Plaintiff v Defendants

CORPORATIONS - Corporations Act 2001 (Cth) - Part 5.4B - s 467(4) - Winding up only remedy sought by plaintiff - Whether winding up justified - Financial position of companies - Companies likely cash-flow insolvent - Whether other remedy available - No proposal for buyout - Voluntary sell-down of assets not feasible - Differences between remedy of appointment of receiver and manager to companies and appointment of liquidator - Companies wound up.

CORPORATIONS - Liquidation of trustee company - Trustee right of indemnity - Where company bare trustee - Just and convenient to appoint liquidator as receiver and manager to assets of unit trust pursuant to ss 232, 233(1)(h) and 461(1)(f) of the Corporations Act 2001 (Cth) and/or s 37 of the Supreme Court Act 1986 (Vic).

PROCEDURE AND EVIDENCE - Abuse of process - What constitutes abuse of process - Collateral purpose - Allegation that proceeding brought as an abuse process not made out.

1 Dawning Investments Pty Ltd ('Investments') and Dawning Developments Pty Ltd ('Developments') (collectively, 'the Companies') are in the business of property investment and development. The plaintiff, Ms Grace Yang ('Grace'), is the holder of 50 of 100 shares in each of the Companies and is also a director of Developments. The first defendant, Mr Xu Dong (Steven) Zheng ('Steven'), holds the remaining 50 shares in each company, is a co-director of Developments, and is the sole director of Investments. Investments was incorporated on 17 June 2010, with Developments being established later, on 30 May 2016, and appointed trustee of the Dawning Developments Unit Trust ('the Unit Trust') that same day. The beneficiaries of the Unit Trust are trustees of certain family trusts established for the benefit of Grace's family, on the one hand, and Steven's family, on the other. Each of those trustees holds 50 units in the trust.

2 In this proceeding, Grace seeks, among other things, orders pursuant to s 233 and/or s 461(1)(f) or (k) of the Corporations Act 2001 (Cth) ('the Corporations Act'), that the Companies be wound up, together with an order pursuant to s 37 of the Supreme Court Act 1986 (Vic) ('the Supreme Court Act'), that a receiver be appointed over the assets of the Unit Trust. In broad terms, Grace alleges there has been oppressive conduct by Steven in relation to the affairs of the Companies, including the unauthorised transfer and application of funds from Investments as well as a failure by the Companies to properly maintain their books and records and meet their taxation obligations. She asserts that the relationship of trust and confidence between herself and Steven has broken down. The relief sought by Grace is opposed by Steven, who argues that the matters alleged by Grace have been overstated and the proceeding has been brought by her as an abuse of process and evidences a 'lack of clean hands'.

3 The relationship between the parties and their respective families goes back several years. Grace emigrated to Australia in November 2005 and completed her high school education in Geelong. In 2009, Grace's parents, Mr Wenchao Yang ('Wenchao') and Ms Guifeng Zhang ('Guifeng'), who were living in China, applied for Australian permanent residency. To achieve this, her parents decided to seek a business investment visa and operate a business in Australia. Whilst looking for suitable business opportunities, they were introduced to Steven's parents through a mutual friend. Steven's father assisted Grace's parents in navigating the visa application process and locating a family home. Grace's parents and Steven's parents eventually owned and operated a restaurant business in the Box Hill Shopping Centre together as partners. Grace and Steven met shortly after their respective parents met.

4 Around this time, Wenchao and Steven discussed the possibility of running a property development company. It was agreed that Wenchao would lend Steven the necessary capital. However, Wenchao also wished for Grace to be involved. He told her that he wanted her to be a co-director and to hold half of the company's shares because it 'would be safer for the money he lent to be used in the business' and also because it would enable her to learn about property development and the running of a business. Grace was initially reluctant to become involved but ultimately agreed to be listed as a shareholder in Investments for those purposes.

5 On 1 November 2010, a 'money lending agreement' was drawn up and executed between Guifeng and Investments to facilitate lending of $5 million to Investments, at a maximum annual interest rate of 10% ('the Money Lending Agreement'). The money lending agreement provided that interest would only be payable for the first five years, and thereafter, interest and at least $1 million of principal would be repayable yearly until the loan was repaid. The next month, on 6 December 2010, a 'cooperation agreement' was executed by Grace and Steven, which described their respective roles and responsibilities in relation to Investments ('the Cooperation Agreement'). The Cooperation Agreement contemplated Steven acting as the legal representative of the company and being solely responsible for its daily operations, business accounting, finance, taxation, and any profits and losses. Steven was also obligated to provide Grace with regular updates about 'the real estate investment budget, financial accounts, business progress and operation and management status of the company'. His salary was 'tentatively' fixed at $1,500 per week and he was to be equipped with necessary tools and transport. Steven's control of the day-to-day operations of Investments included control of the company's bank account. He describes his role as operating the business, whereas Wenchao would provide its funding, albeit initially through his wife. Grace says she did not have access to Investments' bank account until September 2018 and had limited involvement with the company other than to sign occasional paperwork and bank documents.

6 By 2013, Wenchao, his wife and/or his associated entities had advanced $5 million to Investments, as promised. Investments then applied those funds towards two property developments, being the development of apartments at 251 Canterbury Road, Forest Hill ('Canterbury Road') and at 1A Campbell Grove, Northcote ('Campbell Grove'). The company has a half interest in Canterbury Road by way of units in the Hill Forest Canterbury Unit Trust whose trustee, Hill Forest Development Pty Ltd, owns three apartments at the property. Similarly, its interest in Campbell Grove is represented by its ownership of 50 per cent of the shares in North South Property Pty Ltd ('North South'). North South owns all the shares in Yune Developments Pty Ltd ('Yune') which, in turn, owns four apartments at Campbell Grove.

7 At some point, there were discussions between the parents of Grace and Steven about the possibility of Grace and Steven marrying. However, Grace ultimately married Justin Yang ('Justin') in 2014. Justin immigrated to Australia in 2015. Initially, Grace and Justin worked together in a newsagency business Grace's parents had purchased and which she was operating. Grace deposes that Developments was incorporated so that Justin could become involved in the property development business with Steven.

8 In February 2016, on the suggestion of Wenchao, Justin commenced working with Steven in the property development business. At the time, Investments had been involved in two completed development projects. Investments had invested in entities that undertook the development work, but had not undertaken any development work itself. To further the property development business undertaken by Investments, Justin and Steven decided to establish Developments as a new company. Unlike Investments, it was intended that Developments would buy and develop properties directly.

9 Shortly after its incorporation, Developments purchased properties at 91 Whittens Lane, Doncaster ('Whittens Lane') and 5 Willowbank Court, Templestowe ('Willowbank Court'), for a combined price of $3.2 million. In or around August 2017, Developments acquired 56% of the shares in an entity called 185-187 Foote St Pty Ltd ('185-187 Foote St'), which, in turn, purchased a property at 185-187 Foote Street, Templestowe ('Foote Street') for $2.8 million. In March 2018, Developments purchased a property located at 93-99 Rufus Street, Epping ('Rufus Street') for $3.5 million. Developments' interests in these properties were funded by it using money lent to it by Investments. That money had been lent to Investments by Wenchao and/or his interests. There was, however, no formal loan agreement put in place between Developments and Investments to give effect to this arrangement.

10 Around September 2017, Justin commenced discussions with Wenchao about refinancing the loan made to Investments. Justin says that he, Wenchao and Steven all agreed to the incorporation of a new entity called New Sunshine Pty Ltd ('New Sunshine') to lend money to Developments. It was apparently further agreed that these funds could then be used by Developments to repay the loan it owed to Investments and Investments could, in turn, repay Wenchao. The sum to be advanced by New Sunshine was apparently $7,508,873.80, which reflected Investments' total borrowings from Wenchao, less repayments received. Justin explained under cross-examination that the money lent by New Sunshine was, in fact, ultimately sourced from Wenchao. The money was then advanced to Developments by New Sunshine throughout September and October 2017 and remitted by Developments to Investments. According to an affidavit made by Justin in a related proceeding brought by New Sunshine against Developments,[1] the loan between New Sunshine and Developments is alleged to have been eventually reduced to writing and executed in or around September 2018. After the loan agreement was apparently signed, it is alleged that New Sunshine lent a further $3,207,600 to Developments, which was paid in three tranches in December 2018, September 2019 and October 2019.

11 In addition, around November 2017, there was a 'general project management agreement' ('the GPM Agreement') drawn up, which purported to appoint New Sunshine as a project manager over the properties in which Developments held an interest for a fee of $50,000 per month, inclusive of GST.

12 The current director of New Sunshine is Justin and its shareholders are Grace and her siblings, Abby Yang and Robin Yang (as to 20 per cent, 20 per cent and 60 per cent respectively).

13 In March 2017, Justin and Steven started another business selling Australian wine products in China through a company called Winehol Pty Ltd ('Winehol'). Both Justin and Steven were directors of Winehol and each held 50 per cent of its shares. They invested around $200,000 in the company using money borrowed from Investments. The Winehol venture may well represent the start of a terminal decline in the relationship between Steven, Grace, Justin and Wenchao. According to Justin, his relationship with Steven became strained when Steven refused him access to Winehol's bank accounts and after Steven admitted he had transferred Winehol's money into an account held by Steven's cousin in China. According to Justin, he and Steven fell out over this issue, causing Justin to exit the Winehol business and precipitating Grace and himself seeking access to the bank accounts of Investments and Developments.

14 Around 15 July 2020, New Sunshine served a notice of default on Developments and Steven, as alleged guarantor, in respect of the loan amounts advanced by New Sunshine to Developments.

15 Further issues have since emerged between the parties in relation to the conduct of the property development business undertaken by the Companies. Those issues have been refined during the course of this proceeding and are considered below.

16 On 19 September 2020, Grace commenced this proceeding initially only under s 233 of the Corporations Act for orders relating to alleged oppressive conduct in relation to the affairs of the Companies. The relief sought was that Steven transfer his shares in the Companies to Grace at a value to be determined by the Court or, alternatively, that the Companies be wound up. As previously explained, the only remedy now sought by Grace is that the Companies be wound up and a receiver and manager appointed over the assets of the Unit Trust. On 13 February 2020, Connock J made an order referring the proceeding for management under the Court's Oppression Proceeding Program.[2] By a notice of appearance dated 13 October 2020, Steven opposed Grace's application and submitted that there was no justification for the winding up of the Companies.

17 At the initial return of the matter on 15 October 2020, orders were made for inspection by both parties of the books of the Companies pursuant to s 247A of the Corporations Act. Various interlocutory steps have since been ordered in the matter, including the filing of points of claim, points of defence and cross-claim, the obtaining of informal valuations by the parties of the various property interests held by the Companies and the referral of the matter to judicial mediation. Informal valuations obtained by the parties pursuant to the Court's orders valued the property interests of Investments at between $2.03 million and $2.11 million and the property interests of Developments at between $11.32 million and $11.67 million. Following an unsuccessful mediation, the matter came back before the Court for pre-trial orders on 4 August 2021. At that time, the matter was set down for trial on an estimate of two days, commencing 30 November 2021. Orders were also made for the filing of an amended originating process, amended points of claim, amended points of defence and the filing of further affidavit material by the parties. On 5 August 2021, Connock J referred the proceeding to an Associate Judge for hearing and determination pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and r 16.1(3) of the Supreme Court (Corporations) Rules 2013 (Vic). Grace later procured a consent to act as liquidator of the Companies from Peter Andrew Goodin dated 25 November 2021.

18 On 9 April 2021, New Sunshine commenced its own proceeding against Developments, seeking recovery of outstanding loan amounts in the sum of $11,935,548.02 plus interest and naming Steven as an alleged guarantor of that debt ('the New Sunshine proceeding').[3] The New Sunshine proceeding has been separately managed by the Court. However, Steven relies on the existence of the New Sunshine proceeding in support of his argument that the present proceeding has been brought as an abuse of process. That is a matter to which I will return.

19 Although initially listed for two days, the trial ultimately ran for four days over 30 November 2021, 1 December 2021, 22 December 2021, and 16 February 2022 (for closing submissions).

20 Immediately prior to the commencement of the trial in this proceeding, Grace's lawyers notified the Court that Wenchao was located in China and intended to give evidence remotely by audio visual link, using video conference technology. This gave rise to a number of important procedural questions, including:

(a) whether the Civil Procedure Law of the People's Republic of China (9 April 1991)[4] prevented Wenchao from being cross-examined via video conference technology whilst located in China;

(b) whether the taking of evidence by the Court in this way would involve an exercise of sovereignty by the Commonwealth of Australia within the territorial confines of China; and

(c) depending on the answers to the above, whether permission was required of the government of the People's Republic of China through official channels under the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters.[5]

21 The same or similar issues have arisen in a number of other matters that have come on for trial during the COVID-19 pandemic.[6]

22 As it happened, no permission was sought from the government of the People's Republic of China in respect of the testimony of Wenchao. At the commencement of the trial, Grace ultimately elected not to rely on the affidavit evidence of Wenchao given the risks and uncertainty associated with him giving evidence from China. After taking instructions, Steven's counsel agreed that all of Wenchao's affidavits be formally excluded from the evidence, but sought to reserve the right to make submissions about any gaps in the evidence. Consequently, Wenchao's affidavits were not tendered as evidence in the proceeding and were excluded for the purpose of the trial.

23 At the trial, Grace ultimately relied on the following material:

(a) the affidavits and exhibits of Grace Yang affirmed 21 September 2020, 16 September 2021 and 27 September 2021;

(b) the affidavit and exhibits of Yunfei Wu affirmed 19 July 2021;

(c) the affidavit and exhibits of Jian Yang affirmed 27 August 2021 (in Proceeding No S ECI 2021 01040);

(d) the affidavit and exhibits of Liang Xu affirmed 10 September 2021;

(e) the affidavits and exhibits of Jian Yang affirmed 15 September 2021, 29 September 2021 and 22 November 2021;

(f) the plaintiff's outline of opening submissions filed 5 November 2021;

(g) the plaintiff's outline of reply submissions filed 23 November 2021; and

(h) the plaintiff's closing submissions filed 14 February 2022.

24 Conversely, Steven relied on the following material:

(a) the affidavit and exhibits of Xu Dong Zheng affirmed 14 September 2021;

(b) the defendant's outline of opening submissions filed 5 November 2021;

(c) the defendant's outline of reply submissions filed 23 November 2021; and

(d) the defendant's closing submissions filed 7 February 2022.

25 The material filed by the parties was voluminous.[7]

26 Grace, Justin and Steven were all cross-examined in relation to their affidavit evidence at the trial. In addition, Yunfei Wu and Liang Xu were called by Grace to give evidence and did so by affidavit, however, neither was cross-examined.

27 I will address questions of credibility of witnesses and conflicts of evidence progressively in my analysis of the issues below. However, by way of brief overview, it is appropriate to record that I have reservations about the reliability of significant aspects of Steven's evidence. In particular, he gave inconsistent and unreliable evidence about the circumstances and purpose of certain transfers from the accounts of Investments, some of which were a matter of recent invention. He also gave vague, uncorroborated, and implausible evidence about the purchase by Investments of a Tesla motor vehicle for his benefit. I do not have similar reservations about the evidence given by Grace and Justin, both of whom I consider to be witnesses of truth and more reliable. For that reason, I prefer their evidence where it conflicts with the evidence of Steven.

28 The following issues now arise for determination in the proceeding:

(a) has the conduct of the Companies been oppressive because it is either commercially unfair or contrary to the interests of their members as a whole?;

(b) if the conduct of the Companies has been oppressive, is it appropriate that the Companies be wound up either under ss 233(1)(a) or 461(1)(f) of the Corporations Act?;

(c) is it just and equitable that the Companies be wound up under s 461(1)(k) of the Corporations Act?;

(d) is the proceeding an abuse of process because it has been brought for an improper purpose?;

(e) is Grace disentitled to relief because of a lack of 'clean hands'?;

(f) is there a less drastic remedy available than the winding up of the Companies?; and

(g) should orders also be made to appoint a receiver and manager of the assets of the Unit Trust

29 Section 232 of the Corporations Act provides:

The Court may make an order under section 233 if:

(a) the conduct of a company's affairs; or

(b) an actual or proposed act or omission by or on behalf of a company; or

(c) a resolution, or a proposed resolution, of members or a class of members of a company;

is either:

(d) contrary to the interests of the members as a whole;

(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

30 Section 232 of the Corporations Act contemplates conduct that occurs within or in relation to a company that, according to accepted standards of corporate behaviour, is burdensome, harsh and wrongful, productive of unfair prejudice, or contrary to the interests of the members as a whole.[8]

31 The words 'oppressive to', 'unfairly prejudicial to', and 'unfairly discriminatory against' as they appear in s 232(e) of the Corporations Act should be viewed as 'a composite whole and ... as different aspects of the essential criterion, namely commercial unfairness'.[9] Unfairness has historically been regarded as the touchstone in assessing oppression.[10] The following principles are relevant to considering the question of unfairness:

(a) oppressive conduct will be made out if an objective commercial bystander would reasonably conclude that the conduct complained of is unfair;[11]

(b) as the test is objective, it is not necessary to prove that a person knew or believed that the conduct engaged in was unfair.[12] Nor are the motives behind the impugned conduct especially important;[13]

(c) the task of deciding whether there has been commercial unfairness is undertaken in the context of the particular relationship in issue.[14] This may require an examination of the conduct of the applicant, which may result in the Court concluding that the conduct of the other party, even if prejudicial, is not unfair. [15] It may also affect the form of relief granted;[16]

(d) regard must be had to the circumstances as a whole and any assessment of the cumulative effect of the impugned conduct must be undertaken in that context;[17]

(e) unfairness may be identified in the harm suffered as a result of conduct of management, any prejudice caused, a lack of reasonable commercial justification for a course of action taken, or simply in the company's decision-making process;[18] and

(f) a director who conducts a company's affairs in a way to advance their own interests or the interests of others of their choice to the detriment of the company or of the other shareholders, may engage in conduct that is commercially unfair and oppressive for the purpose of s 232(e) of the Corporations Act.[19] Unfairness may be inferred where, in the absence of proper explanation, a transaction does not provide sufficient commercial value to a company to outweigh any possible conflict of interest on the part of a director.[20] Accordingly, where there has been a misappropriation of company funds[21] or dubious payments to directors,[22] the oppression provision may be engaged.

32 It is important to observe that ss 232(d) and 232(e) of the Corporations Act are separate and distinct.[23] Conduct may therefore be contrary to the interests of members in accordance with s 232(d) of the Corporations Act without being commercially unfair for the purpose of s 232(e).[24]

33 The words 'conduct of a company's affairs' in s 232(d) are given a liberal and non-exhaustive meaning by s 53(c) of the Corporations Act to include 'the internal management and proceedings of the company'. Where a dispute between shareholders and directors impairs the proper functioning of the internal management and proceedings of a company, it therefore concerns the conduct of the company's affairs.[25] In assessing whether the 'conduct of a company's affairs' is contrary to the interests of members as a whole, the conduct is to be assessed objectively,[26] having regard to accepted standards of corporate behaviour and how reasonable directors would act in attending to the affairs of the company.[27] Breaches of duty (whether statutory or fiduciary) by directors and officers may constitute conduct that is not in the best interests of members of the company as a whole.[28]

34 A failure of shareholders and directors of a company to cooperate in a way that leads to deadlock has not traditionally been considered to be an instance of shareholder oppression.[29] By contrast, other (and more recent) authority suggests that oppression may be constituted by a state of deadlock for which neither or both sides are responsible.[30] For example, where directors and shareholders are in a state of deadlock and cannot maintain a regime of proper corporate governance, this will be contrary to the interests of the members as a whole.[31] However, a mere breakdown of relationship without actual deadlock will not constitute oppression.[32] The breakdown must prevent the company from functioning properly.[33]

35 Once the Court's oppression jurisdiction is enlivened, s 233 of the Corporations Act sets out a broad range of remedies available to the Court. The provision states:

(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order:

(a) that the company be wound up;

(b) that the company's existing constitution be modified or repealed;

(c) regulating the conduct of the company's affairs in the future;

(d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;

(e) for the purchase of shares with an appropriate reduction of the company's share capital;

(f) for the company to institute, prosecute, defend or discontinue specified proceedings;

(g) authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;

(h) appointing a receiver or a receiver and manager of any or all of the company's property;

(i) restraining a person from engaging in specified conduct or from doing a specified act;

(j) requiring a person to do a specified act.

36 It is apparent that the scope of the Court's jurisdiction to grant relief under s 233 of the Corporations Act for oppressive conduct is particularly broad and versatile.[34] It is also discretionary.[35] If oppression is found, the remedy must relate to eliminating the oppression and compensating the person oppressed for its effects, whilst having regard to the principle of proportionality.[36]

37 In Exton v Extons,[37] Sifris J (as his Honour then was) considered whether the relevant oppression must be present at the date of the hearing for the Court's remedial powers to be triggered. After carefully reviewing the authorities, his Honour concluded that 'the better and predominant view is that the sections are enlivened if the conduct occurs at any time and notwithstanding that it may have ceased at the time of trial'.[38] Whether the oppression continues is relevant to determining if, and to what extent, remedial orders should be made.[39]

38 There is a line of authority that suggests relief should be refused under ss 232 and 233 of the Corporations Act where there is oppression in a company that is a bare trustee.[40] However, competing authority supports the view that given the wide operation of s 53 of the Corporations Act in defining the affairs of a body corporate, the statutory oppression provisions may be used to remedy oppression within a trustee company and deal with both the shares in the trustee company and units in a unit trust, provided there is a rational and discernible link between the remedy and the company in which the oppression has occurred.[41]

39 Section 461(1) of the Corporations Act relevantly states:

The Court may order the winding up of a company if:

(f) affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; or

(k) the Court is of opinion that it is just and equitable that the company be wound up.

40 Section 461(1)(f) is therefore identical in its terms to s 232 of the legislation and there may, in practice, be overlap between s 232 and s 461(1). As McMurdo JA said in Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd:[42]

[T]here will often be facts and circumstances by which the court has powers both under s 233 and s 461. Conduct in the nature of oppression can make it just and equitable that a company be wound up.[43]

41 In Ebrahimi v Westbourne Galleries Ltd,[44] the House of Lords explained that the Court's jurisdiction under the just and equitable ground will commonly be engaged when one or more of the following circumstances are present:

(a) an association formed or continued on the basis of a personal relationship, involving mutual confidence ...;

(b) an agreement, or understanding, that all, or some ... of the shareholders shall participate in the conduct of the business; [and]

(c) restriction upon the transfer of the members' interest in the company - so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.[45]

42 The categories of facts and classes of conduct that enliven the just and equitable jurisdiction are neither rigid nor closed.[46] The Court must have regard to the factual matrix of the dispute to be satisfied whether sufficient reason exists to wind up the company.[47]

43 In Re JSSP Holdings Pty Ltd,[48] I identified the following matters which inform the question of whether a just and equitable winding up order should be made:

(a) a failure of the main object of the company's formation;[49]

(b) a deadlock in the management of the company;[50]

(c) a breakdown in the relationship between the shareholders;[51]

(d) a lack of confidence in the conduct and management of the affairs of the company;[52]

(e) where there has been fraud, misconduct or oppression in relation to the affairs of the company;[53]

(f) serious concerns about the company's compliance with its statutory obligations, [54] including the filing of tax returns;[55]

(g) where there have been breaches of the Corporations Act, including breaches of directors' duties or an inadequacy of accounts or recordkeeping;[56]

(h) questions of commercial morality in the conduct of the company's affairs;[57] and

(i) a risk to the public interest that warrants protection.[58]

44 A lack of confidence (as contemplated above) may arise where, 'after examining the entire conduct of the affairs of the company', the Court cannot have confidence in the 'propensity of the controllers to comply with obligations, including the keeping of books, records and documents, and looking after the affairs of the company'.[59]

45 In determining the relative justice of a winding up, the Court will balance the respective interests of all parties potentially affected by it[60] together with the broader public interest.[61]

46 In the exercise of its discretion, the Court will also have regard to the financial position of the company and the availability of any alternative remedy. As Sifris J (as his Honour then was) said in Exton v Extons:[62]

Courts are 'extremely reluctant to wind up a solvent company' ...[63] As the Court of Appeal has observed, '[i]t is well accepted that the winding up of a solvent and flourishing company should be a last resort'.[64] Courts will consider whether any other relief would be preferable to a winding up order .[65]

47 Even if the Court is satisfied of circumstances which justify a winding up on the just and equitable ground or under the oppression provisions, s 467(4) of the Corporations Act makes clear that the Court must consider whether an alternative and less drastic form of relief is available.[66]

48 Section 467(4) of the Corporations Act is in the following terms:

Where the application is made by members as contributories on the ground that it is just and equitable that the company should be wound up or that the directors have acted in a manner that appears to be unfair or unjust to other members, the Court, if it is of the opinion that:

(a) the applicants are entitled to relief either by winding up the company or by some other means; and

(b) in the absence of any other remedy it would be just and equitable that the company should be wound up;

must make a winding up order unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

49 Given the equitable nature of the Court's jurisdiction under s 461(1)(k) of the Corporations Act, an attribution of fault or a lack of clean hands on the part of an applicant may lead to the Court refusing to make a winding up order.[67] However, it is not a determinative factor[68] and does not constitute an absolute bar to a winding up.[69] The Court may have regard to considerations 'of a personal character arising between one individual and another, which make it unjust, or inequitable, to insist on legal rights or to exercise them in a particular way'.[70] Further, the Court may examine the extent to which the applicant is responsible for any breakdown of the relationship between the parties.[71]

50 I turn now to whether the evidence supports the grounds of relief pressed by Grace as plaintiff. Given that the same facts and circumstances may provide a foundation for relief under either or both of ss 233 and 461 of the Corporations Act, it is appropriate to consider each of the matters in turn.

51 It is firstly necessary to re-visit the underlying relationship between the parties and the purpose of the businesses conducted by the Companies. Grace submits, and I accept, that the Companies were incorporated as vehicles for a partnership between her and Steven. It is not disputed by Steven that Investments was incorporated for the purpose of him and Grace investing in and developing real estate in Victoria as equal partners. Nor is it in dispute that Developments was later registered for the purpose of acting as trustee for the Unit Trust and facilitating Grace and Steven investing in and developing real property as partners by virtue of their equal ownership in Developments and their respective family trusts holding equal interests in the Unit Trust. Both Grace and Steven were appointed directors of Developments. As regards Investments, the Cooperation Agreement delineated the respective roles, responsibilities and expectations of Grace and Steven in relation to that company. Taken together, these arrangements suggest the existence of a quasi-partnership between Grace and Steven.

52 Each of the Companies were incorporated against the backdrop of what was clearly a close personal relationship between the respective families of Grace and Steven. Under cross-examination, Steven emphasised the closeness of the two families and said that given the suggestions of marriage, it was 'as close as it gets'. He further explained that prior to Investments being incorporated, he had discussions with Wenchao in China and Wenchao also had conversations with Steven's father. From the discussions, Steven understood that Wenchao wanted to transfer some of his business interests from China to Australia because he believed that real estate was a 'very safe business' but that he needed to get involved with 'someone that he could trust'. Steven said that after he returned from China, Investments was established and Wenchao left the running of Investments to him because Wenchao trusted him. The Cooperation Agreement was signed by Grace and Steven as well as by Grace's mother and Steven's father (apparently as a guarantor of Steven's obligations), which further illustrates the close nature of the relationship between the two families.

53 Steven confirmed in cross-examination that Wenchao agreed to lend the money to set up the real estate business on the proviso that Grace be a shareholder of the company. However, it was also his evidence that Grace ultimately adopted a passive role in Investments between 2010 and 2017, despite the original intention that she would undertake a bookkeeping course and assist in that capacity. Steven says that, as a result, he was obliged to undertake all the day-to-day work of the business throughout that period and even after Grace became a director of Developments, she continued to be passively involved in the business. Grace, however, gave evidence in chief and under cross-examination that she did in fact provide bookkeeping services to Developments from mid-2018. Steven confirmed that Justin's later involvement in the business occurred to enable Justin 'to ... get a feel for the property development business through the numbers' and 'also to bolster the existing trust' between Wenchao and himself.

54 It is clear that one or more of the factual circumstances described in Ebrahimi are present in this case. The Companies were incorporated on the basis of a personal relationship between Grace and Steven in the context of a broader relationship between members of their families. The informal nature of the relationship between Grace and Steven warranted mutual cooperation and a level of trust between them.[72] Mutual trust and confidence underscored the entire venture. As I have already observed, the business was set up as a quasi-partnership. Financial contributions were made towards the business by Grace's father, whereas Steven contributed his time and expertise. Further, the arrangement between the parties entailed the two shareholders participating in the conduct of the business, either in a hands-on capacity or more passively but with some oversight.

55 Because these threshold circumstances are present, the Court's jurisdiction to wind up the Companies under s 461(1)(k) is engaged. However, it is necessary to further consider the underlying factual matrix of the proceeding to determine whether winding up orders should be made as a matter of discretion.

56 In this proceeding, Grace makes a number of allegations about the misuse or unauthorised transfer of Investments' assets by Steven.

57 Grace and Justin had access to bank statements for Investments from about September 2018, around which time they began to have suspicions that Steven was misappropriating money from Investments. Justin worked with Investments' then accountant, Mr Ronald Ng of Suewin Accounting ('Suewin'), and identified numerous transfers from Investments to a bank account controlled by Steven. Grace says she then confronted Steven who admitted he had taken $100,000 from Investments, but after deducting $20,000 for an 'office registration fee' and $20,000 for his salary, suggested he only owed $60,000 to the company.

58 In June 2020, Justin and Grace began reviewing historical bank statements to which they had access. There were two accounts for Investments: a 'Business Advantage' account with the account number 2690-22093 ('the Business Advantage Account') and an 'Online Saver' account with the number 2690-023379 ('the Online Saver Account'), both of which were held with the ANZ Bank. There are a number of transactions carried out by Justin in respect of those bank accounts which Grace has impugned in this proceeding. I will deal with each category of transaction in turn.

Payment of company funds towards Steven's home loan

59 Based on their review of the bank statements, Justin and Grace identified numerous transactions between 27 June 2017 and 19 July 2018 involving the transfer of money totalling $3,510,000 from the Business Advantage Account and the Online Saver Account to accounts held by Steven or another ANZ Bank account identified as Account 013225 464660971. Grace contends that these transfers occurred without her permission, authority or approval.

60 The payments made from the Online Saver Account were as follows.

61 The payments made from the Business Advantage Account were as follows.

62 In his points of defence, Steven pleaded that none of the payments were unauthorised or done without the knowledge and acquiescence of Wenchao, who had apparently permitted the interim use of those monies by Steven. Steven admitted that, save for payments amounting to: $200,000 in respect of current and future wages on 12 July 2017; $160,000 in 'back-pay' on 27 and 28 June 2017; and $200,000 on 25 August 2017 and $100,000 on 24 January 2018, which were apparently paid to Winehol, the balance of the payments out of Investments' accounts ($2,950,000) were applied towards his home loan. In his points of defence and cross-claim, he also claimed that most of the amounts applied towards his home loan have now been repaid to Investments and that, after applying offsetting amounts owed to him, he only owes the company approximately $160,000. However, in his affidavit of 14 September 2021, Steven suggested that, 'upon further review of the bank statements and wages received, [he is] of the view that no amounts are in fact owed by [him] to Investments.'

63 Grace specifically denies ever being told by Steven about the payments or that he had used the money of Investments to reduce his home loan. That evidence was not impeached under cross-examination. In her cross-examination, Grace stated that of the more than $3.5 million transferred by Steven from Investments between 27 June 2017 and 19 July 2018, Steven returned approximately $2.8 million, leaving $600,000 outstanding.

64 After obtaining access to Investments' bank accounts in September 2018, Justin noticed the $350,000 transfer made on 19 June 2018 (referred to above). The following WeChat messages were exchanged between Steven and himself on 9 September 2018,[73] which have been translated as follows:

Justin: Where did you transfer that 350,000? I can't see it.

Justin: To your own account? You said that they were all linked, but I didn't see anything in the company's account.

Steven: It was in my offset account previously. It was transferred back.

Justin: I have not united [sic] the offset account. [a translator's note suggests the reference to 'united' read as 'linked']

Steven: The company has business account and online. You have both.

Justin: I only have two accounts now.

Steven: Dawning investment only has two.

Justin: Only these two? What do you mean there is an offset account?

Steven: In my offset account.

Justin: Why did you put the company's money in your own account?

Steven: For higher interest.

Justin: The company has been paying interest for its development. While you've been making money for yourself here.

Steven: They are for tax and salary payment.

...

65 Justin also gave evidence that after he discovered Investments' money had been used to pay Steven's home loan, he informed Wenchao, who appeared shocked and expressed an intention to recover the funds.

66 In his affidavit of 14 September 2021, Steven took offence at the allegation he had misappropriated company assets. He proffered the following explanation for directing Investments' money towards his home loan:

I did utilise dormant company amounts from time to time to reduce my home loan offset to save interest amounts at various times and which amounts were put back when the business required them. Wenchao Yang was informed of this and took no issue with it. I had informed him that some such flexibility with the monies was required as a result of the taxation liability difficulties for the business as a result of his personal lending issues and which resulted in no dividend amounts being received by either Grace Yang or myself. Such was all recorded through banking records and never hidden or [sic] as has been inferred.[74]

67 However, under cross-examination, Steven gave inconsistent and varied evidence about the circumstances and purpose of the application of monies towards his home loan. He first stated that he considered the payment of funds into his personal loan account to be 'bridging' or a means to 'park' the money, which could be transferred back if required. Later, he suggested he had paid the amounts to his home loan account for 'safe keeping', although, he could not say why, or from whom, the money needed to be kept safe. When he was pressed on the truthfulness of that evidence, he elaborated as follows:[75]

When you gave your answer a few moments ago when you said that the reason that these transactions were undertaken was to safekeep the money, you did not tell the truth, did you, Mr Zheng?---What I meant by that was that there's no intentions of taking the money. The money is safe.

Is that your explanation?---That's what I meant by safekeeping. Like there's no intentions of taking the money. The money, all records are recorded of the transactions.

Just to be clear, the records that you've referred to are just the bank accounts correct?---Yes, because all the payments through Dawning Investments were all through the bank accounts and the only two bank accounts by Dawning Investments was this and the online saver account and all payments went to this and all records was paid cheque, you know, legitimately and clear.

68 Steven admitted that the payment of the funds into his mortgage offset account were made for the purpose of paying less interest on his home loan and 'utilising the money for best interest rates', and had the effect of reducing the interest he paid on his own mortgage. He also conceded that Investments derived no benefit from the use of its funds in this way and accepted that the transfers happened at a time when the company owed money to Wenchao, which was incurring interest. Steven stated that the money was not instead paid to Wenchao to reduce the debt owing by Investments because the transfers related to 'very insignificant numbers' and bank fees would have been incurred. He also said under cross-examination:

Well, there's other explanations also like I've always thought that Mr Yang should have a continuous amount of interest being paid to him instead of like transfer in like a million dollars and ask for it back in eight days for to reduce the interest rate I pay him and which causes a hassle also.[76]

69 Lastly, Steven accepted that the transfers into his personal offset account did not assist in resolving the 'taxation liability difficulties' of the business alluded to in his affidavit as part of the purported reason for the transfers.

70 It is notable that nowhere in Steven's affidavit of 14 September 2021 did he suggest that the purpose of the transfers into his mortgage offset account was for 'safekeeping' the monies, for 'bridging' purposes, or to 'park' the funds. The evidence he gave under cross-examination in this regard is implausible and appears to be a recent invention. It is apparent that Steven applied Investments' money towards his home loan for the sole purpose of reducing the interest on his personal mortgage.

71 I also do not accept Steven's assertion that he was authorised by Wenchao to make the transfers. He did not refer to any particular conversation or document by which that authorisation was communicated. Nor do I consider that Grace authorised him to make the transfers. Steven admitted under cross-examination that Grace and Justin did not know about the transfer of $350,000 that occurred on 19 July 2018, and Grace has given uncontradicted evidence that she was unaware Steven had used company monies to reduce his home loan. The WeChat exchange between Steven and Justin on 9 September 2018 is instructive. It reveals that Justin did not have any prior knowledge of the $350,000 transfer. Further, Steven did not suggest in any of those messages that he was authorised to make that transfer or any of the 14 earlier transfers towards his home loan. When asked under cross-examination to explain why he told Justin in the WeChat exchange that he had placed Investments' money into his own account for 'higher interest', his answers were unconvincing:

So you were suggesting that you were putting the money into your personal account to get more interest on the money, is that your explanation?---Yes that's what I said to him yes.

Well is that explanation Mr Zheng correct?---So - so I was under the impression that like - each - each party - you know it's okay to get certain amount of benefits and stuff because Mr Yang cost the company to pay $600,000 in extra taxes.

Your explanation for this transaction is - it was just a moment ago that you thought you would get more interest in a personal account on that money then the company would get in its bank account, is that still your explanation or am I misunderstanding?---Yes.

Okay, so that's - is that - that's the explanation that you say you gave Justin Yang correct?---Yes that's correct.

All right, now um - is that explanation accurate? Mr Zheng?---In my offset account I think the interest was like four per cent or something, and in the online saver it was like one point something per cent - so it's accurate in the way that the interest was higher.

So in your offset account you were reducing the amount that you were paying on your mortgage by four per cent, is that right?---I think so yes.

Right, and so that's - that's what you were in fact doing with the money correct?---Yes, yes.[77]

72 The explanation Steven gave to Justin for the transfer was therefore either untrue or, at the very least, misleading. There was no higher interest rate being achieved for Investments, only lower interest for himself. Tellingly, he did not volunteer to Justin that the $350,000 comprised only one of 15 transfers (totalling $3,510,000) or that Wenchao had been informed of the transfers. Steven's assertion in his evidence in chief and closing submissions that the transactions were not hidden because they had been recorded in the relevant banking records is disingenuous. He was not authorised to make such transfers in the first place and was not transparent in relation to them. It also ignores the fact that Grace and Justin did not have access to the bank statements at the time the transfers were made. Although Justin accepted under cross-examination that he understood Steven's stated purpose for the transfers was to reduce his interest, this does not suggest Steven had authorisation or that Grace, Justin or Wenchao knew about the transfers at the relevant time. Further, Steven's explanation for why the funds were not instead utilised to pay down the debt then owed to Wenchao is nonsensical.

73 Whilst there is conflicting evidence about whether Steven has failed to repay part of the approximately $3.5 million transferred from Investments between 27 June 2017 to 19 July 2019, Steven's evidence concerning the transactions lacks credibility. I prefer Grace's evidence that a significant amount remains outstanding.

74 Plainly, no benefit was derived from Investments as a result of these transfers. They were done for Steven's own benefit. Because not all of the monies directed to his home loan have been repaid, Investments has been deprived of the benefit of those funds. At the conclusion of the trial, in his written closing submissions, Steven belatedly 'accept[ed] in hindsight it was not appropriate for such diversion and despite his repayments'.[78]

75 I am satisfied that this conduct by Steven has contributed to a breakdown in the relationship between the shareholders of the Companies and engendered a lack of confidence in the conduct and management of the affairs of the Companies, especially Investments. The transactions were conducted by Steven without authorisation or disclosure and in an opaque manner. Steven was obligated under the Cooperation Agreement to provide Grace with regular updates about, among other things, the 'financial accounts ... and operation and management status of the company' but, in disregard of this obligation, he did not inform her of these transfers when they occurred. He diverted funds of Investments that could have been used to repay its debt. By doing so, he misused the assets of Investments and likely breached his fiduciary and statutory duties as a director of Investments by preferring his own interests over the interests of the company of which he was a director. In particular, it seems he improperly used his position to gain an advantage for himself in contravention of s 182(1) of the Corporations Act. All of these matters weigh in favour of a winding up order on the just and equitable ground under s 461(1)(k) of the Corporations Act. A liquidator may investigate the precise amount owing by Steven in respect of the relevant transfers. At the same time, in making the transfers, Steven engaged in conduct which was clearly not in the interests of the members of Investments as a whole and therefore oppressive for the purpose of s 232 of the Corporations Act. An objective commercial bystander would reasonably conclude it was commercially unfair and oppressive for Steven to make payments of company funds to himself which were not disclosed to Grace, who held half of the shares in Investments.

76 It is common ground that around the time Steven made the transfers towards his home loan, on or about 19 December 2017, he also caused Investments to buy, for his use, a Tesla Model X vehicle worth $164,971.09. The sum was withdrawn from the Business Advantage Account on 22 December 2017. However, the circumstances of the purchase are in dispute. Grace alleges that Steven purchased the Tesla without consulting her or seeking her permission to do so. Conversely, Steven alleges he made the purchase after having discussions with either Grace or Justin, during which it was determined that because Investments had no offices, 'presentable vehicles' would be purchased 'up to the luxury car limit'. He said a comparable Porsche motor vehicle was acquired by Investments for Grace and Justin on 29 January 2019.

77 Grace gave evidence that she first found out about the purchase of the Tesla in September 2018, after Ronald Ng of Suewin provided Justin with a copy of an invoice for its purchase dated 19 December 2017 and addressed to Investments. The invoice was attached to an email dated 22 December 2017, sent by a representative of Tesla to Steven at his personal email address. Steven forwarded the email and invoice to Ronald Ng on 12 September 2018 (more than eight months after it was received). Grace explained that after she and Justin discovered Steven had bought the Tesla, they told him he either had to return it or repay the money he used to buy it. They also told him that if he did not do either of those things, she and Justin would buy a car of equal value. She says that Steven determined not to return the Tesla or repay the money and so she and Justin bought a Porsche 'to balance things out'. Her evidence about the Tesla was largely unchallenged in cross-examination. When asked by Steven's counsel whether she was unhappy with the lack of consultation in relation to the purchase of the Tesla, she responded by saying she took particular issue with Steven's behaviour as opposed to the acquisition of the vehicle itself.

78 Justin gave evidence that he was first told about the Tesla purchase in late July or early August 2018, after the accountant Ronald Ng had informed him that Investments 'had spent a lot of money with Tesla but he did not know what it had bought'. Whilst Justin was aware that Steven had recently acquired a Tesla, he thought Steven had purchased it with his own funds as he had never spoken with him about using Investments' money to buy it and there was never any agreement to do so. Justin says the issue then came up in a meeting between himself, Wenchao and Steven, held in a Box Hill café in September 2018, during which other topics were also discussed, including an alleged refusal by Steven to allow Grace and Justin access to the bank accounts of the Companies, issues the Companies were experiencing with the Australian Taxation Office ('the ATO') because of a failure to lodge documents, and the loan agreement purportedly entered into between Developments and New Sunshine.

79 In his evidence in chief, Steven denied the Tesla was acquired without the knowledge of Grace. He said the parties discussed the acquisition of motor vehicles for each family because the business did not have any offices and it 'needed to project a certain image for ongoing projects and to prospective investors'. He also deposed that the Tesla was acquired after the success of the second project (which I understand to be a reference to Canterbury Road) and for 'various taxation deductions'. However, in cross-examination Steven accepted that at the time of the purchase of the Tesla in December 2017, the majority of apartments in respect of which Investments held an interest had already been sold and the only investors in the company were Wenchao's family, himself, and an individual by the name of Hong Li, who had also lent money to the company. He also accepted that at the time of the purchase of the Tesla in late 2017, he was driving a Mercedes Benz vehicle, which was owned by Investments and that he had waited until September 2018 before informing the company's accountant about the purchase.

80 Steven's evidence about an apparent discussion between the parties concerning the acquisition of motor vehicles is vague and uncorroborated by any contemporaneous documents. The considerable delay by Steven in notifying Investments' accountants of the purchase of the Tesla tells against the likelihood that it was purchased with the prior agreement of his fellow shareholder. So is the fact that Steven already had the use of a Mercedes vehicle for business purposes. His justification for the purchase of the vehicle seems implausible given the nature of Investments' activities of the time.

81 I prefer the evidence given by Grace and Justin on this topic and find that Steven purchased the Tesla without seeking Grace's approval or disclosing it to Grace or Justin at the time. I do not accept Steven's submission that the purchase of the Tesla was a 'non-issue'. It is another example of his unauthorised expenditure of company funds and constitutes conduct which was oppressive because it was commercially unfair and not in the interests of members as a whole. There is no evidence to suggest that Investments required a luxury vehicle to conduct its business or that it derived any benefit from this transaction. Instead, it is likely that Steven improperly used his position to gain an advantage for himself in breach of s 182(1) of the Corporations Act.

82 Grace alleges that between 6 September 2017 and 24 January 2019, Steven transferred a further $4,789,183.24 from Investments' Business Advantage Account, by way of 11 separate transactions, without informing her either at the time each transfer was made or later.

83 Steven contends that the withdrawals were authorised, made for business purposes and that Justin was made aware of each payment. He has proffered cheque numbers, cheque butts and, in most cases, explanations for the various withdrawals. One transaction concerned an amount of $200,000 paid by cheque #0010204 on 10 December 2018, for which no cheque butt or explanation was provided. Another one of these transactions was in respect of the Tesla Model X, which is discussed above. Aside from the Tesla payment, the focus of Steven's cross-examination was in respect of three of the 11 withdrawals only.

84 The first payment concerned an amount of $200,000, which Steven says was paid by cheque #0001086 to his father, Yu Tang Zheng, on 2 October 2017, in partial repayment of an alleged loan related to Forest Hill and which was 'recorded in the financials' ('payment 1').

85 Steven's explanation for this payment was confusing and unreliable. In cross-examination, he initially gave evidence that he believed his father and an entity called 'Sailteam Investments' had lent Investments $800,000. When presented with the financial statements of Investments for the years ended 30 June 2017 and 30 June 2018, he accepted that the statements did not record any such loan as outstanding. He then asserted that the loan was made by a different entity called the 'Zheng Family Trust'. However, the financial statements for Investments recorded a loan from the Zheng Family Trust in the lesser sum of $90,000 for the year ended 30 June 2016, which was later adjusted to be $590,000, but paid out by 30 June 2017. When challenged on that evidence in light of the financials, he stated that the loan amount of $800,000 was just 'a rough amount' and comprised loans from his father, his mother (Lijing Xao), the Zheng Family Trust, and Sailteam. Steven later suggested that to the extent the financial statements of Investments recorded all loans made by his father, his mother, the Zheng Family Trust, and Sailteam as having been repaid by 30 June 2017, they were incorrect. In the end, Steven thought that the $200,000 payment might be something relating to his father.

86 Steven pleaded that the second payment was for the sum of $160,000, paid by cheque #001090 on 12 January 2018 to Ms Hong Li for interest on a loan relating to Forest Hill ('payment 2'). But the financial statements of Investments did not record any loan owing to Ms Li as at 30 June 2017 or 30 June 2018. A loan from Ms Li to Investments was recorded as owing as at 30 June 2016 but as having been repaid by 30 June 2017. When Steven was asked in cross-examination whether the loan owing to Ms Li ought to have been included in the 2018 financial statements, he agreed and stated that financials of the company were erroneous in this regard because they were prepared in a rush when the company was being audited.

87 A further transaction on which Steven was cross-examined was for the sum of $300,028 paid by bank cheque on 24 January 2019 ('payment 3'). Steven alleged in his amended defence that this payment was for the deposit on Rufus Street. He also identified a further amount of $345,000 which was paid on 31 January 2018 as pertaining to the deposit for Rufus Street. However, the contract of sale for Rufus Street, which was signed by Steven on 25 January 2018, records Developments as the purchaser of that property for the price of $3.5 million, with a deposit payable of $350,000 and a settlement date of 18 December 2018. Steven was cross-examined on payment 3 and the terms of the relevant contract of sale. Initially, he said that aside from a possible extension of time for settlement to occur, the contract of sale was not amended. He then gave evidence that he recalled there being two partial 10 per cent deposits prior to settlement. However, he accepted the proposition that had the property settled as originally intended on 18 December 2018, it was unlikely that a second deposit had been paid after this time. He then stated that he was wrong about payment 3 relating to Rufus Street and that it was actually a payment to New Sunshine, which necessitated a correction to his amended defence. I consider Steven's evidence in relation to payment 3 to be unsatisfactory and unreliable.

88 On the basis of this evidence, I am not satisfied that payment 1, payment 2, or payment 3 were made for legitimate business purposes or were undertaken with the knowledge or consent of Grace or Justin. I accept Grace's submission that the evidence regarding these payments suggests Steven has mismanaged the affairs of Investments by using company funds to make substantial payments to third parties that have not been properly recorded in the company's books, were not later disclosed to Grace or Justin, and which cannot be properly explained. The payments were therefore made in circumstances which are commercially unfair and contrary to the interests of members of the company. The inability of Steven to adequately explain the purpose of the payments has contributed to a loss of trust and confidence between the parties and further undermined Grace's confidence in the conduct and management of the affairs of the Companies.

89 Even if the three payments were made for legitimate purposes, the fact that they were not properly recorded suggests a failure of the company to adequately keep and maintain sufficient written financial records for the purpose of s 286(1) of the Corporations Act. I address this aspect further below.

Other evidence of breakdown of relationship of trust and confidence

90 In addition to the matters already discussed, there is further evidence of the extent of the breakdown of trust and confidence between the parties. A striking example is a heated exchange between Steven and Justin, which took place over WeChat on 18 December 2017, after Justin discovered Steven had transferred Winehol's money into an account held by Steven's cousin in China:[79]

Justin: Steven, we are friends but business is business. It is my right to know this financial position and I must know that. You must be aware that we are partners, not who works for whom, and our share proportions are the same and we don't do business like this... In China we need to earn [sic] all the money to the company and it can't be put into your relative's account. [translator's note suggests 'earn' was meant to be a reference to 'transfer']. It's not that I don't believe you. It's that I don't want to do business in such a messy way. You can give the Ukey to your relative, but I need to see every transaction. Back then when you put the money in your relative's account you didn't tell me about it at all. If we want to cooperate in the long-term we must be clear about financial dealings so that no one will feel suspicious. Tomorrow you make a time and let us meet and talk about it. When there is a problem, we will solve it. Everyone is happy.

Steven: ...If you feel that it is really necessary to get your account connected, you go and fill in a form and the company will discuss about the issue, and then the shareholders will sign. How should the business be done? You are not in a position to talk to me like this now.

Steven: ... You didn't [do] your job well, instead, you went to check with the bank. Are you not happy that I treat you as an employee instead of a shareholder? If I didn't treat you as a shareholder, I would have fucked you to death a long time ago. Every time I asked you to do something, you didn't do it seriously, neither listen carefully. All you know is to talk back and shirk responsibility.

Justin: Did you make a typo? What does it mean by saying "fuck me to death"?

Steven: It means that I will curse you.

91 It was after this toxic exchange that Justin and Grace sought to interrogate the accounts for Investments.

92 WeChat messages between Grace and Steven on 17 July 2020 also illustrate the degree to which the relationship between them had irretrievably broken down:[80]

Steven: I think that our differences in relation to the cooperation among us are greater than I thought. Alternatively, let's explore a few options to deal with the company in a way that is beneficial to everyone.

Grace: If you read the lawyer's letter closely, you should've known that we didn't issue this letter just because of issues regarding tax and repayment of money; there were also concerns about you embezzling public funds, which will not go away just because you didn't mention it.

Steven: Let me see if I can borrow money from somewhere else to repay your father. Is this plan okay? Is this plan okay?

Grace: If you can't face your mistakes, there's no need for us to talk any further.

93 On 18 August 2020, a month prior to the initiation of this proceeding, Grace, Justin and Steven had a further WeChat exchange:

Justin: Are you crazy? What you did is good for the company? How shameless of you to say that? You embezzled public funds and acted as if nothing had happened.

Steven: The reason I used public funds was that since Uncle Yang didn't want [it] to involve CRS,[81] the company must pay an extra 700,000 for him. When doing anything, you should not only look from one perspective.

Grace: Steven, everyone knows what you have done, so does my dad. Stop wasting everyone's time. Every step we have taken is legal and reasonable. During your time in the company, you have definitely been earning and lost nothing, and you should be happy. Now [we] will just go through the legal process for all issues.[82]

94 Grace gave evidence that by July 2020, her relationship with Steven 'was completely broken' and that she did not trust him 'to deal with [her] honestly or to deal with the assets of [the Companies]' or to 'properly manage the business of the [C]ompanies'. She considered that Steven's management had harmed the Companies. She gave further evidence that she considered Steven to have taken advantage of her father, Wenchao, and said there was 'no way' she would ever want to do business with him or remain in business with him. Grace was not cross-examined in relation to this aspect of her evidence.

95 When asked under cross-examination about the extent to which she had spoken to Steven since the commencement of the proceeding, she stated that she had occasionally spoken to him on the phone and over WeChat when asking him to approve transactions, or querying whether rent had been received by Developments, but suggested that she spoke to Steven only if she had to.

96 It was Justin's evidence that he did not trust Steven 'at all' and considers him to have been dishonest in the way he has dealt with himself, Grace and Wenchao. He bluntly stated that he cannot, and does not wish to, continue working with Steven. In cross-examination, Justin was taken to a WeChat exchange he had had with Steven on 30 October 2019 concerning operational aspects of the Companies, including the possible sale of property:

Mr Yang, do you accept, based on that exchange, that you and Mr Zheng could do business together?---Um, at the time we were in - uh, we - I'm already in - no trust him anymore. But we still have some project left. We have to deal with the - deal with the project. We have no choice.[83]

97 I accept the submission made by Grace's counsel that Justin clearly did not trust Steven and it was only by necessity that he was continuing to do business with him at the time.

98 The lack of trust felt by Grace and Justin in relation to Steven has prevented the parties from advancing the business of the Companies and working together to achieve the structured sale of the property assets held by the Companies to date. Through his lawyers, on 1 May 2021, Steven proposed a process for the development and sale of Whittens Lane, over a period of at least 12 months, via a joint venture or partnership with an unnamed investor. On 2 July 2021, his lawyers proposed that Developments attend to the immediate sale of Willowbank Court and Rufus Street, in addition to developing Whittens Lane. However, by letter from her lawyers dated 14 July 2021, Grace rejected these proposals for reasons including the total breakdown in the working relationship and trust as between the parties, 'such that she [had] no confidence that [Steven] could or would properly manage any proposed sale of the properties'. It is Grace's evidence that she does not trust Steven to carry out any sale of the relevant properties honestly and that she fears Steven will 'use the sales to enrich himself like he has in the past'. She says that neither she, Wenchao, or Justin are prepared to contribute further money to undertake necessary work on the properties before they can be developed and sold. Further, because Grace does not want to continue in business with Steven, she says she is unwilling to work with him in relation to any sale process. None of Grace's evidence in this regard was seriously challenged under cross-examination.

99 It was Steven's evidence in chief that the breakdown in the relationship had been 'exaggerated by [Grace] in an effort to substantiate the current proceedings'. But at the same time, Steven gave evidence that Justin 'has a personal grievance with [him]' and that Grace had commenced the proceeding to exert illegitimate pressure on him for the purpose of assisting in the recovery of monies for New Sunshine. On one view, this evidence only serves to reinforce the extent of the relationship breakdown and disharmony between the parties. In any event, having regard to the serious nature of a number of the allegations made by Grace in this proceeding, including the unauthorised use of company funds and transfers to third parties, and the quality of evidence elicited in relation to those matters, I do not accept that Grace has exaggerated the breakdown in her relationship with Steven.

Absence of financial statements and other records for the Companies

100 Another of the matters relied upon by Grace in seeking the winding up of the Companies is the state of their financial statements and records.

101 In addition to the deficiencies in the financial statements of Investments referred to above (namely, the failure to properly record payment 1, payment 2 or payment 3), Investments has not prepared any financial statements since 30 June 2018. Steven accepts this but says it was the responsibility of Justin to provide source documents for the preparation of the financial statements of Investments to its accountants.

102 Grace alleges that Developments also failed to prepare financial statements for any period since it was incorporated, either in its own capacity or as trustee of the Unit Trust. That allegation is denied by Steven, although he simultaneously asserts that Justin was responsible for the bookkeeping of Developments and that Grace was responsible for any failure to prepare financial statements given her role as a director of Developments. In his affidavit of 14 September 2022, and in his closing written submissions, Steven also sought to attribute blame for the state of the company's books to Justin.

103 By way of background, Justin gave evidence that in addition to being the accountants for Investments from its inception until December 2020, Suewin were also the accountants for Developments and the Unit Trust from the time Developments was incorporated until December 2020. During that time, Suewin did not prepare any financial statements for Developments. Justin says he did not start doing the bookkeeping for Developments until September 2018, when he and Grace obtained access to the company's bank accounts. Grace gave evidence to similar effect. Whatever bookkeeping work was undertaken was then provided to Suewin. Even then, Grace and Justin experienced problems in identifying what transactions had been undertaken by the company as Steven would not always give them the information they required. Grace and Steven sought to engage new accountants, Wise Choice Partners ('Wise Choice') to, among other things, prepare financial statements for Developments, but the firm has apparently received no cooperation from Steven. For example, a request by Wise Choice of Steven to provide bank statements, invoices, income receipts and documents supporting cash expense payments in respect of Developments was not responded to.

104 Aside from seeking to attribute some of the blame for the failure to prepare financial statements, Steven had no real answer to this evidence. He also confirmed that the financial statements for Investments for the year ending 30 June 2018 were never finalised and signed.

105 As previously noted, the Court has made orders under s 246A of the Corporations Act to facilitate access to the books of the Companies. Inquiries made of Suewin Accountants by Grace's solicitors revealed that the only documents held by those accountants in respect of Developments were its bank statements. However, bank statements do not, of themselves, enable true and fair financial statements to be prepared and audited.[84] After further correspondence between the solicitors for the parties, Steven produced a number of Excel spreadsheets and a bundle of documents, which are listed in Appendix A to Grace's written closing submissions. Those documents include Excel documents described as Business Activity Statements ('BAS') worksheets, certificates of registration, some invoices, emails, and correspondence with the ATO dated 5 May 2017 concerning collection action in respect of Investments. Steven confirmed in cross-examination that he had produced all of the books of the Companies in his possession.

106 In Re Melbournehomes.com Pty Ltd (in liq),[85] an insolvent trading case brought under s 588G of the Corporations Act, I found that the relevant company had not complied with s 286(1) of the legislation, which gave rise to a statutory presumption of insolvency under s 588E(4)(a). I observed that:

it is difficult to see how, in the absence of a general ledger, wage records, bank statements, and a complete set of balance sheets and profit and loss statements, it would have been possible to prepare true and fair financial statements for [the company in question] or to clearly and correctly represent its transactions, financial position, and performance.[86]

107 In the case of the Companies, most of the documents referred to in the above passage are missing. It is clear there has been a failure by the Companies to adequately keep and maintain sufficient written financial records that correctly record and explain their transactions, financial position and performance, and which would enable true and fair financial statements to be prepared for the purpose of s 286(1) of the Corporations Act. Importantly, cl 253 of the unexecuted version of the Unit Trust deed obliges Developments as trustee to keep financial records which, among other things, correctly record and explain its transactions in relation to the Unit Trust assets and its financial position, and which would enable true and fair financial statements to be prepared and audited. Clause 254 of that same instrument explicitly requires Developments as trustee to cause the preparation of financial statements, including a profit and loss account and balance sheet at the end of each financial year. These financial statements are necessary to enable Developments as trustee of the Unit Trust to ascertain and deal with trust income, including by making distributions to unit holders. It appears that Developments has failed to comply with these provisions of the Unit Trust deed.

108 In the absence of basic financial statements and other records, the directors of the Companies are unable to ascertain their relative financial positions with any degree of accuracy, which may separately constitute a breach of the statutory duty of care and diligence found in s 180 of the Corporations Act.[87] The ability of the Companies to comply with their tax obligations, including the preparation and lodgement of annual returns (discussed further below) has also been impeded. Each of Steven, Grace and Justin must accept some responsibility for the lack of financial statements and business records held by the Companies, although the lion's share of blame appears to rest with Steven given he is a director of both Companies and Grace and Justin have not always had access to the books and records of the Companies. Steven has also taken no active steps to assist the work of the new accountants.

109 As previously noted, breaches of the Corporations Act, including breaches of directors' duties or an inadequacy of accounts or recordkeeping are recognised grounds for the just and equitable winding up of a company under s 461(1)(k) of the legislation.[88] An absence of basic financial records also raises serious questions about the 'commercial morality' of the Companies' affairs.[89] Further, it is not in the interests of the members of the Companies for their activities to be conducted with incomplete books and records.

Failure of Companies to meet taxation obligations

110 In addition to failing to maintain basic financial statements and other records, the Companies have also failed to comply with their tax obligations.

111 It is common ground that Investments failed to lodge BAS for the period 1 July 2017 to 30 June 2019 and income tax returns for the years ending 30 June 2018 and 2019. Steven alleges this was a direct result of Justin's failure to take necessary steps to do so. He also states that the delay was occasioned by other matters, including a request from Wenchao that Justin be paid less for bookkeeping services (to which Grace apparently objected), the necessary consideration of foreign investment requirements and the apparent distraction caused by Grace's newsagency business. In his affidavit evidence, Steven took issue with the allegation that there had been a failure by the Companies to comply with their taxation obligations and pointed to '[i]nevitable difficulties ... encountered when Wenchao ... wanted to limit the declared amounts of interest paid to him by Investments on his loan sums ...'. It is unclear what this means.

112 Following a review of Investments' activities by the ATO, which was completed on 17 December 2019, the failure of Investments to lodge historic BAS and income tax returns appears to have been addressed. However, the question of liability for those returns remains. Unsigned copies of the relevant BAS obtained from Suewin Accountants for the period in question suggest Investments owes the ATO $189,625 in respect of GST and PAYG tax withheld. Further, an unsigned income tax return for Investments for the year ended 30 June 2017 discloses $462,968 was owed by the company in income tax for that year. An income tax return for the year ended 30 June 2018 suggests that no tax was payable for that period.

113 In his opening submissions, Steven drew the Court's attention to Investments' Tax Agent Portal with the ATO (described by his counsel as an 'Integrated Client Account') extracted on 22 May 2019, which purports to show a credit in the sum of $300,067.70 as a result of a $300,000 payment made on that amount on 24 January 2019. However, the Tax Agent Portal extract does not appear to take into account the taxation liabilities referred to above. In any event, the credit amount is far less than those liabilities.

114 Grace says she is uncertain whether the outstanding taxation amounts have been paid. She explains that Suewin were the accountants and tax agents for Investments and Developments until 20 December 2020. However, they sought to be removed on 11 December 2020 because of the Companies' failure to file tax returns. Grace and Justin then tried to appoint Wise Choice as new tax agents and accountants for the Companies and the Unit Trust, but Steven has refused to sign the relevant documents in his capacity as director. Grace deposed that she is also uncertain whether Investments has lodged any BAS since 1 July 2019 or income tax returns for the years ending 30 June 2019, 30 June 2020 and 30 June 2021 and what amounts Investments may owe to the ATO in respect of outstanding tax, penalties and interest for those periods. I accept that evidence, which was unchallenged.

115 Similarly, Liang Xu of Wise Choice gave uncontroverted evidence that whilst Justin and Grace sought to engage the firm as tax agent for the Companies, he was unable to register the firm as tax agent for Investments as it required the authorisation of Steven as its sole director. Consequently, no BAS or tax returns have been lodged for Investments by his firm. Further, because he is unable to access information kept on the ATO portal for Investments, he does not know whether the company has any overdue lodgements. When he contacted Steven by email on 1 September 2021 to again seek authority to act on behalf of Investments, Steven responded by referring to the existence of this proceeding and stating that he was waiting for it to be resolved.

116 Steven was cross-examined in relation to the taxation liabilities of Investments. He agreed that he was ultimately responsible for making sure the company's business accounting and taxation was properly attended to. Steven also gave confusing evidence on whether he signed the company's 2018 income tax return and suggested it was filed without his knowledge (despite him being the sole director of Investments at the time). Steven also admitted that the BAS which were prepared were 'rushed' and might contain errors in their preparation, citing at least two errors concerning the recording of sales. Nevertheless, he did not apparently take any steps to correct those errors or to file amended BAS for Investments. Steven's evidence on this topic suggests he was not sufficiently across the tax affairs of Investments as its sole director.

117 In relation to the tax position of Developments, Liang Xu explained that the company has at least 13 BAS lodgements overdue in respect of the period spanning the quarter ending 30 September 2017 to the quarter ending 31 March 2021. In addition, he says that Developments has overdue income tax returns for the financial years ending 30 June 2017, 30 June 2018, 30 June 2019 and 30 June 2020. Again, his evidence was unchallenged. Justin and Grace say that because Steven has not given authority to Wise Choice to commence their engagement, and has not signed draft taxation lodgements prepared by them, Wise Choice have not been in a position to attend to those lodgements on Developments' behalf.

118 On the basis of this evidence, it is unclear what taxation liabilities, general interest and penalties Developments may owe to the ATO.

119 Grace gave evidence that Developments also has a liability to the State Revenue Office ('the SRO') for land tax. Grace first became aware of the land tax debt after Steven sent a letter from the SRO to Justin on 11 January 2021. The available documents show that Developments received a land tax assessment for $101,386.83 in respect of the 2019 land tax year, which remains unpaid. Whilst the SRO sought to recover that debt from Developments on 9 December 2020, Steven apparently entered into an arrangement with the SRO for the debt to be paid in instalments. However, by 11 January 2021, the instalment plan was in default.

120 In addition, further land tax notices were issued by the SRO to Developments on 31 January 2020 for the 2020 land tax year in the sum of $80,662.50 and on 5 February 2021 for the 2021 land tax year for the amount of $84,600. The SRO also served a statutory demand on Developments on or about 24 January 2020 for the sum of $57,892.61. According to correspondence from the SRO, as at 31 May 2021, Developments had a land tax debt of $101,411.79 that was outstanding, with interest payable at 8.10% per annum if payment of the debt was not received by 30 December 2021. As at the date of Grace's affidavit dated 16 September 2021, the debt to the SRO had not been paid. Steven also confirmed in cross-examination that this latter amount had not been paid. It is unclear whether the land tax debt of $101,411.79 includes the amount of $84,600 assessed by the SRO on 5 February 2021, or whether they constitute separate liabilities.

121 In view of the foregoing matters, the Court holds real concerns about the failure of the Companies to abide by their statutory obligations to file lodgements and pay tax. As a result of the breakdown in their relationship the parties have ostensibly been unable to agree on a process for meeting the Companies' obligations to the ATO and the SRO. This is further evidence of a deadlock between the parties which has caused them to cease functioning properly. The Companies' non-compliance with their taxation obligations exposes them to adverse consequences that may be imposed by statutory authorities, including interest and penalties. This is plainly not in the interests of the members of the Companies.

122 The failure of the Companies to comply with their taxation obligations is also a prima facie breach of the duty of care and diligence in s 180 of the Corporations Act by the respective directors of the Companies.[90] Steven's refusal to cooperate to enable BAS and income tax returns to be lodged is illustrative of that breach of duty. The Companies' non-compliance with their statutory obligations, in particular, the filing of tax returns, is also a factor which weighs in favour of the just and equitable winding up of the company under s 461(1)(k) of the Corporations Act.[91]

123 There is also the matter of a proceeding brought in the Victorian Civil and Administrative Tribunal ('VCAT') against Developments. Grace alleges that Developments received a letter dated 20 March 2020 from Owners Corporation PS623730M stating that an ingress of water had caused loss and damage to the property neighbouring Rufus Street and demanding Developments make all necessary repairs and maintenance. Grace further alleges that:

(a) Developments took no action in respect of the letter of demand;

(b) a further demand was then made upon it by letter dated 20 April 2020;

(c) a proceeding was then commenced against Developments by the Owners Corporation in VCAT on 22 May 2020;[92] and

(d) despite being notified of a directions hearing, Developments did not attend, orders were made in its absence and it did not file a defence in the proceeding in accordance with those orders.

124 Grace further submits that the proceedings were first brought to the attention of herself and Justin when provided with VCAT documents in March 2021.

125 In his amended points of defence, Steven says he responded at the time of the initial complaint by liaising with the relevant property manager and a plumber and attending on site. He also says that neither Developments nor himself were made aware of the existence of the VCAT proceedings or the initial hearing because Suewin did not provide the necessary information on a timely basis. He also attributes blame for the company's failure to engage with the VCAT proceeding to Grace, who he says was aware of the relevant hearing date and orders made, but failed to inform him. He further notes that a defence was ultimately filed by Developments by 11 May 2021 and no default order was ever made against the company.

126 The documentary evidence shows that Steven had initial email correspondence with the relevant Body Corporate in May 2020 in relation to the water issue and suggested that he had received advice from 'building consultants' that the problem had arisen because of water proofing issues on the neighbouring property. However, when a written report was expressly demanded by the Body Corporate, Steven simply suggested that 'professional advice' had been given by a plumber and builder. No written support from a building consultant was ever provided. A final demand sent by the Body Corporate on 7 May 2020 attached photographic evidence of the problem, identified aspects of Rufus Street which had allegedly caused the issue and invoked the operation of s 16 of the Water Act 1989 (Vic) to assert that Developments was statutorily liable for damage and loss suffered as a result of the flow of water from its property. There is nothing to suggest that Steven ever took steps to respond to this further demand before the relevant deadline, or at all.

127 Steven did not give any evidence in respect of these matters and did not put forward any convincing explanation for Developments' failure to properly respond to the VCAT proceeding. In closing oral submissions, counsel for Steven indicated that on his instructions, the plaintiff Owners Corporation in the VCAT proceeding was 'wishing to pause the proceeding to resolve the dispute'. Counsel for Grace, however, noted that it remains unclear how a settlement might occur in circumstances where the directors of Developments are not effectively communicating and Steven's solicitors are acting on instructions from one director only.

128 Regardless of whether part of the blame for Developments' failure to engage with the VCAT proceeding rests with the company's former accounts and/or Grace herself, it is yet another example of the deadlock that exists between its directors and shareholders. Further, even though there was no evidence that the company has actually become liable for legal costs as a result of its dilatory response to the VCAT proceeding, the fact that it was unnecessarily exposed to adverse costs or orders in default indicates circumstances that were not in the interests of members of the company.

129 The failure of the Companies to maintain current financial statements makes it difficult to form a clear view about their financial position. I will discuss the position of each company in turn.

130 Financial statements for Investments show consecutive losses for the 2011 to 2016 financial years, with the company only turning a profit in the 2017 financial year. As already explained, the most recent financial statements for Investments are for the year ending 30 June 2018. They reveal an operating loss of $259,844. The balance sheet for the 2018 financial year shows total liabilities of $658,583 and total assets of $1.53 million, which largely comprises loans to related entities, such as Winehol, in the total sum of around $1.2 million. This resulted in a net asset position of $872,966. However, the net asset position needs to be adjusted down to $452,918 because of:

(a) the depletion of the company's cash of $75,566, which Steven explained in cross-examination was spent shortly before the initiation of the proceeding;

(b) the elimination of $280,000 worth of loans, comprising one to Steven of $80,000 and the other to Winehol in the amount of $200,000. Steven gave evidence under cross-examination that neither loan ought to have been recorded as a loan owing to the company. He regarded the former as a mistake and the latter to actually represent the equity of Developments as a shareholder of Winehol. These are additional examples of the deficiencies in the accounts. Even if there was a loan amount owing by Winehol to Investments, such a loan would not be recoverable because Winehol was deregistered on 2 August 2020 for failure to lodge returns and/or pay its annual fee to the Australian Securities and Investments Commission;[93] and

(c) the writing off of the Mercedes Benz previously used by Steven and identified on the balance sheet as being worth $64,482, which Steven said was sold for $20,000, the proceeds of which were expended on the legal costs of this case.

131 It will be remembered that Investments does not own property in its own name but instead has an interest in other entities and structures which own the relevant properties. The financial statements of Investments for the 2018 financial year are erroneous because they did not record its half ownership of North South Property Pty Ltd (representing its indirect interest in Campbell Grove), or its loans to that company or its units held in the Hill Forest Canterbury Unit Trust (representing its indirect interest in Canterbury Road). Nevertheless, it is difficult to assign value to those interests. Financial statements for North South for the year ended 30 June 2020 show North South had assets of $1.62 million and a net asset deficiency of $3,260. On the other hand, its wholly owned subsidiary, Yune, had net assets of $681,639 for the financial year ended 30 June 2020. Those assets presumably comprise the four apartments at Campbell Grove. This is perplexing because the value assigned to North South's ownership of its shares in Yune is only recorded as being worth $100 in the accounts. As regards the Hill Forest Canterbury Unit Trust, at the end of the 2020 financial year, it had $829,030 in assets (comprising real property and cash) but $828,930 in liabilities, including $695,158 in unpaid present entitlements to its unit holders, such as Investments, resulting in a net asset position of $100. It is unclear whether the trust's assets would be sufficient to pay out its liabilities.

132 It is also important to pay proper regard to Investments' own liabilities. As I have previously explained, the evidence suggests Investments owes the ATO at least $189,625 in respect of GST and PAYG tax withheld, together with $462,968 for income tax return in respect of the 2017 financial year. Further, because Investments has not complied with its taxation obligations since 1 July 2019, the extent of its taxation liabilities for this later period are undetermined. The capacity of Investments to meet its tax liabilities would necessitate the sale of its assets, however, given the ownership structure of Campbell Grove and Canterbury Road, it is uncertain how readily this could be achieved. There was also unchallenged evidence of Grace's solicitor, Yunfei Wu, that the liabilities of Investments include a $1.76 million inter-company loan owing to Developments.

133 Doing the best I can with the information available, it would appear that Investments may be solvent on a balance sheet analysis but insolvent from a cash flow perspective, with no immediate capacity to meet its known liabilities as and when they fall due.

134 There are no financial statements to illuminate the financial position of Developments. It is the owner of the Whittens Lane, Willowbank Court and Rufus Street properties and has a 56% interest in 185-187 Foote St, the owner of Foote Street. As already noted, competing informal valuations obtained by the parties place these properties as being worth between $11,323,000 to $11,673,000. There are financial statements for 185-187 Foote St for the year ending 30 June 2018 which show an operating loss of $23,839 and a net asset deficiency of $23,739, with substantial amounts owing to various parties. For example, the statements disclose the existence of a loan from Developments in the sum of $1.55 million. However, Steven accepted under cross-examination that the loan from Developments was undocumented and unsecured.

135 Recent bank account statements for Developments show home loans with balances owing of $1,044,411.93 and $895,277.15 as at 1 November 2021 and 10 November 2021, respectively and other accounts with nominal balances. In addition, the company owes New Sunshine a significant sum. According to a statement of claim filed in the New Sunshine proceeding, Developments is alleged to owe New Sunshine $11,935,548.02 plus interest. In cross-examination, Steven accepted the company owes New Sunshine at least $10.18 million, although he disputed its right to claim interest after a certain period.

136 Developments also has an outstanding land tax debt liability to the SRO of at least $101,411.79, together with interest. It will continue to incur land tax liabilities until the properties it holds an interest in are sold. Its liability to the ATO is unquantified because it has failed to lodge tax returns for the 2017 to 2020 financial years and has not lodged BAS for the period spanning 30 September 2017 to the quarter ending 31 March 2021. Further, the company owes an amount of over $9,000 in land rates to the City of Manningham in respect of Whittens Lane and Willowbank Court, which Steven confirmed has not been paid. Developments has therefore failed to pay its debts to third parties as and when they fall due. Depending on the exact amount owing to New Sunshine, Developments is borderline balance sheet insolvent. It is almost certainly cashflow insolvent. Even if I am wrong in that assessment, there is insufficient evidence to conclude it is solvent.

137 It follows that there is nothing about the financial position of the Companies which would constitute a restraint on the exercise of the Court's discretion to order a winding up.

Is proceeding an abuse of process or brought with lack of clean hands?

138 In his points of defence and cross-claim, Steven pleads that Grace has brought this proceeding as an abuse of process principally because:

(a) she is seeking to improperly exert pressure on Steven and for the collateral purpose of assisting in the recovery of amounts owing to New Sunshine;

(b) she wishes to exclude Steven from the business of the Companies;

(c) the proceeding represents an attempt to improperly acquire Steven's shares or shares held by his family interests in the Companies;

(d) her allegations of misappropriation by Steven of company assets are contrary to known facts; and

(e) by instituting and maintaining the proceeding, she is not acting in a bona fide manner.

139 Aside from reference to a solicitor's letter dated 12 March 2021 and the New Sunshine proceeding, no particulars are given in relation to those allegations.

140 In his written opening submissions, Steven made similar contentions, whilst also submitting that the present proceedings were instituted 'to apply pressure to [Steven] Zheng in the process through reliance on the purported guarantee, and which in and of itself would constitute an abuse of the Court's process' and suggesting that:

[it is] the assumed intention of New Sunshine ... to acquire all of the Defendants' properties and business interests for itself, to exclude or remove Zheng from the business entirely for $100 for his shares, and together with the consequential extinguishment of his profit share entitlement.

141 Again, no specific evidence was relied upon in support of these contentions.

142 When pressed by the Court on how the present proceeding served to achieve the alleged collateral purposes referred to above, counsel for Steven submitted that, in combination with the New Sunshine proceeding, this proceeding had the effect of rendering his client wholly hamstrung and unable to realise any amounts to pay out the debt to New Sunshine. He also submitted that once the New Sunshine proceeding had been commenced (noting that New Sunshine is an entity to whom Grace's interests are aligned), this proceeding ought to have been withdrawn.

143 Steven's counsel also relied on the English authority of Re Bellador Silk Ltd[94] for the proposition that where an oppression proceeding is instituted to bring pressure to bear to achieve a collateral purpose (in that case the repayment of a loan to a related entity), the applicant is disentitled to relief.[95] He also suggested that New Sunshine would be advantaged by the liquidation of the Companies by seeking to acquire their relevant property interests at a discount. Other evidence given and submissions made by Steven on the abuse of process issue were more particularly directed to the question of whether winding up is an appropriate remedy in the circumstances. Reference to correspondence from his lawyers about the proceeding and the lodgement of a caveat on Steven's property by New Sunshine does not serve to clarify the position any further.

144 The question of when a proceeding will constitute an abuse of process was recently considered by the High Court in Victoria International Container Terminal Ltd v Lunt.[96] The following relevant principles emerge from that case:

(a) the Court has power to stay or summarily dismiss a proceeding in order to prevent injustice where a party has abused the Court's processes;[97]

(b) the Court's power is limited to protecting the integrity of its own processes and to taking action only insofar as is necessary to 'safeguard the administration of justice';[98]

(c) where a proceeding is brought for an 'improper purpose' it is liable to be an abuse of process.[99]

145 As the High Court made clear in the earlier decision of Williams v Spautz,[100] an improper or illegitimate purpose will be apparent where proceedings are brought, 'not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they were not designed or some collateral advantage beyond what the law offers'.[101] Further, the party alleging an abuse of process bears the onus of demonstrating it.[102] That onus has been described as 'a heavy one'.[103]

146 For the following reasons, I do not consider that Steven has discharged his heavy evidentiary onus of establishing an abuse of process in this case.

147 First, I accept Grace's submission that there is no evidence before the Court that she instituted this proceeding for the purpose of obtaining an advantage which the law does not offer or that she brought the proceeding other than for the purpose of taking it to its conclusion and obtaining the relief sought. Grace has been consistently clear that she seeks the winding up of the Companies and the appointment of a receiver and manager to the Unit Trust. Further, whilst in Re Bellador Silk the applicant conceded under cross-examination that he was seeking relief under the English equivalent of the oppression provisions for the collateral purpose of satisfying a related-party loan, it was never put to Grace or Justin that the proceeding was commenced for a collateral purpose and no such concession has been made.

148 Secondly, it is simply not apparent how the proceeding itself was instituted or maintained to achieve the identified impugned purposes. The proceeding was commenced almost seven months prior to the institution of the New Sunshine proceeding, by which New Sunshine seeks to recover the debt owing to it by Developments and to enforce a guarantee given by Steven. It is unclear how this proceeding assists in the recovery of that debt or the enforcement of that guarantee. In the event Developments is wound up by this Court, the New Sunshine proceeding would be stayed by force of s 471B of the Corporations Act and the liquidator would deal with New Sunshine in its capacity as creditor.

149 Thirdly, to suggest that, by virtue of this proceeding, Grace is seeking to exclude Steven from the business of the Companies and attempting to improperly acquire his shares ignores the reality that a winding up order is sought instead of an order for the purchase of Stevens' interests. Upon the making of a winding up order, control of the Companies and their business would pass to the liquidator.

150 Fourthly, there is no evidence to support the suspicion that New Sunshine is motivated by a desire to use the liquidation of the Companies to acquire their property assets. Even if there was, it would not be improper for Grace or any other shareholder to seek to salvage the assets of the Companies in this way.[104]

151 Fifthly, I do not accept that Grace's allegations of misappropriation by Steven are contrary to known facts. I have found that the allegations of misuse of company property are supported by the evidence. The other key allegations made by Grace in the proceeding have substance and provide a sound basis for the relief she seeks.

152 It follows that there is no basis to refuse the relief sought by Grace on the basis that the proceeding constitutes an abuse of process.

153 Steven also argues that Grace should be denied relief because she has not commenced the proceeding with clean hands for the same alleged reasons outlined above and because she is a shareholder of New Sunshine, an entity that is currently suing Developments for recovery of loan amounts. It is also pleaded that any shortcoming in the operation of the Companies were either the direct or indirect result of 'inaction or inability' by Grace and/or Justin in assisting in their respective roles within the business.

154 This aspect of Steven's case was underdeveloped but fails on the facts. I have already explained the circumstances of the Companies' failure to maintain books and records and prepare financial statements and observed that each of Steven, Grace and Justin must accept some responsibility for the situation, although most of the blame rests with Steven. Grace was never a director of Developments and Justin was never a director of either company. Further, there is nothing inherently objectionable about a shareholder applying to wind up a defendant company because of oppression and deadlock whilst simultaneously holding an interest in a separate company that is seeking to protect its legal position by suing the same defendant company in relation to a sizeable debt. There is no relationship between the relief sought in this proceeding and the impugned behaviour which would render it unjust to grant the relief.[105]

Other matters raised by Steven concerning the Companies

155 In his closing submissions, Steven said Grace's testimony at trial revealed she had limited knowledge of the business of the Companies and the properties that had been acquired, and that she relied on her husband in relation to these matters. Steven submitted that Grace had elected not to be involved in the business of the Companies or to have only limited involvement in the business. It must be remembered that the Cooperation Agreement itself contemplated that Steven was solely responsible for Investments' daily operations, business accounting, finance, taxation and any profits and losses and was obligated to provide Grace with regular updates. Further, Grace was never a director of Investments. Grace also gave evidence that she did in fact provide bookkeeping services to Developments from mid-2018 onwards. At any rate, even if Steven is correct in his characterisation of Grace as having minimal day-to-day involvement in, or knowledge of, the business conducted by the Companies, or as having elected not to participate in the business, I do not consider that this would disqualify Grace from obtaining relief from oppressive conduct or obtaining a winding up order on the just and equitable ground. It is not Grace's case that she had a 'legitimate expectation' about the basis on which she would participate in the management of the Companies[106] or that she has been improperly excluded from management.[107] Nor does it change the fact there is a clear deadlock between the parties in relation to critical functions of the Companies, including the preparation of financial statements, compliance with taxation obligations, and the process of sale of key assets.

156 In seeking to explain, justify or normalise the facts and circumstances identified by Grace in support of the relief she seeks, Steven makes reference to a number of transactions undertaken by Grace and Justin that warrant specific mention. They are as follows:

(a) Steven characterised the circumstances of Justin's departure from Winehol as uncontentious and asserted that Justin himself took $200,000 from Developments for a business venture called Talko. Justin accepts this occurred, but says he only took this money after he and Steven agreed he could do so. Justin also observes that the amount corresponds with the amount Investments had provided to Winehol. He said because Steven took over Justin's interests in Winehol, he 'should also be able to run [his] own business using a similar amount of money' and that Wenchao apparently agreed to him using Developments' money in this way. It is unclear on the evidence whether this payment by Developments was documented;

(b) in relation to the allegations raised about his purchase of the Tesla vehicle, Steven says a comparable Porsche motor vehicle was acquired by Investments for Grace and Justin. Grace says this was done to 'balance things out' after Steven refused to return the Tesla or repay the money used to buy it. Under cross-examination she clarified that the Porsche was purchased in or around 2018 for approximately $160,000;

(c) Grace admitted under cross-examination that with Steven's assistance she obtained one of the apartments at Campbell Grove which was paid for by Investments. However, when Wenchao became aware of the transaction, he provided her with funds to repay Investments; and

(d) Steven notes that by virtue of the GPM Agreement, New Sunshine was appointed as 'project manager' of the properties held by Developments for which it was paid $50,000 per month. He says this money really represented repayment of interest on the loan amounts owed to New Sunshine, but was structured in this way to create the appearance of New Sunshine receiving income so it could borrow funds. Steven states he has refused to sign reconstructed financials for Developments because of how the New Sunshine loan and management fees have been treated. Justin, on the other hand, gave evidence that the GPM Agreement was part of a 'bigger commercial deal' under which Wenchao agreed to give up his entitlement to be paid interest on money initially lent to Investments.

157 It is not immediately apparent what benefit the Companies derived as a result of the above transactions. A liquidator will be well-placed to interrogate those matters further and determine whether the transactions were undertaken in breach of statutory or fiduciary duty or are otherwise voidable under Pt 5.7B of the Corporations Act.

158 Having regard to the totality of circumstances concerning the Companies and the Unit Trust, the Court has a lack of confidence in the conduct and management of their affairs. The Companies' financial statements are inaccurate or non-existent and the Companies have failed to maintain books that properly record and explain their financial transactions. There has been a lamentable failure to ensure the Companies meet their basic taxation obligations and pay their debts as and when they fall due. Millions of dollars in funds have left Investments' bank account without authorisation and have been utilised by Steven for his own benefit (albeit largely repaid) or are otherwise unaccounted for. By effecting these transfers, Steven misused the assets of Investments and likely breached his fiduciary and statutory duties by preferring his own interests over the company's interests. Specifically, it would appear Steven contravened s 182(1) of the Corporations Act by improperly using his position as director to gain an advantage for himself. These are matters which warrant further investigation by an independent liquidator. So too are the circumstances surrounding the payment to Talko, the purchase by Grace and Justin of the Porsche, the acquisition of the apartment by Grace using Investments' money (albeit apparently repaid), and the payment of the $50,000 per month in 'management fees' to New Sunshine.

159 Because of the breakdown of trust and confidence between the parties, the purpose for which the Companies' property development business was established can no longer be realistically achieved. Grace also gave evidence that neither she, Justin or Wenchao are prepared to fund the business any further. Accordingly, there is a failure of the main object of the Companies' formation.

160 There also exists an intractable deadlock between the parties which has prevented the Companies from operating effectively. I do not accept Steven's submission that the extent of the deadlock has been overstated because he and Grace can continue to communicate for 'decision making purposes'. The evidence does not support that conclusion. It is tolerably clear that the parties cannot agree on how the Companies are to be managed. They have been unable to agree on a strategy for the development and/or sale of the assets of Developments. They have been unable to agree on a process for preparing financial statements and tax returns for the Companies or for meeting the Companies' taxation liabilities. They failed to ensure that Developments engaged with the VCAT proceeding brought against it in a timely manner. The affairs of the Companies are in disarray.

161 All of the above matters support the winding up of the Companies on the just and equitable ground under s 461(1)(k) of the Corporations Act. At the same time, I am satisfied that the Court's jurisdiction under the oppression provisions of the Corporations Act found in ss 232, 233 (and also s 461(1)(f)) has been enlivened. It was commercially unfair and oppressive for Steven to make payments to himself and to not disclose them to Grace, his fellow shareholder in Investments. The misuse and mismanagement of Investments' assets by Steven constitutes conduct which was not in the interests of the members of Investments as a whole and is oppressive for the purpose of s 232 of the Corporations Act. Further, it is not in the interests of the members of the Companies for their activities to be conducted in the absence of reliable financial statements and complete books and records. Nor was it in the interests of members of Developments for the VCAT proceeding to be left unattended.

162 Whilst Steven submits that any oppression that has occurred is no longer present, the oppression provisions may be engaged if the oppressive conduct occurs at any time, notwithstanding that it may have ceased at the time of trial.[108] Regardless, the oppression is continuing. The deadlock that exists between Grace and Steven means that the Companies cannot maintain a regime of proper corporate governance, which is also contrary to the interests of the members of the Companies as a whole.[109] Further, I do not accept Steven's submission that it is prejudicial for Grace to rely on circumstances arising after the commencement of the proceeding in support of her claim for relief. Those circumstances include the continuing state of deadlock between the parties, which should not be allowed to continue.

163 Steven says a winding up of the Companies would be a disproportionate remedy because it would disregard 10 years' worth of work he has put into the business, and deprive him the 'back-end' benefit of the properties which may be developed by the Companies. Further, the loss of opportunity he has identified, along with the likely destruction of shareholder equity, are forms of prejudice that will be experienced by both shareholders equally. Steven's submission also proceeds on the basis that the future development of the properties is feasible. That cannot be assumed. Feasibility studies commissioned by Steven and Justin for the relevant properties reveal that significant capital investment is required to progress those proposed developments. For example, a previous sale of Willowbank appears not to have progressed because of a failure to achieve the subdivision of the property. Further, Grace has given evidence the Companies need to first meet their taxation liabilities before paying for further work on the properties in anticipation of their sale and that neither she, Justin or Wenchao are prepared to fund this work. The Companies simply cannot continue to progress their property development business in the absence of capital from their shareholders or third parties. Steven has not adduced any cogent evidence that he is able to source the necessary capital to realise these development projects. Further, whilst some of the assets of the Companies must undoubtedly be realised to meet their increasing liabilities, Grace and Steven plainly cannot agree upon the orderly sale of the Companies' assets if left to their own devices.

164 Steven contends that other 'development partners' of Investments will be adversely affected by a winding up order. The 'development partners' are presumably a reference to Jinjia CBD Pty Ltd, which is Investments' fellow shareholder in North South (the holding company of Yune which, in turn, owns the four apartments at Campbell Grove) and the other unitholders in the Hill Forest Canterbury Unit Trust, (whose trustee, Hill Forest Development Pty Ltd, owns the three apartments at Canterbury Road). However, there is no evidence before the Court of the prejudicial impact of a winding up order on these shareholders and unitholders. As previously mentioned, the 2020 financial statements for the Hill Forest Canterbury Unit Trust disclose significant liabilities and a net asset position of only $100. Similarly, there is no evidence before the Court of how the winding up of Developments would impact its fellow shareholders in 185-187 Foote St, the owner of Foote Street. It will be recalled that 185-187 Foote St's financial statements for the year ending 30 June 2018 show an operating loss of $23,839 and a net asset deficiency of $23,739 in any event.

165 Steven also submits that he himself will suffer prejudice in the event of a winding up of the Companies because of the guarantee he is alleged to have given to New Sunshine in respect of the debt it claims against Developments. However, a winding up order will not prevent Steven from disputing his liability under the alleged guarantee in the New Sunshine proceeding. Steven also argues that the Court should be mindful of the fact that a winding up of Developments could constitute a default event under the relevant loan agreement with New Sunshine and 'advance New Sunshine's interests ahead of other creditors'. Clause 12 of the loan agreement entitles New Sunshine to require Developments to repay all outstanding loan amounts, together with interest, upon an event of default, which includes Developments failing to make due and punctual payment under the loan agreement or going into liquidation. However, it is Grace's submission that Developments has already defaulted under the loan agreement by failing to repay the principal loan sum, other advances and interest. But, more importantly, Steven has not demonstrated how a winding up would actually advance the interests of New Sunshine ahead of other creditors.

166 Allowing the status quo to remain is a wholly unsatisfactory option. The Companies would continue in a state of limbo and their existing problems in relation to taxation obligations, record keeping and corporate governance will likely worsen. The Court has no confidence that the relationship between the protagonists will improve and that the Companies will commence meeting their statutory obligations. Placing the Companies into the hands of a liquidator will allow an independent officer to take control of the operations of the Companies and 'bring an objective view, unrestrained, unrestricted and unencumbered by the views of the parties'[110] to determine the fate of the Companies. The work of the liquidator would include supervising the sale of the Companies' assets, which is both necessary and inevitable in the circumstances. It is therefore just and equitable that the Companies be wound up and that their stewardship should pass to a liquidator. A winding up will also bring the oppression in the conduct of the affairs of the Companies to an end.

167 As earlier noted, s 467(4) provides that even if the Court is satisfied of circumstances that justify a winding up on the just and equitable ground, it must consider whether some 'other remedy' is available and whether an applicant is acting unreasonably in seeking to have the company wound up instead of pursuing the other remedy. As McPherson J (as his Honour then was) observed in Re Dalkeith Investments Pty Ltd,[111] '[a] winding up is to be regarded as a remedy of last resort and one which ought not to be granted if some other less drastic form of relief is available and appropriate.'[112] Put differently, a winding up will be ordered if there is no other remedy which would adequately redress the consequences of the facts and circumstances which are the basis for relief.[113]

168 Section 467(4) applies equally to an application for winding up made under s 233 of the Corporations Act or under s 461.[114] Further, the 'other remedy' referred to in s 467(4) is not restricted to a legal remedy but 'is to be understood in the wider sense of a course of action otherwise open to the party'.[115]

169 In Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd,[116] McMurdo JA (with whom the rest of the Court agreed) explained the operation of s 467(4) in this way:

In my view, the reasonableness of the applicant's position is to be assessed by reference to the consequences of the events and circumstances upon which the application is founded and what is necessary to redress them. If they could be redressed only by a winding up, then the pursuit of a winding up order would not be unreasonable in the relevant sense. On the other hand, if there is an alternative remedy which would equally redress those consequences, then an applicant's preference for a winding up order would usually be considered to be unreasonable, because ordinarily the winding up of a solvent company will have far reaching effects.[117]

170 The onus is on the defendant to establish the exception to the general requirement that a winding up order be made.[118]

171 Steven submitted that an alternative remedy to a winding up is for the property interests held by the Companies to be voluntarily sold down with the cooperation of his solicitors and Grace's solicitors. Grace has already rejected proposals made by Steven in May and June 2021 for the development and sale of Whittens Lane via a joint venture or partnership with an unnamed investor and the immediate sale of Willowbank Court and Rufus Street, which were options proposed by Steven. I have already identified her reasons for doing so, which include the fact that she does not trust Steven to carry out the sale process honestly. At any rate, Steven's proposal to develop Whittens Lane via a joint venture or partnership with an unnamed investor was scant on detail and would have required at least 12 months of work. Under cross-examination, Steven was unable to provide much further detail, other than to suggest the investor was a partnership comprised of persons called 'Michael' and 'Vincent', one of whom was a builder and the other, a cabinet maker. But, critically, the sale of key assets would not assist in identifying the true financial position of the Companies, including the extent of their liabilities to third parties. It would not result in an independent investigation of the unauthorised withdrawals from Investments' bank accounts and the recovery of outstanding amounts owed to the company. In other words, a sell-down of assets would not redress the relevant facts and circumstances which justify the making of winding up orders in this case. It is also difficult to see how a sell-down could be ordered in circumstances where the entities holding certain property assets (namely, North South, Yune, and 185-187 Foote St) are not parties to the proceeding and have not been heard on the question. Moreover, once assets are sold, the Companies will likely need to be liquidated in any event. Accordingly, I do not consider that Grace has acted unreasonably in resisting the proposals made by Steven.

172 I also note that Steven made an earlier proposal to Grace in July 2020 over WeChat that he would try to borrow funds to repay Wenchao/New Sunshine. However, he conceded under cross-examination that he has been unable to borrow funds to refinance the loan since he first suggested it. I also note that there is no proposal on the table for Steven to acquire Grace's shares in the Companies and the relevant units in the Unit Trust (or at least none that the Court has been directed to). Other attempts at a negotiated outcome have failed. During a WeChat exchange on 17 July 2020, Grace and Justin offered to allow Steven to exit the Companies without repaying any of the Companies' debt. Grace submits that this offer should be considered in light of a term of the Cooperation Agreement which provided that Steven was responsible for all of Investments' losses. Under cross-examination, Steven explained he rejected that offer because he thought the properties would be valuable in the future when developed. I have already explained the practical impediments to the development of the properties.

173 During the course of the trial, I asked Grace's counsel whether an alternative and less drastic remedy to a winding up could involve the appointment of a receiver and manager to the Companies given that Grace was already seeking the appointment of a receiver and manager to the assets of the Unit Trust. I also queried whether a receiver and manager may be able to achieve a structured sale of the relevant assets without creating a perception of a 'fire sale'. I note that neither party supports that relief, and whilst Steven does not oppose it, he does not regard it as necessary. On further reflection, I do not consider that this alternative remedy would be more appropriate in the circumstances of the case for the following reasons.

174 First, a liquidator will be better placed to more comprehensively investigate the affairs of the Companies, including the nature and value of the Companies' creditors, the unauthorised withdrawals from Investments' bank accounts, the extent of outstanding liabilities to taxation authorities, whether statutory and fiduciary duties have been breached, whether certain transactions are voidable under Pt 5.7B of the Corporations Act and whether appropriate litigation should be commenced accordingly.

175 Secondly, the appointment of a receiver and manager is itself an extraordinary and drastic remedy,[119] although it may, in some cases, be preferred over liquidation because it would not necessarily cause the same degree of damage to the goodwill of the company's business[120] and would allow the continuation of the business as a going concern.[121] Here, however, there is no goodwill or business to preserve. The very limited nature of the Companies' present activities[122] and the real risk of further oppression in the form of a sustained deadlock between the parties are factors that favour the appointment of a liquidator. The assets of the Companies must be sold, the debts of the Companies paid and any residual value of the members' equity distributed.

176 Thirdly, although receivership is a very flexible equitable remedy and not strictly limited to the interim preservation of assets,[123] a receiver and manager has a limited and relatively mechanical function when compared to a liquidator and may need to seek guidance from the Court on the scope of his/her functions and powers.[124] A receivership would also not result in a moratorium on actions against the Companies in the same way as would a liquidation under s 471B of the Corporations Act.

177 The Companies will therefore be wound up pursuant to s 461(1)(k) and/or ss 232, 233(1)(a) and/or s 461(1)(f) of the Corporations Act and a liquidator appointed.

Appointment of receiver and manager to assets of Unit Trust

178 I am satisfied that pursuant to ss 232, 233(1)(h) of the Corporations Act and/or s 37 of the Supreme Court Act, the same person who is appointed liquidator, should also be appointed as receiver and manager over the assets and undertakings of the Unit Trust, of which Developments is trustee. Such an order is just and convenient for the following reasons:

(a) as previously explained, there is good authority for the proposition that the statutory oppression provisions may be used to remedy oppression within a trustee company and deal with both the shares in the trustee company and units in a unit trust, so long as there is a rational and discernible link between the remedy and the company in which the oppression has occurred;[125]

(b) there is such a link in the present proceeding. The evidence suggests that Developments acted, traded, and incurred liabilities solely in its capacity as corporate trustee of the Unit Trust. Together, Developments and the Unit Trust conducted the property development business, along with Investments. Equally, there is no evidence that the company held any assets or incurred any liabilities other than in its capacity as corporate trustee. It follows that all of the assets and liabilities of Developments are those of the Unit Trust;

(c) pursuant to cl 200 of the Unit Trust deed, as trustee of the Unit Trust, Developments has a right of reimbursement, indemnity and recoupment out of the Unit Trust assets against liabilities incurred or arising from administering the Unit Trust. It is well-established that a receiver and manager may be appointed over trust property to secure the trustee's right of indemnity out of the assets of the trust;[126]

(d) by virtue of cl 173 of the Unit Trust deed, the office of trustee will be vacated upon the making of an order that Developments be wound up. This will have the effect of rendering Developments a bare trustee. As a bare trustee, the company's duties, powers, and rights would be limited to protecting the trust assets, but do not include a power of sale.[127] However, it would retain its right of indemnity, which is secured by a lien over the assets of the Unit Trust;[128]

(e) the weight of authority suggests that in circumstances where a liquidator is seeking to deal with, and sell, assets of a trust in the exercise of the trustee's right to indemnity, the liquidator must first obtain a court order for sale or an order for the appointment of a receiver to realise the assets of the trust;[129] and

(f) appointing the liquidator of Developments as receiver and manager of the Unit Trust will optimise the conduct of the liquidation of the company and protect the assets of the Unit Trust. It will also facilitate the timely sale of those assets. The proceeds arising from an exercise of the trustee's right of indemnity may then be applied in satisfaction of Unit Trust liabilities to which the right relates and according to the priority regime set out in the Corporations Act.

179 In the exercise of my discretion, I have determined to wind up the Companies on the basis that it is just and equitable to do so and to eliminate oppression in the conduct of the Companies' affairs. I have also decided that it is just and convenient for the appointed liquidator to also be appointed as receiver and manager over the assets of the Unit Trust. However, I will adopt the approach taken in a number of earlier cases[130] and refrain from immediately pronouncing the Court's orders to enable the parties to exhaust the possibility of a commercially acceptable settlement. The parties may provide, within 14 days of the date of publication of these reasons, consent orders for the dismissal of the proceeding if they are capable of resolving the dispute. Failing that, the matter will be listed for further hearing, at which time I will hear the parties on the appropriate form of orders to give effect to these reasons and on the question of costs.

[1] See Supreme Court of Victoria Proceeding No S ECI 2021 01040.

[2] See Supreme Court of Victoria, Practice Note SC CC 8: Oppressive Conduct in the Affairs of a Company, 18 May 2018.

[3] See Supreme Court of Victoria Proceeding No S ECI 2021 01040.

[4] Referred to as 中华人民共和国民事诉讼法 in the Chinese text.

[5] Opened for signature 18 March 1970, 847 UNTS 231 (entered into force 7 October 1972).

[6] See Motorola Solutions, Inc v Hytera Communications Corporation Ltd (Adjournment) [2020] FCA 539; Auken Animal Husbandry Pty Ltd v 3RD Solution Investment Pty Ltd [2020] FCA 1153; Haiye Developments Pty Ltd v The Commercial Business Centre Pty Ltd [2020] NSWSC 732.

[7] The Court Book and Supplementary Court Book prepared by the parties was a combined 2,032 pages; the Joint Book of Authorities was 2,435 pages; the plaintiff's written submissions totalled 69 pages and the defendant's written submissions totalled 29 pages.

[8] Patterson v Humfrey (2014) ACSR 152, 194 [186] (Le Miere J), citing Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534, 543 [40] (Barrett J) ('Goozee v Graphic World').

[9] Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 704 (Young J) ('Morgan v 45 Flers Avenue'); Joint v Stephens (2008) 26 ACLC 1467, 1496) ('Joint v Stephens').

[10] Wayde v NSW Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459, 472 (Brennan J); Morgan v 45 Flers Avenue, 704-6.

[11] Morgan v 45 Flers Avenue, 704; Aqua-Max Pty Ltd v MT Associates Pty Ltd [2001] VSCA 104; (2001) 3 VR 473, [54] (Brooking, Charles and Chernov JJA); Joint v Stephens, 1496 [133] (Nettle, Ashley and Neave JJA); Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359, 399 (Basten JA) ('Campbell v BackOffice Investments'); Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458; (2012) 299 ALR 621, [508] (Gordon J); Endoline Pty Ltd v Drapac [2012] VSC 156, [272] (Ferguson J, as her Honour then was); Re Skytraders Pty Ltd [2022] VSC 416, [28] (Button J) ('Re Skytraders').

[12] Joint v Stephens, 1,498 [138]; Re SRW Nominees Pty Ltd [2019] VSC 547, [34]-[40] (Robson J) ('Re SRW Nominees').

[13] Catalano v Managing Australian Destinations Pty Ltd [2014] FCAFC 55, [19].

[14] O'Neill v Phillips [1999] UKHL 24; [1999] 1 WLR 1092, 1098 (Lord Hoffmann); Joint v Stephens, [136]; Re Skytraders, [30].

[15] Joint v Stephens, 1499 [136]-[137], citing Nourse J in Re London School of Electronics Ltd [1986] Ch D 211, 222.

[17] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688, 739 (Young J) ('Fexuto'); Shamsallah Holdings Pty Ltd v CBD Refrigeration & Airconditioning Services Pty Ltd [2001] WASC 8; (2001) 19 ACLC 517, [15] (Owen J); Lucy v Lomas [2002] NSWSC 448, [45] (Young CJ); Re Spargos Mining NL (1990) 3 WAR 166, 189 [25] (Murray J) ('Re Spargos Mining'); Thomas v HW Thomas Ltd [1984] 1 NZLR 686, 694 (Richardson J); Joint v Stephens, 1497 [136].

[19] Re Bright Pine Mills Pty Ltd [1969] VicRp 121; [1969] VR 1002, 1011 (O'Bryan, Smith and Pape JJ); Re Spargos Mining, 191.

[20] Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539, 560 (Malcolm CJ, Rowland and Franklyn JJ) ('Jenkins v Enterprise Gold Mines'); Re SRW Nominees, [39].

[21] Cowling v Mekken [2015] VSC 196; Petropoulos v Li (2021) 152 ACSR 448, 483 (Osborne J).

[22] Roberts v Walter Developments Pty Ltd (1992) 10 ACLC 804; BAM Property Group Pty Ltd as trustee for BAM Property Group Pty Ltd v Imoda Group Holdings Pty Ltd [2019] FCA 1192, [83]-[85] (Derrington J).

[23] Turnbull v National Roads and Motorists' Association Ltd [2004] NSWSC 577; (2004) 186 FLR 360, 371 (Campbell J) ('Turnbull v NRMA'); Exton v Extons Pty Ltd [2017] VSC 14; (2017) 53 VR 520, 521 (Sifris J, as his Honour then was) ('Exton v Extons'); Allways Resources Holdings Pty Ltd v Samgris Resources Pty Ltd [2017] QSC 74; (2017) 121 ACSR 1, 10 (Bond J) ('Allways Resources'); Re Wyndham Park Estate Pty Ltd [2019] VSC 92, [33]-[35] (Sifris J) ('Wyndham Park Estate').

[24] Exton v Extons, 531-2; Allways Resources, 10; Wyndham Park Estate, [35]; Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Ltd (No 3) [2015] NSWSC 1639; (2015) 109 ACSR 369, 380 (Sackar J).

[27] Goozee v Graphic World, 461; Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Limited (No 3) [2015] NSWSC 1639, [84]; Exton v Extons, 531-2; Allways Resources, 10.

[28] Campbell v BackOffice Investments, 406; Exton v Extons, 531-2.

[29] See Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152, [234] (Austin J); Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, 687 [89] (Spigelman CJ); [2001] NSWCA 97; McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603, 614 (Beazley J); Campbell v BackOffice Investments, 390 [137] (Giles JA); 438 [442] (Young JA); Exton v Extons, 525.

[30] See Campbell v BackOffice Investments, 406-7 (Basten JA); Campbell v BackOffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304, 360 (Gummow, Hayne, Heydon and Kiefel JJ), suggesting the question was unresolved; Beaumont v Peel [2018] NSWSC 95, [19]-[23] (Black J) ('Beaumont v Peel'); Wyndham Park Estate, [33]-[35], [50], fn 5. See also the scholarly analysis of the topic in Nikita Angelakis, 'The Intersection of Deadlock and Oppression: A "No-fault Divorce" for the Members of Closely Held Corporations' (2020) 37(8) Companies and Securities Law Journal 512.

[32] Beaumont v Peel, [13]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, 687 [89] (Spigelman CJ), citing McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603, 614.

[33] Wyndham Park Estate, [37]. See also Khamo v XL Cleaning Services Pty Ltd [2004] NSWSC 1134; (2004) 51 ACSR 397, 403 and Malos v Malos [2003] NSWSC 118; (2003) 44 ACSR 511, 516-17 in the context of deadlock for the purpose of an order for winding up under s 461(1)(k) of the Corporations Act on the just and equitable ground.

[34] Turnbull v NRMA Ltd [2004] NSWSC 577; (2004) 50 ACSR 44, 54 [42].

[36] Fexuto, 741 (Young J); Re Dernacourt Investments Pty Ltd; Baker Davis Supply Co Pty Ltd v Dernacourt Investments Pty Ltd (1990) 20 NSWLR 5988; Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282, [85] (Davies J), citing Szencorp Pty Ltd v Clean Energy Council Ltd [2009] FCA 40; (2009) 69 ACSR 365, [71] (Goldberg J); Donaldson v Natural Springs Australia Ltd [2015] FCA 498, [270] (Beach J).

[37] [2017] VSC 14; (2017) 53 VR 520.

[40] See Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606 (Young J, as his Honour then was); McEewan v Combined Coast Cranes Pty Ltd [2002] NSWSC 1227; (2002) 44 ACSR 244 (Young CJ in Eq); Surf Road Nominees Pty Ltd v James [2004] NSWSC 61 (Einstein J); Ciccarello, Re Adelaide Property Development Pty Ltd v Cubelic [2008] FCA 141, [28] (Mansfield J); Trust Company Ltd v Noosa Venture 1 Pty Ltd [2010] NSWSC 1334; (2010) 80 ACSR 485, [104]-[105] (Windeyer AJ). See also obiter dicta comments by Kourakis CJ in Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd (No 2) [2021] SASC 22, [89], [95].

[41] Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282, 305-6, 309 (Davies J) ('Vigliaroni v CPS'); Wain v Drapac [2012] VSC 156, [287] (Ferguson J, as her Honour then was) ('Wain v Drapac'); Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd (No 2) [2021] SASC 22, [68] (Kourakis CJ); Melrob Investments Pty Ltd v Blong Ume Nominees Pty Ltd [2022] SASCA 29, [110]-[111], [119]-[123] [158], [165]-[166] (Bleby JA, with whom Lovell and David JJA agreed).

[42] [2018] QCA 48; [2018] 3 Qd R 520, 540 [62] ('Asia Pacific Joint Mining').

[43] Ibid 540 [62]-[63] (McMurdo JA, with Gotterson JA and Jackson JJ agreeing).

[44] [1973] AC 360 ('Ebrahimi').

[46] Ibid. See also Australian Securities and Investment Commission v Kingsley Brown Properties Pty Ltd [2005] VSC 506, [96] (Mandie J); Australian Securities and Investment Commission v Storm Financial Ltd (recs and mgrs apptd) (admin apptd) [2009] FCA 269; (2009) 71 ACSR 81, [65] (Logan J); Australian Securities and Investments Commission v Letten (No 10) [2011] FCA 498, [12] (Gordon J) ('ASIC v Letten'); Re Docklands Chiropractic Clinic Pty Ltd [2020] VSC 364, [21] (Hetyey AsJ) ('Re Docklands Chiropractic'); Re JSSP Holdings Pty Ltd [2021] VSC 33, [13] (Hetyey AsJ) ('Re JSSP Holdings').

[47] ASIC v Letten, [14] (Gordon J).

[48] [2021] VSC 33, [14].

[49] Re Tivoli Freeholds Ltd [1972] VicRp 51; [1972] VR 445.

[50] Re Yenidje Tobacco Company Ltd [1916] 2 Ch 426; Johnny Oceans Restaurant Pty Ltd v Page [2003] NSWSC 952; Clarke v Bridges [2004] FCA 394; Booker v You Run the Business Pty Ltd [2008] FCA 1762.

[51] Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 ('Nasser v Innovative Precasters').

[52] Loch v John Blackwood Ltd [1924] UKPC 45; [1924] AC 783, 788; Australian Securities and Investments Commission v ABC Fund Managers [2001] VSC 383; (2001) 39 ACSR 443, 469 (Warren J, as her Honour then was) ('ASIC v ABC Fund').

[53] Macquarie Bank Ltd v TM Investments Pty Ltd [2005] NSWSC 608; (2005) 223 ALR 148, [11], [13] (Barrett J); Macquarie University v Macquarie University Union Ltd (No 2) [2007] FCA 844. See also BH McPherson, 'Winding up on the "Just and Equitable" Ground' (1964) 27(3) Modern Law Review 282, 298-9.

[54] Australian Securities and Investments Commission v Barrack Mortgage Managers Pty Ltd [1999] NSWSC 272 ('ASIC v Barrack Mortgage'); Australian Securities and Investments Commission v Drury Management Pty Ltd [2004] QSC 068 ('ASIC v Drury Management').

[55] Entwisle v Minken Pty Ltd (recs and mgrs apptd) (2013) 97 ACSR 361, 364 (Elliott J) ('Entwisle v Minken').

[56] Australian Securities and Investments Commission v AS Nominees Limited [1995] FCA 1663; (1995) 62 FCR 504, 532-3 (Finn J) ('ASIC v AS Nominees'); ASIC v ABC Fund, 469; Australian Securities and Investments Commission v International Unity Insurance Pty Ltd [2004] FCA 1059, [137], [140]-[142] (Lander J) ('ASIC v International Unity').

[57] Commonwealth Deputy Commissioner of Taxation v Casualife Furniture International Pty Ltd [2004] VSC 157; (2004) 9 VR 549, 580 [494]-[496], 582 [504] (Hansen J).

[58] Australian Securities and Investments Commission v ABC Fund [2001] VSC 383; (2001) 39 ACSR 443.

[59] Galanopoulos v Moustafa [2010] VSC 380, [32] (Sifris J, as his Honour then was) ('Galanopoulos v Moustafa').

[60] Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193, 201; Re Docklands Chiropractic, [37]-[42]; Re JSSP Holdings, [15].

[61] Re Walter L Jacob & Co Ltd (1988) 5 BCC 244, 251 (Nicholls LJ); Australian Securities and Investments Commission v AS Nominees Ltd [1995] FCA 1663; (1995) 62 FCR 504, 530-1 (Finn J); Re JSSP Holdings, [16].

[62] [2017] VSC 14; (2017) 53 VR 520, 545. See also Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247.

[63] International Hospitality Concepts Pty Ltd v National Marketing Concepts Inc [No 2] (1994) 13 ACSR 368, 372 (Young J).

[64] French v Smith [2004] VSCA 207 at [122] per Charles and Chernov JJA and Harper AJA; Sassine v Ray & Sons Construction Pty Ltd [2012] NSWSC 307 at [21] per Black J.

[65] Turner v Ulicorp Pty Ltd [2007] NSWSC 206 at [24] per Barrett J; Host-Plus Pty Ltd v Australian Hotels Association [2003] VSC 145 at [67] per Hansen J.

[66] Re Wyndham Park Estate, [40]-[42]; Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247.

[67] Ebrahimi [1973] AC 360, 367 (Lord Cross); Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319, [39].

[68] Ruut v Head (1996) 20 ACSR 160, 161 (Santow J) ('Ruut v Head'); Malos v Malos [2003] NSWSC 118; (2003) 44 ACSR 511, 516 [26] (Barrett J).

[69] Exton v Extons, 529, citing Re Amazon Pest Control Pty Ltd [2012] NSWSC 1568, [22]; Re David Ireland Productions Pty Ltd [2014] NSWSC 1411, [7].

[70] Ebrahimi [1973] AC 360, 379 (Lord Wilberforce).

[71] Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152, [52] (Austin J), citing Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 708; Ruut v Head, 162. This aspect of the decision was not overturned on appeal. See also Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, 687; Nassar v Innovative Precasters, 359-60 (Barrett J).

[72] Nassar v Innovative Precasters, 356.

[73] Exhibits to the Affidavit of Jian Yang affirmed 27 August 2021, 131.

[74] Affidavit of Xu Dong Zheng affirmed 14 September 2021, [55].

[75] Transcript of Proceedings, In the Matter of Dawning Investments Pty Ltd and Dawning Developments Pty Ltd (Supreme Court of Victoria, S ECI 2020 03674, Hetyey AsJ, 30 November 2021, 1 December 2021, 22 December 2021, 16 February 2022) ('Transcript of Proceedings' or 'Transcript') 319.

[78] Defendant's closing submissions filed 7 February 2022, [7].

[79] Exhibits to the Affidavit of Jian Yang affirmed 27 August 2021, 126 - 130.

[80] Exhibits to the Affidavit of Grace Yang affirmed 16 September 2021, 153.

[81] As confirmed by Steven in his affidavit (at [21]), 'CRS' is a reference to Common Reporting Standard. The Common Reporting Standard is an information-gathering and reporting measure for financial institutions in participating jurisdictions used to assist in preventing tax evasion and to support the integrity of tax systems: see generally Australian Taxation Office, 'Automatic Exchange of Information Guidance: CRS and FATCA' (2 August 2021) .

[82] Exhibits to the Affidavit of Grace Yang affirmed 16 September 2021, 159.

[84] Re Rococo Group Pty Ltd (in liq) [2022] VSC 167, [107] (Hetyey AsJ).

[85] (2020) 356 FLR 390.

[87] Australian Securities and Investments Commission v PFS Business Development Group [2006] VSC 192; (2006) 57 ACSR 553, 623 (Hargrave J) ('ASIC v PFS'). See also Sheahan v Verco [2001] SASC 91; (2001) 37 ACSR 117, 134-5, 140-1 (Mullighan J)

[88] ASIC v AS Nominees, 532-3; ASIC v ABC Fund, 469; ASIC v International Unity, [137], [140]-[142].

[89] Re Parkway One Pty Ltd (in liq) [2019] NSWSC 1495, [85] (Rees J).

[91] ASIC v Barrack Mortgage; ASIC v Drury Management; Entwisle v Minken, 364.

[93] Tendered exhibit 'MFI-15', 'ASIC Current and Historical Extract for Winehol Pty Ltd'.

[94] [1965] 1 All ER 667 ('Re Bellador Silk').

[96] [2021] HCA 11; (2021) 388 ALR 376.

[97] Ibid 381, [18] (Kiefel CJ, Gageler, Keane and Gordon JJ).

[98] Ibid 381, [19], citing Strickland v Commonwealth Director of Public Prosecutions (2018) 266 CLR 325 and Moti v The Queen [2011] HCA 50; (2011) 245 CLR 456.

[100] [1992] HCA 34; (1992) 174 CLR 509.

[101] Ibid 526-7 (Mason CJ, Dawson, Toohey and McHugh JJ) ('Williams v Spautz'), citing In re Majory (1955) Ch 600, 623-4 and Goldsmith v Sperrings Ltd [1977] 1 WLR 478, 498-9; [1917] 2 All ER 566, 581-2; Varawa v Howard Smith Co Ltd (1911) 13 CLR 91.

[102] Williams v Spautz, 529 (Mason CJ, Dawson, Toohey and McHugh JJ).

[103] Ibid, citing Scarman LJ in Goldsmith v Sperrings Ltd [1977] 1 WLR 478, 489.

[105] ICF Spry, The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages (Lawbook, 9th ed, 2013) 175, citing Dering v Earl of Winchelsea (1787) 1 Cox 318, 319; Moody v Cox [1917] 2 Ch 71.

[106] See O'Neill v Phillips [1999] UKHL 24; [1999] 1 WLR 1092, 1101-2 (Lord Hoffmann).

[107] See Re Wan Ze Property Development (Aust) Pty Ltd [2012] NSWSC 722; (2012) 90 ACSR 593, 609.

[110] Galanopoulos v Moustafa, [34].

[111] (1984) 9 ACLR 247.

[112] Ibid 252 (referring to the application of s 367(3) of the Companies (Qld) Code; the legislative predecessor to s 467(4)).

[113] Asia Pacific Joint Mining, 537 [47].

[115] Host-Plus Pty Ltd v Australian Hotels Association [2003] VSC 145, [67] (Hanson J).

[116] [2018] QCA 48; (2018) 3 Qd R 520.

[119] National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] VicRp 31; (1991) 1 VR 386, 541 (Kaye, Murphy and Brooking JJ).

[120] Re Crow Inn Pty Limited [2020] NSWSC 601, [63] (Rees J).

[121] Queensland Phosphate Pty Ltd v Paradise Phosphate Ltd [2019] VSCA 215, [242] (Kyrou, McLeish and Niall JJA). See also McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603, 619.

[122] Kokotovich Constructions Pty Ltd v Wallington [1995] NSWSC 54; (1995) 17 ACSR 478, 494 (Kirby ACJ, with Priestly and Handley JAs agreeing).

[123] Re United Medical Protection [2002] NSWSC 413, [5] (Austin J), citing Bastion v Gideon Investments Pty Ltd (2000) 35 ACSR 466.

[124] Glazier Holdings Pty Ltd v Australian Mens Health Pty Ltd [1998] NSWSC 144 (Young J).

[125] Vigliaroni v CPS, 309; Wain v Drapac, [287].

[126] Rohrt v Princes Square (No 2) (2021) 151 ACSR 270, 282 (Anderson J) ('Rohrt v Princes Square (No 2)'), citing SMP Consolidated Pty Ltd (in liq) v Posmot Pty Ltd [2014] FCA 1382, [7] and the authorities cited there.

[127] Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677, [26], [28] (Gordon J) ('Caterpillar Financial'); Kitay, Re South West Kitchens (WA) Pty Ltd [2014] FCA 670, [20] (McKerracher J); Re Cremin, Brimson Pty Ltd (in liq) [2019] FCA 1023; (2019) 136 ACSR 649, 655-6 [49]-[50] (Moshinsky J) ('Re Cremin').

[128] Ibid; Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth of Australia [2019] HCA 20; (2019) 268 CLR 524, [29]-[32] (Kiefel CJ, Keane and Edelman JJ), [132] (Gordon J) ('Carter Holt'); Jones (in his capacity as liquidator of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) v Matrix Partners Pty Ltd [2018] FCAFC 40; (2018) 354 ALR 436 ('Killarnee'); Rohrt v Princes Square (No 2), 281-2 (Anderson J).

[129] Killarnee, [44] (Allsop CJ); Re Carello, Re Gembrook Investments Pty Ltd (in liq) [2019] FCA 1143, [21] (Colvin J); Re Waratah Group Pty Ltd (in liq) [2020] VSC 523, [36] (Delany J) ('Waratah Group'); Re Parkway One Pty Limited (No 2) [2020] NSWSC 191 (Rees J); Re Glenvine Pty Ltd (In Liq) [2020] NSWSC 866, [46] (Black J); Rohrt v Princes Square (No 2), 282-3 (Anderson J).

[130] See In re Straw Products Pty Ltd [1942] VicLawRp 12; [1942] VLR 139; Re Wondoflex Textiles Pty Ltd [1951] VicLawRp 33; [1951] VLR 458 and also the obiter comments of Young JA in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310, 382; Re TM Fresh Pty Ltd [2019] VSC 383, [49] (Hetyey JR, as his Honour then was). Cf White Family No 1 Pty Ltd v Organic Brands Pty Ltd [2011] VSC 247, in which Gardiner AsJ declined to postpone the making of a winding up order because his Honour was not confident the parties were capable of resolving the dispute.