge Champion's record of Mr Liu's evidence before him which was to the effect that following December 2017, Mr Cheung continued to pay himself $3,600 per month, and that he had authorised the payment to Mr Cheung beyond 15 December 2017.

52 This evidence does not establish that Mr Cheung was authorised to receive these funds. What was necessary was authority from a directors' meeting called by a director on reasonable notice to the other directors including Mr Hu who held over 80% of the shares in the company, and who was likely to prevail in the event of a difference of opinion. This was an important safeguard embodied in the company's constitution. It was not suggested that such a meeting occurred.

53 It is convenient to consider the expense items which are claimed by Mr Cheung in groups of like expenses, or expenses incurred for the same purpose.

Office expenses claims: $53.94 for office stationery on 22 January 2020, $3,002.95 for stationery and postage sundries in the calendar year 2020 including $1,598 for a coffee machine; $182.35 in telephone expenses on 30 March 2020

54 Mr Cheung claims for office expenses including stationery, postage, telephone expenses and a new coffee machine. The company does not say that these expenses did not occur but says that they supported Mr Cheung personally or other business activities of Mr Cheung.

55 Mr Cheung said that he was the sole director of Auburn Land Group Pty Ltd ('Auburn Land Group') which was a property developer, and conducted its business from the property at the relevant times. When it was put to him that Auburn Land Group's website stated that it had been developing properties since 1997, Mr Cheung purported not to know what was on the website suggesting that the wrong address and name had been inserted. He then said that he did not review the website. He did not explain who did. While maintaining that Auburn Land Group was inactive, he acknowledged that it had paid the company $800,000 on 18 September 2015 which was then partially repaid by the company resulting in a net $600,000 contribution to the company by him provided by Auburn Land Group.

56 When shown an ASIC extract relating to Auburn Land Group, Mr Cheung did not accept that it showed that the property was the registered office of Auburn Land Group from 15 May 2017 until 15 July 2021. His evidence on this topic was incoherent and unpersuasive.

57 When asked whether he conducted other businesses from the property, Mr Cheung responded that he had probably conducted a company called Datanet Group Pty Ltd ('Datanet') and a joint venture with Mr Hu known as Kingston Pty Ltd, from the property. An ASIC search dated 7 June 2023 showed that Mr Cheung was the sole director and shareholder of Datanet, and that its registered office was the property.

58 The purchases relating to the office expenses were mainly or entirely made during the period of the COVID pandemic when Mr Cheung resided in Fordham Road, Hawthorn.

59 The Officeworks invoices relied on by Mr Cheung were issued at the Bridge Road, Burnley store in or around 2020. A Harvey Norman invoice from its store at Bridge Road, Richmond was dated 4 April 2020. The item sold was a Breville coffee machine.

60 Mr Cheung said that he recalled buying the coffee machine during the Melbourne lockdown and that he was working from home at that time. He said that the coffee machine was placed in his home office. It has not been returned to the company.

61 Mr Cheung agreed that on 2 April 2020 he bought a computer monitor which was one of the expenses claimed by him. He admitted that the invoice stated that the item was to be billed to Auburn Land Group. He acknowledged that he still had the computer monitor, which has not been returned to the company.

62 Mr Cheung agreed that the invoices for printer ink that he was claiming related to his own printer while he was working from home.

63 Mr Hu stated that he did not know what the receipts or invoices were for. He said that he was concerned that Mr Cheung was claiming expenses that he incurred personally for himself or his other companies. He said that this expenditure was never discussed, or agreed to by the company's board. He said that Mr Cheung had to abide by the decisions of the board of directors. Mr Cheung never put forward a proposal to make purchases and seek reimbursement. Agreement had to be reached by the board of directors before making a purchase.

64 I find that Mr Cheung's evidence relating to his purchases of office items for use by him at home or at the property to be confused, unreliable and to a significant degree incomprehensible. Mr Cheung did not suggest that any of the expenditure had been authorised by board resolutions or considered by the board of directors. He was not able to distinguish between materials used by him personally or by his own companies and materials used by him in the company's affairs.

65 I find that his claims against the company for office expenses are not shown to have been incurred with the authority of the board of directors, and the items purchased have not been shown to have been used for the purposes of the company. They must be disallowed.

66 There is a further reason why some of the office expenses cannot be allowed. Mr Cheung was due to make a contribution to the company of $55,680 by 30 June 2020. He made the contribution by depositing cash of $30,094.46 and by paying expenses of $25,585.54. In a WeChat message dated 29 June 2020, Mr Cheung requested the other members of the board to accept that the expenses that he had incurred be treated by the board as part of his contribution to the funding injection into the company then underway by the directors. The expenses included the telephone fee of $182.35 and the printer cartridge of $53.94. Having elected to treat these expenses as part of his funding contribution, Mr Cheung cannot now double dip, and make separate claim for repayment.

WorkSafe Victoria payment for WorkCover Insurance paid on 18 February 2020 for $7,064.25

67 Mr Cheung relies on an invoice from WorkCover Insurance to the company dated 4 May 2019 in the amount of $7,064.25. Handwritten annotations on the invoice suggest that it was paid by Mr Cheung on 18 February 2020, and related to three financial years.

68 If Mr Cheung was employed by the company over this period, WorkCover insurance would be payable. In Cheung (No 3), Judge Champion held that the payments of $3,600 per month made to him over the period from 30 June 2016 to 30 December 2017 were compensation for expenses incurred by Mr Cheung and not wages, and that no remuneration was paid to him as an employee.[18] While Mr Cheung continued to receive payments of $3,600 per month between 1 January 2018 and 31 May 2021, he should not have done so, as the board had agreed that payments would cease on 31 December 2017.

69 Mr Cheung did not attempt to show that his payment of WorkCover insurance was previously authorised by the board of directors. His payment of WorkCover insurance was consistent with his own unsuccessful claim that he was a salaried employee of the company from 30 June 2016 until 31 May 2021. He did not advance any basis on which he was able to claim for WorkCover insurance in the absence of an employment relationship.

70 Again there is a further reason why a claim for WorkCover insurance must fail. By the WeChat message dated 29 June 2020, Mr Cheung requested that the other members of the board accept that his job insurance payment of $7,064.25 be treated as part of his contribution to the funding injection then underway by the directors. Having elected to treat this expense as part of his funding contribution, Mr Cheung cannot now double dip, and make separate claim for repayment.

71 The claim for payment of WorkCover insurance in the amount of $7,064.25 must be disallowed.

Consultant and authority fees relating to the property: R.B. Waste Consulting Service: $330.00 on 20 February 2020; O'Brien Traffic: $3,267.00 on 21 February 2020; City of Melbourne: $4,072.75 on 17 July 2020 and $722.80 on 4 August 2020; Traffix Group Pty Ltd: $984.50 on 27 February 2021; Fulcrum Urban Planning Pty Ltd: $7,761.00 on 27 March 2021

72 It is common ground that the project plan was to get a permit for the development of the property and then sell the property at a profit. No construction work was intended or occurred.

73 In May 2017, the company applied for a planning permit from the Melbourne City Council ('Council'). In October 2017, the Council stated its concerns about the project. In June 2018, the company revised the drawings and lodged an amended application for a permit. In November 2018, the amended application was approved. A marketing campaign conducted by the company from April 2019 was unsuccessful in finding a buyer, and the project remained in the market until the end of 2019. In January 2020, the company decided to alter the primary concept design to add a supermarket because the marketing campaign for the permitted development had been unsuccessful. In June 2020, the company made an application for an amended permit. The Council approved this application in March 2021.

74 The consultant and authority fees claimed by Mr Cheung principally relate to the amendment of the project plans from January 2020 and the approval of an amended permit in March 2021.

75 The invoice from RB Waste Consulting Service is dated 18 February 2020 and was in the amount of $300 for the preparation of a waste management plan.

76 The first invoice from O'Brien Traffic is dated 31 July 2018 and is for an agreed fee of $1,650 excluding GST for traffic engineering services. The second invoice from O'Brien Traffic is dated 19 October 2018 and is in the amount of $1,452 including GST. It is also for traffic engineering services.

77 The payment of fees to councils, and the amount of fees, is prescribed under the Planning and Environment (Fees) Regulations 2016 (Vic) and the Subdivision (Fees) Regulations 2016 (Vic). On 17 July 2020, Mr Cheung paid a Council fee of $4,072.75. This fee was payable on the making of the application to amend the permit, and had to be paid before the Council would process the application. A second fee of $722.80 was paid by Mr Cheung to the Council on 4 August 2020.

78 The first invoice from the Traffix Group is dated 19 August 2020 and is in the amount of $478.50. It relates to traffic engineering services for the project. The second invoice from Traffix Group is dated 17 September 2020 and is in the amount of $506. Again the invoice relates to traffic engineering services for the project.

79 The first invoice from Fulcrum Urban Planning Pty Ltd is dated 30 September 2020 in the amount of $4,342.80. It relates to planning work. A second amount of $3,418.80 was paid to Fulcrum on 26 March 2021 also for planning services.

80 On 14 February 2020, Mr Cheung messaged Mr Hu and Mr Liu by WeChat referring to changes to drawings concerning the shopping mall. He advised that sketches would shortly be available to be followed by formal drawings. A WeChat message on 14 March 2020 referred to design changes and advised that the designers were still working on drawings and models.

81 Mr Hu agreed that after the company tried unsuccessfully to sell the property in 2019, the directors decided in January 2020 to amend the drawings to include a supermarket. He agreed that the work required the redesign of the drawings and the lodging of an amended planning permit application. He said that the three directors consulted and acted in accordance with the actual market situation. All directors were concerned to improve the project design after the property failed to sell in 2019. The addition of a supermarket was seen by all directors as an enhancement of the property. The company made the application for an amended planning permit in about June 2020. After the amended planning permit was approved, the company took steps to sell the property. When the property ultimately sold on 18 April 2024, it did so on the basis of the amended plans. The decision to sell the property was made by Mr Hu and Mr Liu.

82 Mr Liu said that the project was intended to be completed by the end of 2017. When this did not occur, the three directors agreed to carry on with the project. Mr Liu said that while in Australia he accompanied Mr Cheung in going to see Council planners, talking to the real estate agent about leasing the property, and the investigation, inspection and auction of the property.

83 The defendants admit that the council fee of $4,072.75 paid on 17 July 2020; the Traffix Group fee of $984.50 paid on 27 February 2021 and the Fulcrum Urban Planning Pty Ltd fees of $7761.60 paid on 27 March 2021 were expenses incurred by Mr Cheung on behalf of the company. I am satisfied that the fees of R B Waste Consulting Service, O'Brien Traffic, and the second council fee are in the same position.

84 I conclude that Mr Cheung would, as a consequence, be entitled to repayment by the company of consulting and council fees totalling $17,138.05 in relation to the amended project design.

85 There is however one further matter to be taken into consideration. In a WeChat message to the other directors dated 29 June 2020, Mr Cheung requested that his payments to the traffic engineer of $3,267, and to the garbage designer of $330 be treated as part of his funding contribution. This is what occurred. As a result, he is not entitled to double dip and make separate claim for reimbursement of these amounts. The amount that he is entitled to recover from the company for consulting fees and council fees is reduced to $13,541.05.

86 On 28 April 2020, Mr Cheung wrote a cheque to the ATO in the amount of $14,423.00. The Australia Post receipt for the tax payment refers to 7 May 2020 as the date of acceptance of the cheque. Mr Cheung's witness statement provides no enlightenment as to what the payment of $14,423.00 represents, and why the company should be liable to reimburse him for this payment.

87 In a WeChat message to Mr Hu and Mr Liu dated 29 June 2020, Mr Cheung stated that he had paid his share of contributions to the company of $55,680 resolved at a directors meeting on 28 June 2020. His contributions consisted of a deposit of $30,094.46, and expenditure from his account of $25,585.54. The expenditure from his account included the tax payment of $14,423.00.

88 I am not satisfied that Mr Cheung has shown any basis on which the company should be required to pay the amount of $14,423. It has not been shown that the company is liable to do so. In addition, Mr Cheung requested that this amount be treated as part of a funding injection to the company made by the shareholders. He is not permitted to double dip by claiming the amount as a contribution as part of the funding injection to the project and then seeking to separately recover the amount as an expense.

Payments to ASIC of $265.00 and $347.00 on 26 June 2020

89 On 26 June 2020, Mr Cheung paid $265.00 to ASIC being the annual review fee for the company.

90 On the same day, he paid the amount of $347.00 to ASIC, being the annual review fee that related to Huytrake Pty Ltd. Mr Hu is a director of Huytrake Pty Ltd, which is the trustee of his family trust.

91 It appears that Mr Cheung made this payment as a friendly gesture to Mr Hu. Whatever be the position, it is plain that the sum of $347.00 is not an expense of the company and is not recoverable from the company.

92 In a WeChat message of 28 June 2020, Mr Cheung asked Mr Hu and Mr Liu to treat his payment of the annual company registration fee of $265.00 as part of his contribution to the directors' funding injection to the company. He cannot now double dip and make separate claim for this item an expense. As a result, the amount of $265.00 is not recoverable from the company.

Payment of $30,094.46 to the company on 29 June 2020

93 On 29 June 2020, Mr Cheung paid the company $30,094.46 to reduce the interest owning to Westpac on its bank loan. Mr Cheung is making a separate claim in relation to his payments to the company. This will require a determination as to whether a number of payments made by Mr Cheung were capital injections or whether they were made by way of loan. This item is more conveniently considered as part of that process.

Loan offer fee of $3,300 paid to AAA Money on 16 December 2020 and valuation fee of $5,500 paid to Charter Keck Cramer Pty Ltd on 27 February 2021

94 In about November 2020, Mr Cheung made an application for a loan approval from Territorial Lease and Mortgage Service Pty Ltd trading as 'AAA Money'. He paid a non-refundable assessment fee of $3,300. No loan was made.

95 Mr Cheung said that the indicative loan approval from AAA Money was in the amount of $9,000.00 or 50% of valuation, whichever was less. The loan was to be an interest only loan at an interest rate of 8.99% fixed. There was a lender fee of 1% of the loan amount plus GST. There was also a AAA fee of 0.5% of the loan amount plus GST. If the loan was repaid within 12 months, there was an early repayment fee of one month's interest.

96 The loan approval required the borrower to commission a valuation on behalf of the lender with the valuation cost to be borne by the borrower.

97 Mr Cheung said that in November and December 2020 he had discussions with Mr Hu who on each occasion rejected a loan from AAA Money to refinance the Westpac loan because the interest rate was too high.

98 In December 2020, Mr Cheung obtained a valuation of the property from Charter Keck Cramer Pty Ltd ('valuer'). The valuer's report advised that the market value of the property with vacant possession was $10,450,000. Mr Cheung paid the valuation fee of $5,500 on 27 February 2021.

99 There was no board resolution authorising these expenses. Mr Hu did not recall receiving or discussing the indicative loan approval from AAA Money. He said that in 2020 the directors' focus was on ensuring that there were sufficient funds contributed by the shareholders to cover the company's expenses and looking for a potential buyer for the property.

100 Mr Hu said that Mr Cheung did not consult with him before contacting AAA Money. He denied that he asked Mr Cheung to contact AAA Money. He said that Mr Cheung did not report his actions to him.

101 In his evidence, Mr Cheung did not suggest that he had obtained the approval of the board of directors before approaching AAA Money or the valuer. He said that his approaches to Mr Hu were rejected because Mr Hu considered the interest rate charged by AAA Money was too high.

102 There is no evidence that in approaching AAA Money, Mr Cheung acted with the approval of the other directors. Equally, there is no evidence that in retaining the valuer, Mr Cheung acted with the concurrence or knowledge of the other directors.

103 Insofar as there are differences between the evidence of Mr Cheung and Mr Hu, I prefer the evidence of Mr Hu. Mr Cheung's answers to questions were often incoherent or unresponsive. By contrast, Mr Hu's answers to questions were direct, relatively short and responsive to the questions asked of him.

104 I find that Mr Cheung acted unilaterally in seeking the loan approval and instructing the valuer. He did so without the approval of the other directors. He was not authorised by the board of directors to incur the AAA Money loan assessment fee or the valuation fee on behalf of the company.

105 I find that the claims for the loan assessment and valuation fees fail.

Legal and accounting expenses: $2,795.32 paid to Gadens Lawyers on 29 January 2021; $7,524.00 paid to Gerald Lou & Associates on 26 March 2021

106 On 22 December 2020, Gadens Lawyers ('Gadens') billed Mr Cheung for professional costs of $2,500 and ASIC fees of $41.20 plus GST. The account was paid by Mr Cheung on 28 January 2021. The invoice describing the work done relates to the drafting and revision of a share sale agreement, transfer documents, attendances and answering questions from Mr Cheung.

107 Mr Cheung said that near to the end of 2020, Mr Liu said that he could not afford to make payments on the Westpac loan and wanted to sell his shares to him. The work done by Gadens relates to the possible sale of shares in the company by Mr Liu to Mr Cheung. No transaction of this nature proceeded.

108 Mr Cheung admitted that he had engaged Gadens to act on his behalf in early 2021. On 25 January 2021, Gadens sent a letter of demand to Mr Hu stating that they acted on behalf of Mr Cheung, and demanding payment of an amount of $383,314.67 by 1 February 2021. The letter alleged breach of an agreement to provide a loan to Mr Cheung in the amount of $1,198,000 at an interest rate of 7% per annum.

109 On 22 February 2021, Gadens, acting for Mr Cheung, sent a second letter of demand to Mr Hu. The letter required payment of an amount of $432,027.34 by Mr Hu for accommodation, meals, golf fees and medical fees. The amount claimed from Mr Hu included a claim for assistance with Mr Hu's Australian immigration application, airfares, accommodation and visits to Australia.

110 On 16 April 2021, Gadens, acting for Mr Cheung, sent a third letter of demand to the company claiming that the company was indebted to Mr Cheung in the amount of $943,805.00. The letter alleged that the company was indebted to Mr Cheung in relation to a personal loan of $499,570.00 and for unpaid wages of $444,235.00.

111 Mr Hu said that Gadens were the personal lawyers acting for Mr Cheung and were never engaged to act on behalf of the company. He said that the company was never engaged in any share sale transaction as referred to in the invoice.

113 Mr Cheung did not suggest in evidence that his retainer of Gadens was considered or approved by the directors of the company or was authorised by them. It is apparent that at least from January 2021, Gadens considered their client to be Mr Cheung. It is equally apparent that in April 2021, Gadens did not consider that they had any conflict of interest in acting for Mr Cheung in making a substantial claim against the company.

114 On the evidence before me, I conclude that in December 2020 and January 2021, Gadens were acting for Mr Cheung in his personal capacity and not for the company. Under the proposed share sale agreement, it was Mr Cheung personally who was to purchase shares from Mr Liu. It was a personal transaction between Mr Cheung and Mr Liu. This conclusion is consistent with the fact that neither Mr Cheung or Mr Liu raised the matter at a meeting of the directors.

115 The claim by Mr Cheung for legal expenses paid to Gadens on 29 January 2021 must fail.

116 Mr Cheung also claims for accounting fees in the amount of $7,524.00 paid to Gerald Lau & Associates ('Lau') in March 2021. By this time, he had sent two letters of demand to Mr Hu.

117 The invoice from Lau is dated 15 March 2021 and relates to the preparation and lodgement of the company income tax return for FY2020, followed by the preparation and lodgement of a revised income tax return for the same year. Among other matters, the invoice related to the checking and reconciliation of shareholders loan accounts, taking up and accrual of an outstanding market wage payment, and correcting previous director loan transactions. The instructions to Lau were given by Mr Cheung.

118 The FY2020 financial statements show an increase in Mr Cheung's loan to the company to $499,570 as against $210,231 in the FY2019 accounts. In addition, a new item in the amount of $444,235 is shown as owing to Mr Cheung as against nil in FY2019.

119 The directors report prepared by Lau for FY2020 under Mr Cheung's instructions states in part:

On amount of under payment of market wage for four and a half years since 1 December 2015 to 30 June 2020 amounting to $444,235.000 has been taken up in this 2019/2020 financial year. The actual underpayment of wage amount will be reflected in the Company tax return when it is paid.

120 The accounts were signed by Mr Cheung on 15 April 2021. Both Mr Hu and Mr Liu declined to sign these accounts.

121 Mr Hu said that Mr Cheung engaged Lau to produce financial reports to support his claim that he was an employee of the company.

On 15 April 2021, Mr Cheung (but not Mr Hu or Mr Liu) signed revised Financial Statements for [the company] for FY2020. For the first time there was a reference to an outstanding salary due to Mr Cheung, referable to the terms of the alleged Employment Agreement, in the sum of $444,235.

On 16 April 2021, Mr Cheung's then lawyer made a formal demand for repayment of a loan of $499,570 and unpaid wages of $444,235.[19]

123 Later in his reasons for decision, Judge Champion referred to the Lau invoice as demonstrating that the reference to a market wage by Mr Cheung occurred after the event.[20]

124 Mr Cheung signed the revised financial statements for FY2020 on 15 April 2020. One day later, Gadens wrote to the company demanding payment of the amounts shown in the revised accounts as owing to Mr Cheung. Those amounts were $499,570 as a personal loan, and $444,235 for outstanding wages. The preparation of revised company financial statements and Mr Cheung's claim against the company were co-ordinated activities.

125 When asked in cross-examination as to whether his purpose in engaging Lau to prepare revised accounts for FY2020 was to assist him in making a claim against the company in relation to loans and wages, Mr Cheung's answer was incoherent and unresponsive.

126 All of the work undertaken by Lau in the revision of the company's financial statements and income tax return for FY2020, including the directors report was completed on the instruction of Mr Cheung. Mr Cheung was not acting in the best interests of the company but was seeking to advance his own financial interest and the claim which he intended to make for wages and loan repayment against the company and Mr Hu. Most of the work carried out by Lau was necessitated by Mr Cheung's self-serving instructions including (as Lau's invoice stated) 'Preparation for necessary shareholders loan adjustments as requested', 'Taking up accrual of outstanding market wage payment as requested', 'Other corrections and review of previous directors/shareholders loan transactions', and 'Extract and provide transactions history and details for your review as requested'.

127 Any work carried out by Lau that preceded Mr Cheung's instructions for the revision of the accounts in his favour, would have been rendered worthless by the need for the company to retain fresh accountants, and to revisit and check all the work that Lau had done.

128 At a directors meeting on 20 April 2021, Mr Cheung was removed as a director. Subsequently, fresh accountants were appointed to act for the company.

129 In the circumstances, Mr Cheung's claim against the company for reimbursement of the amount of $7,524 paid to Lau must fail. Most of the work done by Lau was completed on the basis of self-serving instructions given by Mr Cheung and not known or agreed to by Mr Hu and Mr Liu.

130 Mr Cheung's instructions were made to Lau without the knowledge of the other directors. Mr Cheung intended to get a head start in his claim against the company and Mr Hu in relation to the claims that he intended to bring against them. He acted in his own personal interest and not in the best interests of the company.

131 I conclude that the claim for accounting expenses must fail.

(a) the company is entitled to recover the sum of $147,600 from Mr Cheung being the total of the amounts of $3,600 per month paid to him over the period from January 2018 until May 2021 (inclusive);

(b) the company is entitled to recover the sum of $178,000.00 being the amount of the cheque drawn on 31 March 2021 less an amount of $13,541.05 which I allow for expenses.

[1] See Cheung v Hu [2022] VCC 291 (Judge Macnamara); Hu v Cheung & Anor [2022] VCC 1565 (Judge Cosgrave); and Cheung v Aust Landing Group Pty Ltd [2024] FedCFamC2G 278 (Judge Champion) ('Cheung (No 3)').

[2] See for example GJB Building Pty Ltd v AI & PB Property Pty Ltd [2023] VSC 782, [2025]-[2031] (Nichols J); Newman v Hartwig [2024] VSC 54, [611]-[612] and [629]-[637]. (Matthews J).

[6] [1990] HCA 32; (1990) 170 CLR 146, 205; Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] VicRp 68; [1992] 2 VR 279, 303 (Ormiston J) (appeal dismissed in substance); Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company v Cheng [2021] NSWSC 1141, [135] (Payne JA).

[7] Witness statement of Weiyang Cheung dated 15 July 2024, [19].

[8] Witness statement of Xiangmao Liu dated 23 August 2024, [13].

[9] Reply and defence to counterclaim filed 10 May 2024 [15(c)].

[10] Reply and defence to counterclaim filed 17 May 2024 [7].

[14] [1939] HCA 23; (1939) 62 CLR 464, 531-532.

[15] See Tomlinson v Ramsay Food Processing [2015] HCA 28; (2015) 256 CLR 507, 517 [22] (French CJ, Bell, Gageler and Keane JJ); Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853, 935 (Lord Guest); Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363, 373 [21] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan, and Heydon JJ); Commissioner of State Revenue (Vic) v Mondous [2018] VSCA 185; (2018) 55 VR 643, 663 [83] (McLeish JA); Shaw v Gadens Lawyers [2014] VSCA 74, [59] - [62] (Maxwell P; Tate JA and Garde AJA agreeing).

[16] Cheung (No 3) (n 1), [151]-[157], [170], [173].

[17] See Murphy v Abi-Saab (1995) 37 NSWLR 280, 288 (Gleeson CJ; Kirby P and Rolfe AJA agreeing); Brewer v Brewer [1953] HCA 19; (1953) 88 CLR 1, 15 (Fullagar J).

[19] Cheung (No 3) (n 1), [60]-[61].