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[2024] VSC 705
Supreme Court of Victoria
2024-11-14
M Osborne J
Original judgment source is linked above.
CORPORATIONS - Oppression proceeding - Whether affairs of company have been conducted in an oppressive manner - Removal of director - Whether legitimate expectation of participation in management - Whether unreasonable denial of access to company records - Understanding of the parties when they commenced a quasi-partnership in the form of a company - Whether conduct was unfairly prejudicial to a member - Commercial unfairness - Oppression made out - Corporations Act 2001 (Cth) ss 180, 198F(2)(b), 232(b) and (e), 233(1)(a) and (d), , (1)(k), , , , .
CORPORATIONS - Relief on oppression proceeding - Appropriate remedies - Whether minority or majority should be able to buy the other out - Whether winding up on just and equitable ground justified - Winding up as a remedy of last resort - Whether 'some other remedy' available that is less intrusive - Valuation of shares - Direction of buy-out order - Date of assessment - Appointment of expert pursuant to s 65M of the Civil Procedure Act 2010 (Vic).
For the Plaintiff and for the First, Second and Third Defendants by Counterclaim
SM Nazmus Shadat appeared in person and with leave on behalf of the Second and Third Defendants by Counterclaim
Dr O Bigos KC with J Kohn and R Turnbull of counsel
1 The plaintiff and first defendant by counterclaim, SM Nazmus Shadat ('Mr Shadat'), is the owner of 38 of the 100 issued shares in the third defendant and plaintiff by counterclaim, ANIT Australia Pty Ltd ('ANIT'). The first defendant, MD Imtiaj Rahman ('Mr Rahman'), also owns 38 shares. The remaining 24 shares are owned by the second defendant, MD Abu Huraira ('Mr Huraira').
2 ANIT was incorporated on 8 August 2016. It provides education services to foreign students under the trading name 'Albright Institute of Business and Language' ('Albright').
3 At a shareholders' meeting held on 31 March 2020, Mr Rahman and Mr Huraira, voted to remove Mr Shadat as a director of ANIT. The relevant resolution was in the following terms:
Due to various unethical, unfair and unexpected transactions carried out by SM Nazmus Shadat, a vote shall be cast in order to determine whether Mr Shadat shall remain as a Director. Both Md Abu Huraira and Md Imtiaj Rahman voted in favour of SM Nazmus Shadat being removed as a Director. Since they hold the majority of shares (62% in total) an ordinary resolution was passed where the outcome is the removal of SM Nazmus Shadat as a Company Director. Mr Shadat was reluctant to sign the minutes and disagreed with the whole outcome.
4 The removal of Mr Shadat as a director of ANIT and associated events lie at the heart of this proceeding.
5 The three men were formerly friends. They shared a cultural background, having immigrated from Bangladesh. Mr Shadat arrived in Australia and moved to Melbourne in 2009, and obtained a Certificate IV in Accounting from Swinburne University in 2012. He later graduated with a Bachelor of Business from the Kaplan Business School in 2014. Mr Rahman came to Australia in 2012, and obtained professional accountancy qualifications from the Charles Stuart University, Melbourne Campus in 2014.
6 In 2014, the Australian Government introduced the Pearson Test of English (PTE) which is an English language test which must be completed as a pre-requisite to obtaining permanent residency. Both Mr Shadat and Mr Rahman completed the PTE successfully in late 2014, and obtained permanent residency in Australia. From about 27 January 2015 onwards, Mr Shadat and Mr Rahman started operating a private coaching business known as PTE Study Centre, which provided English language training to students with the aim of enabling them to achieve good results in the PTE.
7 Mr Rahman had already obtained an ABN in his own name on 30 April 2013. Initially, when the business started operating under the 'Melbourne PTE Study Centre' name, it used Mr Rahman's personal ABN and operated from Mr Rahman's house in Sunshine.
8 On about 6 March 2015, Mr Shadat and Mr Rahman opened a new PTE branch in Parramatta and then a second branch later in December 2015 in Surry Hills, which they referred to collectively as 'Sydney PTE Study Centre'. The Sydney branches were managed by Mohammed Rashedul Alam Khan ('Mr Khan').
9 On 22 April 2015, PTE Study Centre Pty Ltd was incorporated and obtained its own ABN. Its 100 issued shares were owned in equal parts by Mr Shadat and Mr Rahman, who were appointed as the company's directors. PTE Study Centre Pty Ltd started operating the PTE businesses. On 17 December 2015, Mr Shadat resigned as a director of PTE Study Centre Pty Ltd and transferred his shares in the company to Mr Rahman. The circumstances of Mr Shadat's resignation and transfer are disputed and are subject to further consideration below.
10 Despite his resignation as a director, Mr Shadat remained involved (to use a neutral term) with the PTE Study Centre businesses.
11 In about April 2016, Mohammed Nahid Karnal Tonmoy ('Mr Tonmoy'), a friend of Mr Rahman, was appointed as the manager of a new PTE branch in Brisbane, which operated under the business name, 'Brisbane PTE Study Centre'. The Brisbane branch used Mr Rahman's existing ABN.
12 In about January 2017, the Adelaide PTE branch was established and operated out of premises in Hindley Street, Adelaide. Mr Shadat's brother, Nazmus Sohan (Mr Sohan) who is the fourth defendant by counterclaim, was appointed as its centre manager.
13 In about August 2016, Mr Shadat, Mr Rahman, Mr Huraira, and another friend Tanvir Ahmed ('Mr Ahmed'), discussed establishing a new company which would also obtain RTO accreditation. The name of the company 'ANIT' was chosen because it represented the first letter of each of their first names (Abu Huraira, Nazmus Shadat, Imtiaj Rahman, and Tanvir Ahmed).
14 In late 2016, ANIT was recognised by the Australian Skills Quality Authority ('ASQA') as an RTO. ANIT commenced trading under the business name 'Albright' in January 2018, operating out of levels 2 and 8, 341-345 Queen Street, Melbourne, pursuant to a lease entered into by ANIT. It started receiving tuition fees from students from 29 January 2018. ANIT also carried on business in Adelaide, Brisbane, and Sydney from premises which it occupied variously as lessee or licensee - opening in Adelaide from January 2018, Brisbane from September 2018, and Sydney from July 2020. It is not in dispute that PTE Study Centre also operated from the Queen Street, Melbourne premises.
15 ANIT's initial shareholders were Mr Shadat, 40 shares; Mr Rahman, 30 shares; Mr Huraira, 20 shares; and Mr Ahmed, 10 shares. It is common ground that this was an error and the records should have shown that Mr Shadat and Mr Rahman each held 35 shares. Each of the four shareholders were appointed as co-directors. There is some dispute about how ANIT was to be funded; according to Mr Shadat, the majority of the proposed initial funding was to be provided by PTE Study Centre which would lend ANIT $260,000, whilst Mr Huraira would advance $50,000. Mr Rahman and Mr Huraira both say that each of Mr Shadat and Mr Rahman was to lend $130,000 and Mr Huraira $50,000. The difference may arguably not matter much as Mr Shadat agrees that the $260,000 in total to be lent by PTE Study Centre was to be treated as if it was advanced as to $130,000 by each of Mr Shadat and Mr Rahman. It is also common ground that Mr Shadat and Mr Rahman did not have any operational role in the business and concentrated on the PTE businesses. In contrast, Mr Huraira was to be the Chief Executive Officer of the business and responsible for its operations and strategy.
16 On 15 August 2017, PTE Study Centre Adelaide Pty Ltd ('PTE Adelaide') was incorporated, with Mr Rahman registered as its sole director and shareholder. On the next day, PTE Study Centre Brisbane Pty Ltd ('PTE Brisbane') and PTE Study Centre Sydney Pty Ltd ('PTE Sydney') were both incorporated with Mr Shadat registered as the sole director and shareholder. PTE Brisbane and PTE Sydney are the second and third defendants by counterclaim. These entities operated the PTE businesses in those cities. It is also not in dispute that PTE Adelaide, PTE Brisbane, and PTE Sydney operated from the same premises as ANIT in those cities. Nor is it in dispute that PTE Study Centre Pty Ltd (which for convenience from this point is referred to as 'PTE Melbourne') continued to operate the PTE business in Melbourne from the Queen Street, Melbourne premises leased by ANIT.
17 The circumstances relating to the establishment of PTE Adelaide, PTE Brisbane, and PTE Sydney, and the reason why Mr Rahman was the sole director and shareholder of PTE Melbourne and PTE Adelaide and Mr Shadat the sole director and shareholder of PTE Brisbane and PTE Sydney are disputed. According to Mr Shadat, it was Mr Huraira's idea who said it would be simpler administratively given Mr Rahman was still recorded as the sole director of PTE Melbourne. Mr Shadat said he agreed to this, but only after being told that it did not affect the underlying effective ownership of the PTE businesses, which he said were owned 50:50 by he and Mr Rahman. Mr Rahman in contrast said that he owned 100% of PTE Melbourne and PTE Adelaide, whilst Mr Shadat owned 100% of PTE Brisbane and PTE Sydney. In Mr Rahman's witness statement, he says that Mr Shadat's ownership of PTE Brisbane and PTE Sydney was subject to an agreement that Mr Shadat was to pay Mr Rahman a royalty of 20% of the sales from the operation of the PTE Sydney and PTE Brisbane businesses. This is denied by Mr Shadat.
18 As noted above, the removal of Mr Shadat as a director of ANIT by resolution passed on 31 March 2020 lies at the heart of Mr Shadat's claim.
19 The allegations of oppressive conduct encompass events which precede and post-date, but are nevertheless related to that key event.
20 First, Mr Shadat complains of an unreasonable denial of access to company records by Mr Rahman and Mr Huraira with respect to certain withdrawals effected by Mr Huraira from ANIT's bank account during December 2019.
21 Secondly, Mr Shadat complains of his exclusion from the management of ANIT as and from 16 January 2020, by Mr Rahman and Mr Huraira which extended to being denied access to financial resources and information.
22 Thirdly, Mr Shadat complains of his removal by Mr Rahman and Mr Huraira as a director of ANIT at the meeting on 31 March 2020.
23 Fourthly, Mr Shadat complains of being refused access to the financial records of ANIT by Mr Rahman and Mr Huraira prior to orders being made by the Court on 3 September 2020.
24 Fifthly, Mr Shadat complains of the incorporation by Mr Rahman and Mr Huraira of a company called ANIT Aus Pty Ltd on 16 January 2020 ('ANIT Aus') and the diversion of funds from ANIT to ANIT Aus from 16 January 2020 onwards.
25 Sixthly, Mr Shadat complains of the additional diversion of ANIT's funds by Mr Huraira to his personal account during the period February 2018 to December 2019, and during the period September 2017 to December 2019.
26 Seventhly, Mr Shadat complains of the misleading recording of loan funds provided by him and the purported repayment of those loans in what purport to be financial statements of ANIT for the financial years ending 30 June 2019 ('FY 2019 Financial Statements') and 30 June 2020 ('FY 2020 Financial Statements'). In particular, he contends that his loan account is based on a flawed investment summary document prepared by Mr Rahman and Mr Huraira and provided to Mr Shadat on or about 25 September 2020, which understates Mr Shadat's loan account.
27 Eighthly, Mr Shadat complains about the accuracy of the FY 2019 and FY 2020 Financial Statements. This complaint picks up the inaccuracy in Mr Shadat's loan account, but also extends to complaints about the understatement of revenue and overstatement of the rental expenses in those years.
28 It is convenient to group Mr Shadat's oppression complaints into five main categories - his removal as a director and exclusion from management ('the Exclusion Conduct'); the inaccuracy of the investment summary schedule and financial statements ('the Financial Statements Inaccuracy'); the establishment of ANIT Aus ('the ANIT Aus Establishment'); the denial of information and access to company records ('the Denial of Information'); and the transactions effected by Mr Huraira and the absence of satisfactory explanations by him concerning those transactions ('the Huraira Transactions').
The counterclaim brought by ANIT against Mr Shadat, PTE Brisbane, PTE Sydney, and Mr Sohan
29 First, ANIT's counterclaim alleges breaches of fiduciary and statutory duties owed by Mr Shadat as a director arising from him causing ANIT to guarantee the performance of the obligations of PTE Brisbane in respect of an equipment finance agreement entered into by PTE Brisbane with the Bank of Queensland Equipment Finance Limited ('BoQ') dated 13 December 2018 ('the PTE Brisbane-BoQ Agreement') and by reason of Mr Shadat causing ANIT to make equipment rental payments in the total sum of $75,512.91 from ANIT's bank accounts for the benefit of PTE Brisbane in respect of PTE Brisbane's obligations under the PTE Brisbane-BoQ Agreement.
30 Secondly, ANIT complains of an analogous breach of duty by Mr Shadat as a result of him causing ANIT to guarantee the performance of the obligations of PTE Brisbane under an equpiment finance rental agreement entered into by PTE Brisbane with Capital Finance Australia Pty Ltd ('Capital Finance') on 23 November 2018 ('the PTE Brisbane-Capital Finance Agreement').
31 Thirdly, ANIT makes analogous allegations of breach of duty on the part of Mr Shadat in causing ANIT to make five equipment rental payments in the total sum of $70,075.00 from ANIT's bank accounts for the benefit of PTE Sydney in respect of an equipment finance rental agreement entered into by PTE Sydney with BoQ dated 1 October 2019 ('the PTE Sydney-BoQ Agreement').
32 It is convenient to consider these three claims, the 'Equipment Finance Claims', together.
33 Fourthly, ANIT submits that Mr Shadat is liable for $491,551.20 in an action for moneys had and received by reason of Mr Shadat causing sums totalling this amount to be transferred from ANIT to accounts held or controlled by Mr Shadat, PTE Brisbane, PTE Sydney, Mr Sohan, or their agents or creditors, whether directly or by payments routed through the personal bank accounts of Mr Huraira during the period between 2 July 2018 and 15 January 2020 ('the Unauthorised Transactions').
34 Fifthly, ANIT contends that Mr Shadat breached his fiduciary and statutory duties by effecting payments totalling $69,000 from ANIT's bank account to his own personal account on 16 January 2020 ('the 16 January 2020 Withdrawals').
35 Sixthly, ANIT complains that on or around 17 May 2018 and on or around 3 June 2018, Mr Shadat breached his fiduciary and statutory duties by causing payments totalling $17,600 to be paid from ANIT's bank account for the benefit of Mr Sohan ('the Sohan Payments'). Mr Sohan is also alleged to be directly liable for the Sohan Payments.
36 Seventhly, ANIT contends that Mr Shadat is liable for damages for the tort of conversion and/or detinue arising from his failure to return a Ferrari motor vehicle registered in ANIT's name, despite several demands made by ANIT for Mr Shadat to give over possession of the Ferrari ('the Ferrari Damages Claim').
37 Eighthly, ANIT contends that Mr Shadat is liable to pay equitable compensation or compensation pursuant to s 1317H of the Corporations Act 2001 (Cth) ('the CA') with respect to ANIT's liability for fringe benefits tax ('FBT') in the amount of $51,763 by reason of Mr Shadat's personal use of the Ferrari ('the FBT Liability').
38 It is convenient to consider the FBT Liability and the Ferrari Damages Claim together ('the Ferrari Claims').
39 Lastly, ANIT contends that Mr Shadat breached his director's duties by causing ANIT to breach its superannuation guarantee liability obligations ('SGL') for the period 1 April 2018 to 31 December 2020 ('the SGL Claim').
40 For completeness, there are various claims of ancillary liability on the part of PTE Brisbane and PTE Sydney. These claims only need to be considered if the claims of primary liability against Mr Shadat are made out.
Witnesses and some notable features of the trial
41 During the lead up to the trial, Mr Shadat was represented by a number of different law firms. This proceeding was fixed for trial on a date to be fixed by orders made 15 September 2023. On 9 October 2023, the trial date of 19 August 2024 was confirmed and conveyed to the parties by email.
42 On 30 May 2024, I heard an application by Mr Shadat for leave to amend his statement of claim and for further discovery. The application was refused on the basis, among other things, that it was too late and involved a substantial expansion of the issues in the proceeding. Subsequent to the determination of that application, on 12 July 2024, Mr Shadat's then solicitors obtained leave to file a notice of ceasing to act. Following the filing of the notice of ceasing to act, Mr Shadat was self-represented, as was his brother Mr Sohan, the fourth defendant by counterclaim. On 16 August 2024, I made orders giving Mr Shadat leave to appear on behalf of PTE Brisbane and PTE Sydney.
43 In the lead up to the trial, Mr Shadat issued various subpoenas, including a subpoena to give evidence and produce documents served on the former accountant for ANIT and the PTE companies, Md Russell Rahman[1] ('Russell Rahman') from Russell & Partners Chartered Accountants and the current accountant for ANIT, Lutful Baki ('Mr Baki') from Edge Advisory Services Pty Ltd.
44 In addition, Mr Shadat served a subpoena to give evidence on Mr Daniel Heywood ('Mr Heywood'). Mr Heywood is a chartered accountant and former partner at PWC Australia. Mr Heywood had previously prepared an expert's report on the instruction of the solicitors of Mr Rahman and Mr Huraira.
45 Mr Shadat also served a subpoena on Paul Waterhouse ('Mr Waterhouse'), who had earlier prepared an independent business valuation of ANIT pursuant to orders of the Court made 3 September 2020. In the result, Mr Shadat chose to not call on that subpoena. Accordingly, Mr Waterhouse did not give evidence.
46 Aside from Mr Heywood, whose evidence-in-chief was given by way of the tender of his expert report, and those witnesses who gave evidence after being subpoenaed by Mr Shadat, the remaining three witnesses, Mr Shadat, Mr Huraira, and Mr Rahman, all gave evidence-in-chief by way of the tender of lengthy witness statements.
47 The orders for the service of witness statements provided for the statements to be served on a staggered basis, with Mr Shadat's witness statement being served on 28 October 2022, followed by the statements in response from Mr Huraira and Mr Rahman on 23 January 2023, and a subsequent reply witness statement from Mr Shadat on 6 April 2023. In the reply witness statement, Mr Shadat set out in some detail those aspects of the evidence of Mr Huraira and Mr Rahman with which he agreed and those with which he took issue.
48 The staggering of witness statements in this way had the effect of ensuring that the three lay witnesses, Mr Shadat, Mr Huraira, and Mr Rahman, were or ought to have been on notice of the material parts of their evidence which was in contest. In those circumstances, the assertion made by Mr Rahman, Mr Huraira, and ANIT (together 'the defendants') in closing submissions that Mr Shadat's failure to cross-examine Mr Huraira and Mr Rahman on various matters breached the rule in Browne v Dunn is of little consequence. Browne v Dunn is a rule of procedural fairness which ensures that a party has notice of and the opportunity to respond to factual matters alleged against it. Where the party against whom an allegation is made is denied such opportunity, it may result in a denial of procedural fairness such that it is unsafe or inappropriate for the fact-finder to make findings against the party denied procedural fairness. That is not the case here, where the service of detailed witness statements on a staggered basis made clear the key factual controversies. Any failure to put matters to a witness in those circumstances only goes to the weight to be attributed to the evidence relied upon.[2] For completeness, there were just as many (if not more) occasions where the defendants did not put certain matters to Mr Shadat, most particularly those contained in new aspects of their evidence given by way of amendments to their respective witness statements which were made when Mr Huraira and Mr Rahman stepped into the witness box.
49 Mr Shadat was cross-examined for a little over one day by senior counsel for Mr Huraira and Mr Rahman. He was cross-examined fairly, but vigorously. He made few concessions in cross-examination, aside from those that he had earlier made in his reply witness statement. Mr Shadat presented as an intelligent and measured witness. Overall, I formed a favourable view of Mr Shadat's evidence.
50 The second witness called by Mr Shadat was Russell Rahman. Russell Rahman had ceased providing accountancy services for ANIT in September 2020. He presented as an honest witness, but one who had little independent recollection of relevant matters. The gist of Russell Rahman's evidence was to the effect that he or others in his office reviewed and prepared various documents on the basis of instructions provided to him or them, for the most part, by Mr Huraira. Russell Rahman was not cross-examined.
51 The third witness called by Mr Shadat was Mr Heywood. Mr Heywood's evidence-in-chief was given by way of the tender of his expert report. Mr Heywood was not cross-examined.
52 The fourth witness called by Mr Shadat was Mr Baki, who has been ANIT's tax accountant since March 2021. Mr Shadat adduced evidence from Mr Baki in relation to various matters concerning his preparation of business activity statements ('BAS') and financial statements for ANIT from the date of his appointment, which included, relevantly, his preparation of a company tax return for ANIT for the period ending 30 June 2019, which was prepared by Mr Baki's firm on or about 12 May 2021.
53 Mr Baki was briefly cross-examined by senior counsel for Mr Rahman and Mr Huraira. The principal purpose of the cross-examination was to tender through Mr Baki, BAS for ANIT Aus for the quarter 1 January 2020 to 31 March 2020 and for ANIT for the quarter 1 April 2020 to 30 June 2020, and ANIT Aus's company tax return for the period ending 30 June 2020. Mr Baki presented as an honest witness.
54 Mr Huraira was the first witness called by the first and second defendants. His evidence-in-chief was given by way of the tender of an 89-page witness statement, which included reference to numerous documents and various tables detailing bank payments and student enrolment capacity in ANIT during different years.
55 Mr Huraira's witness statement, upon challenge, presented as an incomplete and, in large part, inaccurate version of events. Mr Huraira at least showed sufficient awareness to be embarrassed as he sheepishly sought to maintain a narrative which was obviously false, as became apparent to Mr Huraira during the course of cross-examination. Overall, I found Mr Huraira's evidence unreliable.
56 As was the case with Mr Huraira, Mr Rahman's evidence-in-chief was given by way of the tender of a lengthy 52-page witness statement.
57 I formed a most unsatisfactory view of Mr Rahman's evidence. He gave new accounts of critical events for the first time variously in oral evidence-in-chief or when cross-examined, sometimes in gratuitous and arguably offensive terms. His evidence in a number of key respects was untrue or highly improbable. Mr Rahman was a most unsatisfactory witness.
Some notable features of the activities of ANIT and the PTE companies
58 The directorships and shareholdings in ANIT changed frequently due to the personal and business reasons of its directors. As noted above, each of Mr Shadat, Mr Rahman, Mr Huraira, and Mr Ahmed were initially appointed as co-directors, and each held shares in the proportions set out earlier (noting that all parties accept that it was an error to record Mr Shadat as a 40% shareholder and Mr Rahman as a 30% shareholder, and that both should in fact have been shown as 35% shareholders).
59 It is also common ground that, in about mid-2017, Mr Ahmed ceased all involvement with ANIT due to personal reasons and agreed to give up his shareholding. Although there was no clear explanation, his departure from ANIT was not reflected in the change of shareholdings or directorships until some time later. It is nevertheless common ground that Mr Shadat, Mr Rahman, and Mr Huraira agreed that Mr Ahmed's shareholding would be divided among them, such that Mr Shadat and Mr Rahman would each hold 38.5% of the shares and Mr Huraira 23%. Mr Huraira emailed Russell Rahman on 8 August 2017 and 9 September 2017, requesting that Mr Ahmed be removed as a director and that the shareholdings be changed such that Mr Shadat and Mr Rahman each hold 38% of the shares and Mr Huraira 24%. For reasons unexplained, Russell Rahman did not lodge the relevant forms with ASIC until 4 April 2018, at which time the records with ASIC were updated to record Mr Ahmed's resignation as a director. A change was also effected to Mr Ahmed's shareholding at that same time, which differed from the instruction sent to Russell Rahman on 8 August 2017.
60 The reason for this is that it is accepted that on 7 February 2018, Mr Huraira requested that he be removed as a director of ANIT and that his shares be transferred to Mr Shadat because Mr Huraira was applying for a home loan, and he considered that it would increase his prospects of getting his home loan application approved if he was not shown as a director and shareholder of ANIT because ANIT was still a start-up company. Mr Shadat agreed that he would transfer Mr Huraira's shares back to him at a later stage on request. In the result, on 8 February 2018, Russell Rahman lodged forms with ASIC recording Mr Huraira's resignation as a director and the transfer of Mr Huraira's 20% shareholding to Mr Shadat. At that time, the ASIC records showed that Mr Shadat held 60% of the shares in ANIT, Mr Rahman 30%, and Mr Ahmed 10%, and that the three directors were Mr Shadat, Mr Rahman, and Mr Ahmed.
61 As noted above, the transfer of Mr Ahmed's shares to Mr Rahman and the resignation of Mr Ahmed as a director was effected by forms lodged with ASIC on 4 April 2018. As at that date, the ASIC database showed that Mr Shadat held 60% of the shares in ANIT and Mr Rahman 40%, and that the two directors were Mr Shadat and Mr Rahman.
62 On 23 May 2018, Mr Rahman resigned as a director of ANIT and transferred all of his shares to Mr Shadat, with the result that Mr Shadat was now shown as the sole director and sole shareholder. It is common ground between Mr Shadat and Mr Rahman that this occurred so as to assist Mr Shadat's prospects of obtaining finance for his home loan application in order to acquire a block of land for a house in Melbourne. It is also common ground that Mr Shadat agreed that he would transfer the shares back to Mr Rahman whenever Mr Rahman wanted, and that Mr Rahman would be reinstated as a director of ANIT on request.
63 Mr Rahman and Mr Huraira say that subsequently, Mr Shadat refused to transfer the shares back and re-appoint them as directors. Mr Shadat denies this and says that despite the changes in the ASIC records, nothing had changed and that all three acted exactly as they had done from the time ANIT was established. Mr Shadat says that Mr Rahman or Mr Huraira did not ever raise the question of the transfer back of the shares or their re-appointment as directors until 28 November 2019. He says that if they had asked him, he would have done so.
64 In any case, it is common ground that on 28 November 2019, Mr Shadat signed and Russell Rahman lodged various forms with ASIC, which recorded that Mr Rahman and Mr Huraira be appointed as directors and that Mr Shadat transfer 38 shares to Mr Rahman and 24 shares to Mr Huraira.
65 The result of these transactions was to leave Mr Shadat as the owner of 38% of the shares in ANIT, Mr Rahman 38%, and Mr Huraira 24%, with the three shown as directors of ANIT.
66 Unknown to Mr Shadat, on the next day, Mr Huraira resigned as a director and transferred his 24 shares to Mr Rahman, apparently because Mr Huraira was concerned his appointment as a director and shareholder of ANIT would complicate a new loan application by him for finance that he was seeking to obtain to build a house. According to Mr Huraira, he wished to avoid disrupting this process.
67 In any case, on 7 February 2020, Mr Huraira was once again appointed as a director of the company, and Mr Rahman transferred 24 shares back to Mr Huraira. The ASIC records were accordingly updated by Russell Rahman on the instruction of Mr Huraira.
68 Moneys earned by ANIT from its business activities were banked into a series of bank accounts. ANIT had separate bank accounts for its offices in each State in which it carried on business. This is unremarkable; what is less orthodox is that some of the revenues earned by ANIT were banked into a bank account in Mr Huraira's name, as well as in a further bank account in the name of Mr Huraira and his wife. It seems that Mr Huraira made withdrawals or effected transfers from those accounts to pay various expenses of ANIT. In addition, it is not in dispute that ANIT received cash payments which were held either in a safe at the company's Melbourne offices or in a locked drawer in the manager's office, and then used to pay expenses. Mr Huraira accepted somewhat sheepishly that the reason that moneys were banked into his personal account and the joint account with his wife was because of 'tax'.
69 The PTE companies adopted similarly unorthodox practices. Revenue earned by PTE Adelaide and PTE Brisbane was apparently deposited into a bank account held in the name of Mr Huraira's brother-in-law, Abdullah Ah Mahmud ('Mahmud'). In addition to moneys earned by PTE Brisbane being banked into Mahmud's bank account, other revenues received by PTE Brisbane were also banked into a personal account in the name of Mr Rahman and a joint account held in the name of Mr Rahman and Mr Tonmoy. Moneys earned by PTE Adelaide were banked into Mahmud's bank account at Mr Huraira's direction. The most likely inference is that the reason for this approach again had something to do with obtaining tax advantages.
70 In addition, PTE staff also undertook work for ANIT and vice versa.
71 Another unusual feature of the dealings between PTE Melbourne and ANIT is that some of PTE Melbourne's fee income was banked into ANIT's bank account and according to ANIT's defence, accounted for as both an entry in ANIT's balance sheet as a 'loan' from PTE Melbourne and as 'income' in ANIT's BAS.[3] Russell Rahman, ANIT's accountant at the time, agreed that such accounting treatment was not correct.
72 Against the background of these rather unusual matters, it is convenient to return to the oppression allegations and to the more pertinent evidence that relates to them.
Relevant evidence in connection with the oppression allegations
Mr Shadat signs forms re-appointing Mr Rahman and Mr Huraira as directors of ANIT
73 As noted above, on 28 November 2019, Mr Shadat signed various ASIC forms which facilitated the re-appointment of Mr Rahman and Mr Huraira as directors of ANIT. Additionally, and by his transfer of shares to Mr Rahman and Mr Huraira, the ASIC register now recorded that Mr Rahman and Mr Huraira held the majority of shares in ANIT. On Mr Shadat's account, his transfer of shares and re-appointment of Mr Rahman and Mr Huraira simply gave effect to their earlier agreement reached on or about 23 May 2018 when Mr Rahman had resigned.
74 Mr Rahman and Mr Huraira both gave similar evidence that, notwithstanding the agreement reached on or about 23 May 2018 to the effect that Mr Shadat would transfer the shares back to Mr Rahman whenever he wanted (and a similar agreement entered into with Mr Huraira in about February 2018), Mr Shadat subsequently refused to do so.
75 This account from Mr Rahman and Mr Huraira was generalised in nature and lacked all specificity. Mr Shadat, in contrast, floats a different theory; he says that Mr Rahman and Mr Huraira were never troubled by not being shown as directors or shareholders, and only sought to regularise the ASIC records in late November 2019 as part of a plan to assume control of ANIT to the exclusion of Mr Shadat. It is not necessary to decide that Mr Rahman and Mr Huraira initiated the change in directorships and shareholdings in late November 2019 for that purpose.
76 However, I do not accept that Mr Shadat ever refused to transfer the shares back to Mr Rahman and Mr Huraira during the period from 23 May 2018 to 28 November 2019. As noted above, Mr Huraira and Mr Rahman were most unsatisfactory witnesses. Their account of Mr Shadat's refusal is not corroborated by any email or text and of course is entirely at odds with the fact that, on 28 November 2019, only 18 months after Mr Rahman had resigned as a director and his shares were transferred to Mr Shadat, Mr Shadat signed the forms that effectively gave rise to a return to the status quo ante at ANIT. Any refusal of the kind complained of by Mr Rahman and Mr Huraira must have been limited to a refusal over an 18 month period which came to an end by some unexplained change of heart by Mr Shadat. I reject their evidence.
77 Overall, the evidence as a whole reveals that Mr Shadat, Mr Rahman, and Mr Huraira altered the directorships and shareholdings regularly over the course of ANIT's affairs to suit their own personal needs, without intending to alter the underlying ownership and control of ANIT. There is no credible evidence, that during the brief period when Mr Shadat was the sole director of ANIT, the roles of Mr Rahman and Mr Huraira changed in any way. Mr Shadat said they did not and his evidence in that respect is accepted. It is tolerably clear that whatever change was recorded at the ASIC register did not reflect the continued and unaltered involvement of each of Mr Shadat, Mr Rahman, and Mr Huraira in ANIT's affairs.
78 It is common ground, however, that another event occurred in early November 2019 which may have affected the relationship between the key protagonists. According to the accounts set out in both Mr Rahman and Mr Huraira's witness statements, in around November 2019, Mr Rahman wanted to purchase a Lamborghini Huracan, and discussed the prospect of doing so with Mr Shadat who did not say anything in response at that time. According to Mr Rahman and Mr Huraira, the two of them participated in a conference call with Russell Rahman on 8 November 2019. They say that during the course of that telephone call, Russell Rahman warned them that Mr Shadat was not someone they should be in business with, or at least suggested that the three of them did not make good business partners. According to Mr Rahman and Mr Huraira, Russell Rahman told them that Mr Shadat had phoned him that morning complaining about Mr Rahman's planned Lamborghini purchase and offered him $10,000 if he could stop the purchase from going ahead. According to them, Russell Rahman then called Mr Shadat on a second telephone call whilst muting his existing conference call with Mr Rahman and Mr Huraira so that Mr Shadat would not know that Mr Huraira and Mr Rahman were listening in. Mr Rahman and Mr Huraira say that they heard Mr Shadat asking Russell Rahman to not proceed with Mr Rahman's application for finance for the acquisition of the Lamborghini, saying that there was an internal problem in his family and that his wife did not want Mr Rahman to have a Lamborghini. This time, apparently, Mr Shadat offered to pay Russell Rahman double ($20,000) if Russell Rahman ensured that the Lamborghini was not acquired.
79 In senior counsel's cross-examination of Mr Shadat, he put to Mr Shadat the essence of this conversation, also putting to him a further matter not set out in the witness statements of Mr Rahman or Mr Huraira that Mr Shadat's wife was the one who wanted to acquire a Lamborghini. Mr Shadat dismissed the account, among other things, saying that it was ridiculous and that his wife did not even have her driver's licence at that point.
80 When Mr Shadat then called Russell Rahman as a witness, he did not ask any questions of Russell Rahman about this conversation. Nor did senior counsel for Mr Rahman and Mr Huraira ask any questions of Russell Rahman about this in cross-examination.
81 When Mr Shadat cross-examined Mr Rahman and Mr Huraira, he did not raise the matter either. However, in Mr Shadat's reply witness statement, which was tendered as part of his evidence, he dealt with his call to Russell Rahman about the prospective acquisition of the Lamborghini in some detail. In his reply witness statement, he said he did not know Mr Huraira and Mr Rahman were ever listening in to the telephone call, saying that as far as he was aware, it was only between him and Russell Rahman.
82 According to Mr Shadat, during the course of a telephone call with Russell Rahman, he raised concerns about the accounts for the PTE entities and the tax that the PTE entities might owe. He said that he asked Russell Rahman how much it would cost for Russell Rahman to go through the accounts for the PTE entities and reconcile them, to which Russell Rahman responded by saying it would cost about $15,000 to $20,000 in accounting fees. According to Mr Shadat, he then discussed the acquisition by Mr Rahman of the Lamborghini, saying that Mr Rahman wanted to use PTE Adelaide to acquire a Lamborghini and that Mr Shadat did not support this because of his concerns around the financial position of PTE Adelaide. On Mr Shadat's account, Russell Rahman said he would have a conversation with Mr Rahman about fixing the accounts for the PTE entities first, but that as far as he was aware, Mr Rahman was in the process of arranging finance for the acquisition of the Lamborghini.
83 In Mr Shadat's reply witness statement, he also said that Mr Rahman already had a Range Rover SDV8 which was the subject of a finance agreement entered into by PTE Melbourne in February 2019 and that this had come up in discussions between the two when Mr Rahman proposed purchasing the Lamborghini.
84 It is not in dispute that Mr Rahman later went ahead and entered into a similar finance agreement with PTE Adelaide and procured the Lamborghini for personal use.
85 On Mr Rahman's account, the vehicle was sold on or around 27 January 2021. Although the date of disposal only affects Mr Rahman's credit, I do not accept that he only disposed of the Lamborghini then. Rather, I accept that he sold the vehicle on about 12 April 2022, which date is verified by Mr Rahman posting a video to his Facebook page, stating 'final cold start in cold morning. Farewell to the beast' featuring the Lamborghini.
86 To the extent that it matters, I do not accept the evidence of Mr Rahman and Mr Huraira about the conversations between Russell Rahman and Mr Shadat. It was not corroborated by any other account or any other document. Given my overall concerns with their evidence and my general preference for Mr Shadat's evidence where there is a conflict, I accept Mr Shadat's account, which is more detailed and logical, and consistent with the PTE entities having some tax issues at the time which was the case. Further, having observed both Mr Shadat and Russell Rahman in the witness box, Mr Shadat did not come across as someone who would either offer Russell Rahman a bribe of between $10,000 and $20,000 in exchange for taking some unspecified step which somehow would produce the result that Mr Rahman would not acquire a Lamborghini or as someone who would think that Russell Rahman would take such a bribe. Russell Rahman presented as a rational and respectable chartered accountant. The account proffered by Mr Rahman and Mr Huraira had a cartoonish quality, which is consistent with other aspects of Mr Rahman's evidence, but inconsistent with the overall impression I formed of both Mr Shadat and Russell Rahman.
87 Between 4 December 2019 and 30 December 2019, Mr Shadat travelled overseas on a holiday.
88 According to Mr Shadat, during this period Mr Huraira withdrew $79,415.92 from ANIT's bank account by way of the following six payments:
(a) $9,018.20 on 8 December 2019;
(b) $15,000 on 8 December 2019;
(c) $15,352.15 on 10 December 2019;
(d) $5,045.57 on 15 December 2019;
(e) $20,000 on 18 December 2019;
(f) $15,000 on 21 December 2019.
89 Mr Shadat said he did not authorise these payments and was not aware of any reasonable basis for them occurring.
90 Mr Shadat said that when he returned from overseas in about early January 2020, he noticed the payments when he looked at ANIT's online banking system and raised it with Mr Huraira straight away. He said that Mr Huraira refused to provide an explanation, and said that it was not anything that Mr Shadat needed to worry about.
91 Mr Huraira acknowledges that he made the transfers of $15,000 on 8 December 2019 and $20,000 on 18 December 2019, as well as a further transfer of $20,000 on 2 January 2020. According to Mr Huraira, the transfers from the company's bank account to his personal bank account on 8 December 2019 and 18 December 2019 were accounted for by the company as a 'decrease' in his shareholder loan, although the transfer from his personal bank account to the company's bank account of the $20,000 on 2 January 2020 was not accounted for by the company, as it was only a 'short term loan'.
Mr Rahman's 13 January 2020 email
92 On 13 January 2020, Mr Rahman emailed the various managers of the PTE businesses and copied Mr Shadat into the email, with the subject line 'Vision 2020 from 01 February 2020'. In his email, he noted that the businesses had struggled during the last part of the year because of 'the overall immigration scenario' and 'as per my analysis - my failure to take part in the business operation effectively'. He expressed his doubts as to whether the PTE business would remain sustainable in their current state, and stated that it was necessary to cut down significantly on variable operating costs and, also if possible, fixed operating costs. He noted that the businesses needed immediate cash flow to pay off liabilities as soon as possible, especially those owing to the ATO. He then wrote the following:
Keeping the above factors and other below outlined factors in mind, including my current and future vision of the business which is usually not aligned with other managers and stake holders, I have decided to STEP DOWN from the management role of TWO states and relinquishing stake holding; and taking up the whole management and whole stake holding of the other TWO states, only at this point. In other words, I will no longer look after two states of PTE Study Centre and Solely look after and own two other states of PTE Study Centre. Which two, it will be finalized after discussion with everyone involved in the business decision making and it will be implemented from 01 February 2020 Saturday.
93 The email continued with Mr Rahman posing a series of questions which he then answered in the same email. In response to the question, 'Will I open any branches in other states/cities?', he answered, 'No. Where there is current PTE Study Centre, I will not open any branches in that city'. In relation to the question, 'What will be the relationship between PTE and Albright as some managers are working for Albright?', he answered, 'There is no existing relationship between PTE and Albright other than rent and premise sharing. All PTE branches will be under sublease from Albright in written agreement within February 2020. I will leave the process of how the managers will work for Albright to the discretions of the managers. If they can manage their extra time for the work of Albright apart from PTE, it will be decided on the nature of the required tasks of the particular time'.
94 Although the 13 January 2020 email made no reference to, and is inconsistent with Mr Rahman having chosen the two states, in his witness statement, he said that he intended at the time to retain PTE Melbourne and PTE Adelaide which were geographically closer and of which he was already the sole director and shareholder.
95 According to Mr Shadat, he had not received any prior notice from Mr Rahman about his intentions as set out in the 13 January 2020 email and was shocked when he came to know Mr Rahman's decision regarding the change to the ownership and management structure of the PTE entities.
96 On the same day that Mr Rahman sent his email, Mr Huraira emailed Mr Shadat and Mr Rahman at 5:40pm, with the subject line, 'Cash - ANIT PTE' attaching an Excel spreadsheet headed, 'Cash Transaction - PTE ANIT - Final 13.01.2019'. The enclosed spreadsheet was a cash reconciliation in respect of expenditures that Mr Huraira said he incurred for Mr Shadat in relation to the bank accounts of ANIT and the PTE business. In his covering email to Mr Shadat and Mr Rahman, Mr Huraira wrote that he had attached his final calculation for cash transactions relating to the ANIT, PTE, and Mahmud accounts. He requested that this be finalised by 17 January 2019, and otherwise that Mr Shadat pay $13,089.42 to his account on 18 January 2019. Mr Huraira's Excel spreadsheet set out a list of transactions passing between PTE entities, ANIT, Mr Huraira's wife Sumana, Mr Sohan and others, the net effect of which, according to Mr Huraira, was a debt owed by Mr Shadat to Mr Huraira of $13,089.42.
97 It is common ground that Mr Shadat and Mr Rahman met face-to-face on 15 January 2020 to discuss Mr Rahman's 13 January 2020 email.
98 According to Mr Shadat, he told Mr Rahman that the proposed division of the PTE businesses could not proceed and would happen over his dead body. Mr Shadat said that Mr Rahman told him that he did not want to be in business with Mr Shadat any longer. Mr Shadat said he wanted to be involved in the day-to-day operation of ANIT's business and the PTE entities' businesses.
99 According to Mr Rahman, he said that the PTE businesses were in serious financial decline, that Mr Shadat was not making any meaningful contribution to the PTE businesses, was failing to manage the PTE Brisbane and PTE Sydney franchises, and was charging personal expenditures to PTE Brisbane and PTE Sydney, which 'was affecting (his) royalty payments'. Given that Mr Rahman earlier set out in his witness statement that he was entitled to a 20% commission on sales from the two PTE businesses, it is unclear how excessive expenses which would affect profits but not sales would reduce his 'royalty' payments.
Mr Rahman's 16 January 2020 email - the final decision
100 On 16 January 2020 at 3:14pm, Mr Rahman sent a text message to Mr Shadat in which he referred to a conversation that Mr Rahman had with another PTE employee who had told him that Mr Shadat wished to be more involved in Albright (ANIT) because Mr Huraira had created some problems with money and was allegedly stealing. Mr Rahman was critical of Mr Shadat for discussing the matter with the other employee, and said that Mr Shadat had done something similar with him at an earlier time making false accusations. Mr Rahman said that he did not want to discuss anything with Mr Shadat, and that Mr Rahman had his decision in the email.
101 A minute or so later, Mr Rahman sent an email to Mr Shadat and the other managers of the PTE businesses with the subject line 'Urgent Meeting for Restructuring of PTE Study Centre from February 01, 2020' which set out his 'final business decision'. He informed the recipients that if they agreed with him, they were 'more than welcome to make PTE Study Centre the largest PTE Coaching [centre] in Australia', but that if they did not, they could either decide to manage a State on their own without Mr Rahman's involvement or without the aid of any services like the PTE portal or the website, or they could look elsewhere 'for other options than PTE Study Centre.'
102 In the email, he advised the recipients that he would 'continue to be the sole managing director of the PTE Study Centre', and that Mr Shadat would 'no longer be taking any part in any Management decision of the PTE Study Centre, but [would] remain in the business for [an] honorary post to enjoy a part of the profit from [the] overall existing business.' He said that Mr Shadat would receive an honorary profit share of 20% from the existing States, whilst Mr Rahman would derive 25% of the existing States. 10% of the profits would go into reserve until it reached a certain level. Management would get 10% of the profit, and every full-time employee would get 1% of the profit to be paid quarterly, up to a maximum limit of 5%. Profits from newly created PTE States or online would go as to 10% by way of honorary profit to Mr Shadat, with 1% to charity, and other profit to be distributed as per the discretion of the managing partners of that State or online.
103 In the concluding parts of his email, under the sub-heading 'Involvement of S M Nazmus Shadat in other business', Mr Rahman stated that as per his conversation with Mr Shadat on 15 January 2020, Mr Shadat wished to be involved in the day-to-day operations of any business but that as he no longer is working in PTE, Mr Shadat's focus would be on the business of Meridian. Mr Rahman's email advised that, 'As per my communication with Albright management team and their decision, there is no significant role to fit him (that is Mr Shadat) there'.
104 The reference to Meridian related to a business that was being conducted by Raina Poddar called Meridian Migration and Education Consultancy, which subleased offices in the Queen Street building also occupied by ANIT.
Mr Shadat withdraws $69,000 from ANIT's bank account
105 According to Mr Shadat, after receiving Mr Rahman's email, he became concerned that he was being unfairly cut out of ANIT and the PTE entities' operations. He became worried that ANIT would not repay Mr Shadat's share of the loans made to ANIT by the PTE entities, and that ANIT would not pay him his share of profits. As a result, on 16 January 2020 between 3:37pm and 3:39pm he made the 16 January 2020 Withdrawals by way of the following transfers:
(a) $30,000 from the bank account used for ANIT's Melbourne business;
(b) $15,000 from the bank account used for ANIT's Adelaide business;
(c) $15,000 from the bank account used for ANIT's Brisbane business;
(d) $9,000 from the bank account used for ANIT's Sydney business.
106 The effect of Mr Shadat's withdrawals was to reduce the balances held in those accounts to a total of $8,023.51.
107 On 17 January 2020 at 12:34am, Mr Rahman emailed Mr Shadat and Mr Huraira (blind carbon copy to Russell Rahman). In that email, he complained about the four unsolicited withdrawals from the various ANIT bank accounts, saying that the withdrawals were 'unethical, unexpected [and] unplanned', and advising that the amount of money in those accounts was for paying rent, regular bills, and other expenses. His email concluded:
For hedging purposes, and to protect PTE Businesses from your further personal ill intention, I have decided to transfer and secure a chunk of money from PTE Accounts, which are described as safe keeping in the transaction details. These amounts are readily available for PTE needs.
I would request you to kindly transfer as much possible of this amount back to the Albright Account for Rent and daily transactions and make everyone's life easy.
The establishment of ANIT Aus by Mr Rahman and Mr Huraira
108 Unbeknown to Mr Shadat, at 5:32pm on 16 January 2020, Mr Rahman and Mr Huraira had lodged an application with ASIC for registration of a new company to be known as ANIT Aus, of which Mr Rahman was to be the sole director and sole shareholder.
109 According to Mr Rahman and Mr Huraira, the establishment of ANIT Aus was the brainchild of Russell Rahman. According to them, when they became aware that Mr Shadat had made the 16 January 2020 Withdrawals, they telephoned Russell Rahman for advice. Mr Rahman and Mr Huraira said that Russell Rahman said that they should open up a new bank account in the name of a new company, as Mr Shadat could not take any money where he was not a director of the company. Mr Rahman said he asked Russell Rahman to set up a new company in the name of ANIT Aus with only Mr Rahman as sole director, secretary and shareholder. Mr Rahman also said he told Mr Huraira to open up a new bank account in its name to hold ANIT's income in order to protect it from Mr Shadat. Mr Rahman said that he told Russell Rahman that the money held by ANIT Aus would still be used to pay ANIT's expenses, and that when it was safe to do so, he would transfer the money back to ANIT.
110 According to Mr Rahman, from on or around 17 January 2020, he and Mr Huraira transferred money from ANIT's bank account to ANIT Aus's bank account and directed fee payments received from students for courses provided by ANIT to the bank account of ANIT Aus. He said that all money deposited into ANIT Aus's bank account was held on trust for ANIT.
The 20 January 2020 board meeting and follow up events
111 Mr Shadat proposed a board meeting take place on 20 January 2020 and it is common ground that on that day, Mr Shadat, Mr Rahman, Mr Huraira, and various managers of the PTE businesses attended a meeting to discuss various matters relating to the operation of the PTE businesses and ANIT. According to Mr Shadat, he said he wanted to be involved in the day-to-day operation of ANIT's business, as well as remain involved in the operation of the PTE businesses. He said that Mr Rahman said he did not want to be involved in business with Mr Shadat anymore and that he wanted to split the PTE businesses on the terms proposed in his 13 January 2020 email.
112 Mr Rahman says, and Mr Shadat disputes, that during the course of the 20 January 2020 meeting, Mr Shadat disclosed for the first time that the Ferrari was the subject of a finance agreement entered into by ANIT. According to Mr Rahman, this was the first time that he became aware of this, as he otherwise believed that Mr Shadat had paid cash for the Ferrari, as he had allegedly previously said on 22 August 2018.
113 Following the meeting on 20 January 2020, one of the attendees, Mr Khan, who managed PTE Sydney, emailed all those who had attended, recording a number of matters which had been discussed at that meeting. Amongst the matters apparently decided at the meeting on 20 January and referred to by Mr Khan in his email was an agreement that Mr Shadat would be given all access to RTO Manager, bank statements and PRISMS, as well as an Excel file maintained by Mr Huraira for all the cash transactions by 28 January 2020. Point 3 of his email recorded that Mr Shadat would 'not use any other resources from ANIT or PTE till 1st of Feb', and that after that day, individual branches would decide on whether they are willing to assist Mr Shadat. Point 5 of Mr Khan's email recorded that 'There needs to be a plan from ALL three partners of ANIT to cover up to $750,000 worth of business liabilities or gap by 28th of February. These submissions will be by 24th of February and finalised by 28th.' Point 6 of the email recorded that 'ALL ANIT & personal transactions must be reconciled within the given time period'.
114 On 26 January 2020, Mr Huraira emailed Mr Shadat attaching 12 Excel spreadsheets which, among other things, contained bank reconciliations for ANIT up to September 2019 and a final investment figure up to September 2019. Later that day, Mr Huraira forwarded further Excel spreadsheets with finalised October and November bank reconciliations for ANIT.
115 On 27 January 2020, Mr Rahman wrote to Mr Huraira and Mr Shadat. His email referred to his calculation of a 'final figure of the investments' in respect of which he would have to take account of all the expenses by all branches of PTE, which included 2018-2019 rents and other expenses. His email continued:
It is known to me that Sydney and Brisbane have paid most of the rents of Albright in 2019, and Adelaide has paid few of the month's rent of Albright in 2019. I am waiting for them to finalise the figure of total rent and expense paid for Albright. Once it is confirmed, you can add them to net investment to get the final figures. I am hopeful to do that by today, but I have to depend on the branch managers/franchises for that information.
116 On 28 January 2020, Mr Shadat emailed Mr Huraira and Mr Rahman, amongst others, referring to his promised access to information concerning 'cash transactions (incoming and outgoing), all access to RTO manager, prisms, bank reconciliations, myob and xero', explaining that it was not possible to verify the bank reconciliations without access to the cash transactions, RTO manager, and PRISMS information. His email requested a copy of the information so that he could access them as soon as possible.
117 By return email, Mr Huraira provided Mr Shadat with the access details to enable Mr Shadat to access the PRISMS and RTO Manager software.
118 The PRISMS and RTO Manager software provided information as to the enrolment details and fees paid by students at Albright.
119 Accompanying his email providing Mr Shadat with log-in access details, Mr Huraira advised that he was unable to spare any accounts team member to assist Mr Shadat, as some were away on leave and others were working part-time.
120 Mr Shadat said that he met with Mr Huraira on 29 and 30 January 2020, and asked Mr Huraira for copies of the documents that he had signed on 28 November 2019 relating to the directorships and shareholdings of ANIT, as well as requesting information showing ANIT's cash expenses. There is some difference as to the detail of these discussions, but they are largely at the margin. Mr Huraira said that Mr Shadat's requests were unnecessary and were a distraction from other important work that needed to be done, including understanding how the funding gap he had identified for ANIT could be mitigated.
121 On 31 January 2020, Mr Huraira sent a group email to Mr Khan, Mr Rahman, Mr Shadat, and others which set out a number of matters that Mr Shadat had continuously raised with him, which he complained were interrupting his daily workload and impacting his personal life and business. Amongst the matters listed by Mr Huraira was Mr Shadat's request for details of ANIT's cash expenses. Mr Huraira's email set out his response in the following terms:
Please note I am not comfortable to deal/communicate this without Bipu's [Mr Rahman's] presence. I will be explaining all cash expenses in front of Bipu & requesting Rashed Bhai on the phone part of discussion.
122 Mr Huraira's email concluded by stipulating that Mr Shadat should only communicate via email going forward, and that Mr Shadat should focus on reconciling the ANIT investment figure as soon as possible, rather than interrupting or wasting valuable time. Mr Huraira emphasised that these matters needed to be resolved as a priority.
123 On 3 February 2020 at 4 pm, Mr Huraira sent a group email, including to Mr Shadat, which proposed a cash transaction meeting to take place the next day for 30 minutes. His email advised that he would explain the overall template and list of transactions, and then hand over the file to Mr Shadat and Mr Rahman for finalisation.
124 At the meeting the next day, Mr Shadat said that he asked for access to the cash file for ANIT for January 2018 to October 2018. According to Mr Shadat, at this meeting, Mr Huraira said that the cash file for that period did not exist. Mr Shadat said that it did, and that he had previously been shown it by Mr Huraira at meetings for ANIT.
125 According to Mr Huraira, he told Mr Shadat at this meeting that it was Mr Shadat alone who was responsible for cash reporting and custody during the period from February 2018[4] to October 2018, and that he had failed to keep the very records that he now complained of. Mr Shadat disputes both that this was said and that he maintained the cash reporting file over this period.
126 After the meeting had concluded, one of the attendees, Mr Khan, sent an email on 4 February 2020 recording the outcome of discussions at the meeting. Mr Shadat accepts that this email is an accurate and fair account of what was discussed at the meeting. The subject matter of the email is 'Albright - Cash Transaction Review'. The email records, among other things, at item 2 that Mr Shadat asked for accounts before 15 October 2018, having been given copies of the accounts for the period from October 2018 to January 2020. It also records Mr Huraira saying that he did not have any such file. It says nothing about Mr Huraira saying at that meeting that the cash file for that period was Mr Shadat's responsibility.
127 Mr Huraira sent an email in response later that night, which, among other things, said that Mr Shadat had already received all the required files, but still says that he (that is Mr Shadat) cannot do the reconciliation because of the cash transaction file, which proves that his query is not about the cash transactions, as he already has all the information necessary for his reconciliation. Mr Huraira's email stated that he strongly believed that Mr Shadat was wasting everybody's time and trying to manipulate the overall process, so that he could buy more time to come up with the ANIT investment figure. Mr Huraira's email concluded by saying he was not sending any more files to Mr Shadat, as it was not required, and that the only thing that he was waiting on was his final number for the ANIT investment on 14th February 2020. Mr Huraira's email makes no mention of the missing cash file for January 2018 to October 2018 being Mr Shadat's responsibility.
128 On 5 February 2020, Shaikh Hafizur Rahman, who apparently was an accountant employed by ANIT and who had been attending some of the meetings, sent an email to Mr Khan, Mr Shadat and Mr Rahman, among others, with the subject line, 'PTE Study Centre Mediation', which attached a working document with a list of queries in relation to the separation of ownership of the PTE businesses. The attached document listed a number of issues and provided sections which would be completed by each of the critical participants, including a space for solutions proposed by Mr Rahman and by Mr Shadat, among others.
129 On 6 February 2020, Mr Shadat sent a lengthy email in response to the matters raised by Mr Huraira in his email of 31 January 2020. The detail of the email does not matter much, except to observe that Mr Shadat pointed out his outstanding request for information and his complaint that the 'hole' referred to by Mr Huraira regarding ANIT's financial position was confusing, self-contradictory, and frequently changing. Relevantly, in Mr Shadat's email, he refers, among other things, to the following:
As a CEO of Anit he [Mr Huraira] understands how withdrawing money would affect Albright, similarly I explained how investing and providing loan to ANIT from different PTE businesses affected PTE but unfortunately Abu vai [Mr Huraira] refuses to accept this fact as he is not a part of PTE business and is not affected directly ...
According to the verbal agreement that we had while we started the business in 2016, it was agreed for me and Imtiaj to take out our invested and loan money provided to business first and then the profit would be distributed as per shares. This was explained in front of everyone on the 21st of January in the mediation meeting and he agreed. ... I also request the mediation team to clarify what he means by "unauthorised withdrawals". Depending on what Abu vai [Mr Huraira] is referring to, I can provide tens of examples of transactions which were withdrawals by different directors and CEO of Albright and then we can classify any unauthorised transactions that are still happening. I was authorised to access the Albright accounts of which Abu vai was aware of, noting that I am also a director of ANIT. As such I am unclear about how the mentioned transactions are unauthorised.
I was also told that Imtiaj and Abu Vai [Mr Huraira] are so generous as they did not file a 'criminal case' against me for this matter. I request the mediators to be the judge of how this type of threatening behaviour is a show of good faith, or any help in resolving the conflict when I am so keen to resolve ... To be clear, ANIT's share structure has been altered quite a few times, for personal and business reasons, involving ALL shareholders and for different share holders' benefits ... Needless to say that I am now frightened and feel threatened. I feel a complete shareholder oppression scheme plotted against me at this stage. While still a major shareholder of ANIT, I have been threatened numerous times by Abu Vai [Mr Huraira] (verbal abuse, threaten to physical assault by Abu in front of the mediation Team and subjection to public harassment). I have also been denied access to financial information which is causing extreme stress and anxiety due to the potential financial risk involved with my personal investment and loans to ANIT.
130 On about 10 February 2020, the log-in details for RTO Manager and PRISMS were changed, so that when Mr Shadat tried to log into the systems that day, he was not able to do so. He sent a group email to Mr Huraira and Mr Rahman and others complaining that he was not able to access them, and his access was restored on the same day. He was also provided with log-in details for MYOB and Xero on 10 February 2020. About three or four days after Mr Shadat's access had been reinstated and access provided for MYOB and Xero, he was once again denied access to MYOB, Xero, PRISMS, and RTO Manager. Mr Shadat says that access was never reinstated.
131 On 25 February 2020, Mr Shadat sent a group email to Mr Rahman, Mr Huraira, and others querying Mr Huraira's calculations of the total investments made by the PTE entities to ANIT, among other things. Among the matters Mr Shadat referred to was the cash file from January to late-2018, which he said was still missing.
132 Mr Rahman responded to Mr Shadat's email by email sent 26 February 2020. Among other matters, Mr Rahman complained of his frustration with Mr Shadat not providing a final concrete investment number. Mr Rahman wrote that he could see a $50,000 shortfall in 'this month from each of the PTE business[es] which is almost $200,000'. He said he did not have the luxury to spend a single day after 28 February 2020 thinking about the investment figure for ANIT, that saving the businesses is his top priority, and anything unrelated to its modus operandi would be overlooked and ignored by him after the 28th.
133 On 26 February 2020, Mr Huraira sent a group email to Mr Shadat, Mr Rahman, and others, stating that he would give Mr Shadat until the end of 27th February to come up with one final investment figure. His email advised that he was working with all the PTE businesses to see how everyone could survive. Mr Huraira complained that with the cash withdrawals from Albright, there was now a significant gap in Albright's cash flow to maintain day-to-day activities, whilst the PTE entities were struggling with their enrolments and unable to contribute their monthly rental commitments. He also complained that he was paying off $20,000 of PTE and directors' financial liabilities each month.
134 On 27 February 2020, Mr Shadat sent an email to Mr Huraira, Mr Rahman, and others, which noted what he described as a discrepancy between ANIT's income and that deposited into the ANIT bank account. According to Mr Shadat, the discrepancy totalled $598,984. In Mr Shadat's email, he identified the total moneys noted as being deposited from the PRISMS data, together with miscellaneous fee income and payment planning, which gave rise to a total income of ANIT of $1,999,513, which he then reconciled with the total income received in ANIT's bank account of $1,400,589, leading him to the shortfall of $598,984.
135 Mr Huraira responded by email the next day, dismissing Mr Shadat's calculations as baseless and fabricated. Mr Huraira explained that the PRISMS report was not a correct indicator of tuition fee calculation, and explained why with reference to two examples. In effect, in the examples shown in Mr Huraira's email, in the case of one student, the tuition fee had been transferred from one student to the other, not paid again, and was shown in the PRISMS report as having been paid by both students individually, whereas in fact there was only one fee paid, whilst in the other case, there was a mismatch which was not picked up.
Mr Rahman's email of 2 March 2020 - the Probable Solution
136 On 2 March 2020, Mr Rahman sent an email to Mr Huraira, Russell Rahman, and to Mr Shadat headed 'Probable Solution'. In his email, he proposed a series of payments which would have had the effect of dividing up the PTE entities and businesses, and would effectively provide for a transfer of various liabilities in return for a payment being made to Mr Shadat.
137 By the terms of this proposal, Mr Shadat would effectively be exited from the PTE businesses and his directorship and shareholding in ANIT, but would be able to open a new business for PTE Adelaide, which he could fully control along with Mr Sohan, whilst he and Mr Sohan would be relieved of their obligations to repay moneys owing to Mr Rahman. In addition, Mr Sohan would obtain the benefit of his portion (50%) of ANIT's investment balance which he wrote had been agreed that day by Mr Rahman and Mr Huraira in the amount of approximately $545,000. Mr Shadat's half share of $272,500, would be offset against various other liabilities owed by PTE Brisbane, PTE Sydney, previous tax liabilities under Mr Shadat's directorship of $65,000, and current tax liabilities under Mr Shadat's directorship of $90,000. On the terms of this proposal, Mr Shadat was to exit his interests in ANIT and all PTE entities except PTE Adelaide and be relieved of all liabilities. However, he would still maintain his portion of a stake-holding in Meridian. Mr Rahman's email concluded by stipulating that it was a final proposal. Mr Shadat never responded to the proposal.
The engagement of solicitors and the 31 March 2020 board meeting removing Mr Shadat as a director
138 On 8 March 2020, Mr Shadat received a notice of a general meeting for ANIT from Mr Huraira via email, which provided for a meeting of shareholders to take place on 31 March 2020, at which time it was proposed that the shareholders would vote on a resolution removing Mr Shadat as a director and secretary of the company.
139 On 27 March 2020, PCL Lawyers who had been retained to act on Mr Shadat's behalf, wrote to Mr Rahman and Mr Huraira, alleging that they had engaged in conduct which was unfairly prejudicial to Mr Shadat, constituting oppressive conduct within the meaning of s 232 of the CA.
140 The matters set out in the letter in broad terms correlated to the complaints now pressed in this action. In addition, Mr Shadat's solicitors advised that they had been instructed to serve on the company a shareholder direction pursuant to s 293 of the CA pursuant to which Mr Shadat would seek an order for the production of a financial report and director's report for FY 2018 and FY 2019, and requested that he immediately be provided with full access to all company records, including official and unofficial financial records, company-related documentation including the company constitution, BAS, PAYG, superannuation payment records, RTO Manager, PRISMS, Xero, and MYOB.
141 On 30 March 2020, MDW Law, who had been retained to act on behalf of ANIT, Mr Rahman, and Mr Huraira, wrote to PCL Lawyers denying, among other things, that the conduct complained of was oppressive and reaffirming that the meeting of members had been called in accordance with the company's constitution (enclosed in the letter) and would proceed as set out in the notice.
142 On 31 March 2020, a meeting was held and a resolution was passed in terms which removed Mr Shadat as a director of the company 'due to various unethical, unfair and unexpected transactions'.
143 On 31 March 2020, Russell & Partners lodged a form with ASIC notifying that Mr Shadat had been removed as a director of ANIT.
144 Since 31 March 2020, Mr Shadat has not been invited to any general meeting of shareholders or any other meeting of the company and has not been involved in its affairs.
145 On 20 July 2020, newly retained solicitors for Mr Shadat, Duxton Hill, wrote to Russell Rahman requesting that Russell Rahman provide Mr Shadat with copies of financial statements, bank statements, BAS lodgements for the years 2017 to 2020 inclusive, and data extracts of records from MYOB and Xero for ANIT for the period from its incorporation to date.
146 By letter dated 28 July 2020, Duxton Hill wrote to the directors of ANIT and to Mr Rahman and Mr Huraira requesting inspection of like documents pursuant to s 198F(2)(b) of the CA. Section 198F(2)(b) of the CA provides, in substance, that a person who has ceased to be a director of a company may inspect the books of the company for the purposes of a legal proceeding that that person proposes in good faith to bring and that such a right exists for seven years after the person has ceased to be a director of the company.
147 By letter dated 29 July 2020, MDW Law, wrote on behalf of ANIT to Duxton Hill requesting that Mr Shadat deliver up possession of the Ferrari to Zagame Automotive Group (agents of ANIT) by 3 August 2020. The letter asserted that, absent the delivery up of possession, the company reserved its rights to commence proceedings against Mr Shadat to recover the Ferrari.
148 By a separate letter sent on the same date, ANIT through MDW Law wrote to Mr Shadat via Duxton Hill in respect of the 16 January 2020 Withdrawals. The letter asserted that Mr Shadat had misappropriated the company's funds and breached his director's duties, and expressed a strong confidence that the company would succeed in any proceedings brought against Mr Shadat in respect of the unauthorised withdrawals of $69,000.
149 The letter informed Mr Shadat that ANIT nevertheless wished to avoid the necessity of entering into any proceedings and wished instead to enter into a deed of settlement in relation to dealing with the repayment in full of the unauthorised withdrawals by Mr Shadat to ANIT.
150 By letter dated 31 July 2020, MDW Law responded to Duxton Hill's letter of request made pursuant to s 198F(2)(b) of the CA. MDW Law's letter advised that to the extent to which Mr Shadat purported to inspect the books of ANIT for the purposes of a legal proceeding which he proposed in good faith to bring, the request was 'fatally misconceived', including because it failed to disclose any relevant factual background to the proposed proceedings, any relevant cause of action, any particulars of the person against whom the proposed proceedings were to be brought, the capacity in which Mr Shadat would bring the proposed proceedings, and the relevance that the documents sought had to the proposed proceedings. The request for access was refused.
Proceedings commenced and the 3 September 2020 Court orders
151 Mr Shadat commenced the proceeding by originating process filed on 5 August 2020, supported by an affidavit sworn by him on the same day. By order made 13 August 2020, the proceeding was referred for management under the Court's oppression proceeding program and was later the subject of orders made 3 September 2020 which, inter alia, provided that the defendants provide access to and inspection of the books and records of the company to Mr Shadat comprising the following:
(a) all bank statements for the bank accounts of the company used for depositing business income received for the period from 1 July 2018 to 31 August 2020;
(b) all BAS returns lodged by the company for the period from 1 July 2018 to 30 June 2020;
(c) all books and records recording fees and charges collected by the company;
(d) a trading statement for the company including all revenue and expenses of the company for the period from 1 July 2018 to 31 August 2020;
(e) all books and records relating to any -
(i) loans;
(ii) wages; and/or
(iii) distributions of profit
to the directors, or any of them, for the period from 1 July 2018 to 31 August
(f) a balance sheet of the company for the financial year ended 30 June 2019 and for the financial year ended 30 June 2020 with prior year comparatives; and
(g) all books and records for the period from the registration of the company on 8 August 2016 to 31 August 2020 in respect of:
(i) any loans or capital contributions made to the company by any of the parties to this proceeding;
(ii) any loans or capital contributions made to the company by companies or other entities controlled by any of the parties to this proceeding; and
(iii) any repayment or part repayment by the company of any loans or capital contributions identified in sub-paragraph (g)(i) or (g)(ii).
152 The orders made 3 September 2020 further provided that there be an independent valuation of the company to be completed on or before 30 October 2020:
(a) the costs of the valuation to be borne in the proportion one half by [Mr Shadat] and one half by [Mr Rahman and Mr Huraira];
(b) the valuation to be performed by a valuer agreed between the parties or, failing agreement being reached within 14 days of the authentication of these orders, by a valuer to be appointed by the Chairman of the Australian Valuers Institute; and
(c) the valuer to enter into a confidentiality undertaking acceptable to the parties limiting the valuer's access to documents and records to the purpose of preparing the valuation report.
153 Subsequent to the orders made 3 September 2020, on about 25 September 2020, the defendants produced financial statements for ANIT for FY 2019 and FY 2020. The documents are unsigned, but have been prepared by Russell & Partners Chartered Accountants, and the compilation report for each is dated 24 September 2020. For each of those financial years, the financial statements include the prior year comparatives.
154 Relevantly, the FY 2019 Financial Statements show a total income for that financial year of $2,431,891 and total expenses of $2,431,219, resulting in a profit from ordinary activities before tax of $672. This compares with total income for the prior year (FY 2018) of $1,480,101 and total expenses of $1,470,428. The most substantial increase in the relevant expense items is for salaries, which increased from $351,605 for FY 2018 to $1,109,037 in FY 2019.
155 The balance sheet shows total current assets for FY 2019 of $875,860, largely comprised of trade debtors, total non-current assets of $922,665, resulting in total assets of $1,798,525, which compare with corresponding figures of $368,624, $505,747 and total assets of $874,371 for FY 2018. The total liabilities for FY 2019 are $1,787,514, largely comprised of non-current liabilities which total $1,606,908. This results in total net assets for FY 2019 of $11,012, which is broadly comparable to that for FY 2018, where the net assets totalled $10,340.
156 The non-current liabilities for FY 2019 comprised $164,982 relating to the motor vehicle loan in connection with the Ferrari (which is essentially cancelled out by an asset which is also recorded in the balance sheet as $164,982), together with liabilities owed to Mr Rahman in the amount of $899,387, Mr Shadat $466,639, and Mr Huraira $75,900.
157 For the FY 2018 comparative, the amount owing to Mr Rahman was $622,903, to Mr Shadat $135,355, and to Mr Huraira $45,000.
158 In the case of the FY 2020 Financial Statements, gross income had increased to $5,371,729. Despite the substantial increase in gross income, profit had barely increased, with the profit before tax increasing from $672 in the previous financial year to $927 for FY 2020. The expenses for FY 2020 which had increased markedly from those in the prior year, were for commissions which had increased to $2,013,530 from $607,151 and rent which had increased to $1,299,745 from $327,936 in FY 2019, and salaries which had increased to $1,585,384 from $1,109,037.
159 For FY 2020, the total current assets had increased from $875,860 to $1,142,696, with the increase largely explained by a substantial increase in cash from $13,374 to $249,922. The non-current assets included a receivable in respect of moneys owed by Mr Huraira which now totalled $34,100.
160 The current liabilities had increased from $123,901 to $1,307,088, largely comprised by a very significant increase in trade creditors, whilst the non-current liabilities had decreased from $1,606,908 to $766,797, with the amount owing to Mr Rahman reduced from $899,387 to $607,246, the amount owing to Mr Huraira reduced from $75,900 to zero, and the amount owing to Mr Shadat reduced from $466,639 to $5,551.
161 At the same time, the defendants produced a spreadsheet entitled, 'Financial Year Investment August 2016-August 2020 Summary.pdf' ('the Financial Investment Schedule'), which is replicated below:
162 The Financial Investment Schedule correlates to the balances shown in the non-current liabilities of the FY 2019 and FY 2020 Financial Statements and thus explains why it is that Mr Shadat is said to be owed $5,550.76 as at 30 June 2020, whilst Mr Rahman is said to be owed $607,246. The figures in the table above include July and August 2020 which represent the figures in the 2020-2021 column. The 2020-2021 figures need to be deducted from the total to produce the relevant figure as at 30 June 2020.
163 In the table set out above, the amounts shown in brackets record investment returns, or, to put it another way, moneys which are treated in ANIT's accounts as repayments of loan funds advanced. Thus, the table shows, and accordingly the financial statements record that the amount owed by ANIT to Mr Shadat during the course of FY 2020 was reduced by $461,088.49, which is the sum of the three figures shown in brackets, ($281,768.94), ($52,393.37), and ($126,926.18).
164 Relevantly, the Financial Investment Schedule groups or allocates as part of ANIT's loan balances owed to or from Mr Rahman, moneys paid or advanced by Mr Rahman himself as well as those from PTE Melbourne, PTE Adelaide, QLD PTE Study Centre Pty Ltd and NSW PTE Study Centre Pty Ltd.
165 QLD PTE Study Centre Pty Ltd and NSW PTE Study Centre Pty Ltd are companies which Mr Rahman registered on 28 January 2020, which record him as the sole director, secretary, and shareholder. According to Mr Rahman, he registered these new companies on 28 January 2020 to 'protect [his] interests in the PTE Business and to protect the Intellectual Property'.
166 According to the Financial Investment Schedule, the newly incorporated QLD PTE Study Centre Pty Ltd advanced $36,978.10 to ANIT for FY 2020 and $17,620 for FY 2021, whilst ANIT advanced $35,021.90 and $15,850.20 to NSW PTE Study Centre Pty Ltd in FY 2020 and FY 2021.
167 Relatedly, the Financial Investment Schedule groups or allocates as part of the debt owing to Mr Shadat, moneys paid by or to Mr Shadat himself, Chinese PTE, PTE Brisbane, and PTE Sydney.
168 The significant loans made by PTE Melbourne of $206,051.10, $280,843.04 and $198,098.27 in FY 2017, FY 2018, and FY 2019 have been grouped for Mr Rahman's benefit, whilst payments concerning Chinese PTE, PTE Brisbane, and PTE Sydney have all been grouped under Mr Shadat's name.
169 This process of allocation forms part of Mr Shadat's complaint with respect to the accuracy of the Financial Investment Schedule and thus represents a significant part of his oppression complaint, as it results in the alleged understatement of amounts owing by ANIT to Mr Shadat.
170 On or about 27 July 2021, the defendants produced five Excel spreadsheets ('the Substantiation Spreadsheets') which contain detailed line-by-line items which purport to substantiate the balances referred to in the Financial Investment Schedule and in the case of the Substantiation Spreadsheet for 2020-2021, extend the relevant period beyond June 2020 to August 2020.
171 Following the production of the FY 2019 and FY 2020 Financial Statements, and as contemplated by the 3 September 2020 orders, an independent valuation report of ANIT was prepared by Mr Waterhouse. Neither party sought to tender Mr Waterhouse's expert report. However, Mr Rahman and Mr Huraira sought to rely upon a letter sent by Watson Webb on 5 June 2024 which was an 'open' settlement offer and set out aspects of that report and referred to the modest attribution of value given to the shares in ANIT, as determined by Mr Waterhouse's report. Relevantly, the letter noted that Mr Waterhouse's report valued Mr Shadat's shares as at 31 August 2020, determining that the business was valued at $119,000 and that the adjusted balance sheet net asset value as at 31 August 2020 was -($357,269)[5], with a total value comprising the business value less the adjusted balance sheet value, being -($238,269).
172 Both Mr Rahman and Mr Huraira gave evidence that the funds banked into the ANIT Aus bank account were made available for ANIT, as needed, and that on 29 September 2022, the ANIT Aus bank account was closed and the balance of funds in that account were transferred to ANIT's account. The defendants tendered a document confirming the closure of the ANIT Aus bank account on that day, but there is no document which shows the balance prior to closure or which shows the actual destination amount transferred to ANIT's bank account.
173 Notwithstanding Mr Shadat's removal as a director of ANIT, effective 31 March 2020, substantial funds constituting student fees were banked into the ANIT Aus bank account during the course of calendar year 2020 and at least until 31 March 2021 which is the last date of the ANIT Aus bank statements which are in evidence.
174 In his oral opening, Mr Shadat noted that moneys continued to be banked into the ANIT Aus bank account after his removal as a director of ANIT on 31 March 2020 and pointed out that this was inconsistent with the foreshadowed evidence of Mr Rahman and Mr Huraira that moneys were banked into the ANIT Aus bank account as a protective measure whilst Mr Shadat was a director of ANIT.
175 Further, when Mr Shadat adduced evidence-in-chief from Russell Rahman, he obtained copies of BAS for ANIT Aus for the quarter 1 April 2020 to 30 June 2020, which showed sales income of $154,065, together with a BAS for ANIT Aus for the quarter 1 July 2020 to 30 September 2020, which recorded sales of $120,972. The email contact listed on both BAS was Imtiaj.csu@gmail.com[6], and both BAS had been lodged by Russell Rahman's firm, Russell & Partners.
176 The subpoenas served by Mr Shadat on Russell Rahman's firm also produced a summary document headed '2020 FY BAS Summary as per ATO lodgments (for ANIT)'. The summary document recorded sales for each of the four quarters in FY 2020 as follows: $1,414,149 for the September 2019 quarter; $1,348,993 for the December 2019 quarter; $1,057,432 for the March 2020 quarter; and $1,551,155 for the June 2020 quarter. The total amount was shown as $5,371,729.
177 For the corresponding quarters, the purchases were recorded as $520,806 for the September 2019 quarter; $846,978 for the December 2019 quarter; $1,124,255 for the March 2020 quarter; and $1,270,509 for the June 2020 quarter. The total amount was shown as $3,762,548.
178 Those figures reveal a significant drop in sales for the March 2020 quarter, despite a substantial increase in expenses during that same quarter. The BAS summary document also shows a significant increase in the proportion of expenses as a percentage of revenue for the March 2020 and June 2020 quarters when compared with the September 2019 and December 2019 quarters.
179 As noted above, Mr Shadat also served a subpoena on Mr Baki's firm, Edge Advisory Services. Mr Baki gave evidence that he had been engaged to perform accounting works for ANIT and ANIT Aus in March 2021, at which time ANIT had two years of overdue tax returns for FY 2019 and FY 2020. When senior counsel for Mr Rahman and Mr Huraira then cross-examined Mr Baki, the defendants tendered revised BAS which had been lodged on behalf of ANIT Aus by Edge Advisory Services for the period January 2020 to March 2020 which was lodged on 4 January 2021, and for the quarter April 2020 to June 2020 which was lodged on 24 May 2022, both of which show total sales of zero.
180 Similarly, the defendants tendered through Mr Baki in cross-examination a copy of ANIT Aus's tax return for the period ended 30 June 2020 which was lodged on 1 June 2022, which showed zero income, and a zero income BAS for ANIT Aus for the period July 2020 to September 2020 lodged on 24 May 2022; a zero income BAS for ANIT Aus for the period October 2020 to December 2020 lodged on 19 May 2021; a zero income BAS for ANIT Aus for the period January 2021 to March 2021 lodged on 19 May 2021; and a zero income BAS for ANIT Aus for the period April 2021 to June 2021 lodged on 17 April 2022.
181 In summary, Edge Advisory Services lodged revised BAS for ANIT Aus for the January 2020 to March 2020 and April 2020 to June 2020 quarters, showing a zero return (in contrast to those earlier lodged) and a tax return for ANIT Aus for the year ending 30 June 2021, which showed zero income for that entity on or about 24 May 2022.
182 Following Mr Shadat's removal as a director of ANIT on 31 March 2020, ANIT's business expanded substantially.
183 On 27 April 2020, Mr Huraira sent an email to all employees of ANIT, announcing the approval of an additional capacity of 366 students for ANIT's Melbourne campus, which resulted in total capacity at the Melbourne campus of 1,096 students and a total national capacity of 1,872 students. Mr Huraira also gave evidence that since 17 June 2019, ANIT's student enrolment capacity had increased from 1,506 students to 5,716 students as reported to ASQA as at 22 November 2022, with a total of 3,559 enrolled students as at 22 November 2022, of which 1,278 were enrolled at the Melbourne campus, 1,204 at the Sydney campus, 538 at the Adelaide campus, and 539 at the Brisbane campus.[7]
Audited financial statements for FY 2021, FY 2022, and FY 2023.
184 On or around 25 January 2022, Mr Rahman and Mr Huraira appointed Mr Ryan Mizael of Mizael Partners as the auditor of the company and engaged his firm to perform an audit of ANIT's special purpose financial statements for the year ended 30 June 2021 ('FY 2021'). Mr Mizael continued to be engaged by the directors and also performed an audit of ANIT's special purpose financial report for the years ended 30 June 2022 ('FY 2022') and 30 June 2023 ('FY 2023').
185 The audited financial statements for FY 2021, FY 2022, and FY 2023 show very significant increases in the company's revenue, albeit only slight increases in the operating profit before tax. There are some items of expenses which have increased significantly over these years which appear to account for the comparatively small profit increases.
186 The table below identifies in summary form the increases in income, expenses, and profit which for convenience (and comparative purposes) also includes the corresponding figures for the unaudited financial statements in FY 2019 and FY 2020.
187 In the case of the balance sheet for the company for FY 2021 to FY 2023, the amount owed to Mr Shadat as at the end of FY 2020 remained fixed at $5,551.
188 However, ANIT's liability owed to Mr Rahman at the end of FY 2020 of $607,246 had reduced to $552,749 at 30 June 2021, then to $245,563 at 30 June 2022, and then to zero at 30 June 2023. From 30 June 2020 to 30 June 2023 therefore, ANIT paid $607,246 to Mr Rahman so as to reduce its alleged indebtedness to him to zero.[9] During that same period, Mr Rahman had also received a salary from the company as the "Executive Manager, Administration, Student Services and Admissions," of $100,000 plus superannuation having accepted that position on 28 October 2020.
189 As at 30 June 2020, Mr Huraira had owed the company $34,100. Mr Huraira's indebtedness to the company had reduced marginally as at 30 June 2021 to $33,244, and then again marginally to $30,957 as at 30 June 2022, but then to zero as at 30 June 2023. From 13 July 2022, Mr Huraira's full-time salary had increased to $150,000 per annum.
Relevant evidence in connection with the counterclaim
190 It is appropriate to set out some key evidence for each group of the claims which form part of the counterclaim. The evidence concerning the Unauthorised Transactions can be dealt with somewhat briefly as that claim was dropped by ANIT in its closing submissions. It is also unnecessary to refer to the evidence concerning the 16 January 2020 Withdrawals as the evidence is not disputed and has been set out above.[10]
191 There is no dispute that PTE Brisbane entered into the PTE Brisbane-Capital Finance Agreement on 23 November 2018 and that PTE Brisbane's obligations under that agreement were guaranteed by ANIT. There is no dispute that Mr Shadat executed the agreement on behalf of both PTE Brisbane and ANIT.
192 Nor is it in dispute that PTE Brisbane entered into the PTE Brisbane-BoQ Agreement on 13 December 2018 relating to the purchase of office equipment, which was also the subject of a guarantee provided by ANIT. Mr Shadat executed that agreement as well, on behalf of both PTE Brisbane and ANIT. There is no dispute that ANIT made payments totalling $75,512.91 in the form of 16 equipment rental payments of $4,719.99 by direct debit from ANIT's bank accounts in respect of obligations imposed on PTE Brisbane under the PTE Brisbane-BoQ Agreement.
193 Likewise, it is common ground that on 1 October 2019, Mr Shadat procured the execution by PTE Sydney of the PTE Sydney-BoQ Agreement.
194 In all three cases, Mr Rahman and Mr Huraira say that they objected to Mr Shadat causing ANIT to provide guarantees and told him that they did not approve of this. The objections are not corroborated by any documentary record and are denied by Mr Shadat. They otherwise both say that ANIT obtained no real corporate benefit from the agreements and nor did Mr Huraira and Mr Rahman.
195 Each of the three agreements is referred to in Mr Huraira's witness statement who describes the substance of the agreements in terms which suggest that the agreements provide for the advance of funds by the financier to the relevant counterparty (PTE Sydney or PTE Brisbane) which were then repayable by monthly instalments by the counterparty. In fact the agreements and the invoices make clear the relevant agreements were rental agreements. The finance was provided by the financier to the equipment supplier with the counterparty, PTE Brisbane or PTE Sydney, liable as a renter to the financier under the agreement.
196 Mr Huraira also gave evidence which was a little unclear[11] that linked the PTE Sydney-BoQ Agreement with a funds transfer made by the equipment supplier, Together I.T., of $230,000 into ANIT's bank account by three transfers made 10 October 2019, 14 October 2019, and 18 October 2019 respectively for $100,000, $100,000, and $30,000. These deposited transfers were then said to be the source of the subsequent unauthorised withdrawal of moneys from that account made for the benefit of Mr Shadat. Both the witness statements of Mr Huraira and Mr Rahman stated that ANIT did not obtain any benefit from the moneys deposited by Together I.T. into ANIT's bank account. That evidence was on its face difficult to reconcile with the fact that the funds were credited to ANIT's bank account.
197 When Mr Shadat was cross-examined on these transactions, his evidence was to the effect that ANIT made various payments and provided the guarantees because it, too, benefited from the equipment the subject of the agreements. Mr Shadat gave evidence that he, Mr Huraira, and Mr Rahman decided that the relevant counterparty to the agreement was whichever of the entities (ANIT, or one of the PTE entities) was best suited to enter into the agreement, but otherwise there was no substantive distinction drawn between which entity was to benefit from the use of the equipment.
198 In support of his characterisation of events, Mr Shadat cross-examined Mr Huraira and drew Mr Huraira's attention to a number of emails between Mr Huraira, and the broker arranging the finance, Matrix Finance Group. On occasions, the emails also included Mr Rahman. The emails showed that it was Mr Huraira who arranged the finance and that each of Mr Shadat and Mr Rahman were aware of what Mr Huraira was doing. Among the email exchanges the subject of Mr Shadat's cross-examination of Mr Huraira were email exchanges between Mr Jennings from Together I.T., Mr Huraira, Mr Shadat, and Mr Rahman dated 1 November 2018, which provided final pricing for finance for various items of equipment and the intended location of those items of equipment which included Parramatta, City Sydney campus, Brisbane, and Melbourne. He also cross-examined Mr Huraira about an email between Matrix Finance Group and Mr Huraira, with the subject line 'PTE Study Centre Brisbane Pty Ltd' dated 23 November 2018 which requested that Mr Shadat come to sign the documents at the office of Matrix Finance Group on 23 November 2018 as well as an email from Matrix Finance Group to Mr Huraira dated 20 November 2018 confirming the conditional approval of the application for the new PTE Lab upgrade from Together I.T. Mr Shadat also cross-examined Mr Huraira on an invoice from Mr Huraira to Mr Rahman and Mr Shadat dated 11 December 2018 which attached an Excel Spreadsheet which allocated the equipment to the locations set out above, and then split up how the total finance would be met from each of PTE Sydney, PTE Brisbane, and ANIT with the majority of the finance (61.08%) being met by ANIT.
199 Mr Shadat cross-examined Mr Huraira about an email exchange between Mr Rahman, Ms Mahsa Moravej, Mr Huraira, and Mr Shadat dated 9 April 2019 with photos of a classroom identified as 'Brisbane 204'. The photos showed a classroom with various desks and computer terminals and contained the email message, 'Thanks uploaded'. Mr Shadat put to Mr Huraira in cross-examination that these photos were uploaded to the AQSA portal in anticipation of an application by ANIT for AQSA approval for its Brisbane operation and that the equipment was acquired for the purposes of a laboratory upgrade to that end. Mr Huraira did not accept this, but accepted that Ms Mahsa Moravej was an Albright (ANIT) employee. Her email sign off is as the campus manager of Albright's Brisbane campus. At the very least the evidence points to the Albright campus manager uploading photos of a teaching laboratory with desks and computers in a Brisbane classroom in premises occupied by ANIT in April 2019 some few months after equipment was rented by PTE Brisbane.
200 Mr Shadat also relied upon emails passing between Mr Huraira, Matrix Finance Group, Mr Shadat and, in some cases, Mr Rahman in relation to the PTE Sydney-BoQ Agreement which, among other things, included an Excel spreadsheet sent by Mr Jennings from Together I.T. to Mr Huraira dated 14 October 2019, with the subject line 'Final Costing', which included a listing of all the equipment the subject of the rental agreement and the designated location of those items, which included computers and laptops being provided to Adelaide, Melbourne, Sydney-Parramatta, and the Albright manager's office.
201 The communications from October 2019 upon which Mr Huraira was cross-examined also extended to emails between Mr Huraira, Together I.T., Mr Rahman, and Mr Shadat, which attached two invoices, one from PTE Melbourne to Together I.T. issued 20 December 2018 for $150,018, as well as an invoice from ANIT to Together I.T. for services. Although the attachments were not in evidence, the email identifies the attachments as including, among other things, receipts issued by PTE Melbourne and ANIT. These emails and invoices were clearly referable to the payments made by Together I.T. into ANIT's bank account which were the subject of Mr Huraira's evidence set out above.
202 Mr Huraira was also cross-examined on emails between Mr Huraira, Matrix Finance Group (copied, for the most part, to Mr Shadat) during the period 17 July 2019 to 13 September 2019, which commenced with an email from Matrix Finance Group to Mr Huraira and to Mr Shadat, copied to Together I.T., in which Matrix Finance Group asks Mr Huraira and Mr Shadat to let them know 'where these goods are being used and which entity will be going on the application form. To date we have used PTE Study Centre Pty Ltd and PTE Study Centre Brisbane Pty Ltd (which was guaranteed by Anit Australia Pty Ltd). If this requirement is for your Sydney site/s and you have another ABN in Sydney that you want to use for this purchase then we will need the following information relating to it ...'.
203 ANIT maintains a claim for $17,600 against Mr Shadat and Mr Sohan, which is said to arise because Mr Shadat caused ANIT to pay $17,600 for the benefit of his brother, Mr Sohan in respect of Lexica Pty Ltd ('Lexica'), a newly formed RTO in Parramatta which the defendants allege 'was operated by Mr Sohan'. The defendants rely upon a payment of $1,100 from ANIT's bank account on 17 May 2018 and a payment of $16,500 made from the company's bank account on 3 June 2018.
204 Mr Huraira gave evidence that Mr Shadat wished to set up a new RTO with his brother Mr Sohan, and that Mr Shadat asked Mr Huraira to instruct Russell Rahman to set up a new company by that name, with Mr Sohan as the sole director, secretary, and shareholder. According to Mr Huraira, he recalls a conversation with Russell Rahman on 11 May 2018 in which Mr Huraira told Russell Rahman that Mr Shadat wanted a new company set up for his brother which was to be called Lexica, with Mr Sohan as the director, secretary, and shareholder.
205 In the defendants' closing submissions, they submitted that neither Mr Shadat nor Mr Sohan gave evidence in relation to these transactions, and an adverse inference should be drawn that their evidence would not have assisted them. Whilst it is true that Mr Sohan did not give evidence, in fact, Mr Shadat dealt with these allegations in some detail at paragraphs [199] to [205] of his reply witness statement. In those paragraphs, Mr Shadat denied that the establishment of Lexica was his idea and said that it was a matter discussed by Mr Rahman, Mr Huraira, and himself and that Mr Huraira advised that he had spoken to Mr Maciek Fibrich, who said that if a new RTO was to be set up, it should be with a new CEO and director who was not connected to ANIT. Mr Shadat said that Mr Huraira put forward three potential names, Mr Sohan, Mr Khan, and Mr Tonmoy, and that Mr Huraira suggested that they go with Mr Sohan, and that once the RTO was established, they could look to change the shareholding in the new RTO to reflect the ownership in ANIT.
206 Mr Shadat then referred to five emails to which he, Mr Rahman, and Mr Huraira (but not Mr Sohan) were parties sent during the period from 25 April 2018 to 11 May 2018 and which, among other things, included an email from Mr Rahman to Mr Huraira and Mr Shadat dated 9 May 2018 where Mr Rahman suggests business names, Lexica Pty Ltd, Lexica Groups Pty Ltd and Lexica Education Pty Ltd, and an email from Russell & Partners to Mr Huraira copied to Mr Shadat and Mr Sohan dated 11 May 2018, which attaches documents for the formation of the company.
207 Mr Shadat also cross-examined Mr Huraira on a series of emails dated 25 April 2018 which relevantly included a tax invoice from RTO Consultancy Group Pty Ltd to ANIT for $16,500, which was in connection with the provision of consultancy services in relation to the establishment of an RTO. The $16,500 the subject of the claim against Mr Sohan therefore comprised payment of the invoice from RTO Consultancy sent to ANIT.
208 It is not in dispute that, ANIT acquired the Ferrari on 13 August 2018 with the aid of finance and that Mr Shadat guaranteed ANIT's obligations. According to Mr Shadat, he, Mr Rahman, and Mr Huraira agreed that Mr Shadat and Mr Rahman would purchase motor vehicles and that the funds used to acquire the vehicle to be used by Mr Shadat would be borrowed by ANIT, whilst the funds used to acquire the motor vehicle to be used by Mr Rahman would be borrowed by PTE Melbourne.
209 It is not in dispute that PTE Melbourne entered into an agreement in similar terms pursuant to which Mr Rahman was provided with a Range Rover.
210 Nor is it in dispute that Mr Huraira assisted Mr Shadat with the purchase of the Ferrari.
211 On 13 May 2021, the Court made orders in respect of various interlocutory matters. At that directions hearing, Mr Shadat, by his counsel, gave undertakings to the effect that he would not transfer, sell, encumber or otherwise deal with the Ferrari, would maintain possession of the Ferrari, would make all payments owing under the agreement between ANIT and the financier (BMW Australia Finance Ltd), would keep the vehicle insured for no less than its market value, and would keep the vehicle registered.
212 On 15 September 2023, the Court made various procedural directions including an order made by consent that, by no later than Monday 18 September 2023, Mr Shadat would deliver up the Ferrari to ANIT by delivering it to Zagame Automotive Group at its Swan Street, Richmond premises ('the Zagame Premises'), along with all service logs, keys, removable accessories, spare tyres, and the like. The orders made on that day also provided, inter alia, that ANIT would make such payment as is required to discharge in full the balance owing to BMW Australia Finance Ltd arising out of the chattel mortgage agreement dated 9 August 2018, and that ANIT would do all things necessary to enable the vehicle to be sold by public auction, with the proceeds of sale to be paid, firstly, as to the selling costs of any selling agent; secondly, reimbursing ANIT for any amounts paid by it to the financier; then to various costs and expenses of solicitors acting for ANIT in connection with the sale; with the balance of moneys to be paid into Court.
213 Mr Shadat effected delivery of the vehicle to the Zagame Premises on 18 September 2023.
214 On the same day, Mr Rahman posted a photo on social media of himself standing next to the Ferrari at the Zagame Premises, accompanied by the statement, 'After a long stressful period, Albright has successfully repossessed the company vehicle. Albright will be selling this vehicle in auction or by a reasonable offer. Any genuine interested buyer, please send me a message privately or email at imtiaj.rahman@albrightinstitute.edu.au'.
215 Mr Shadat's then solicitors wrote to the solicitors for the defendants on 19 September 2023 requesting that the social media post be removed on the basis that it was inaccurate as no repossession occurred and that the vehicle was dropped off by Mr Shadat following consent orders between the parties. The letter noted that Mr Shadat, Mr Rahman, and Mr Huraira were part of the Bangladeshi community and that, as such, it is more than likely, given the size of that community, that the dispute between their respective clients would be known amongst community members. The letter stated that the post was a deliberate attempt to humiliate Mr Shadat. The defendants refused to remove the post.
216 On 3 November 2023, the Court made consent orders of a machinery nature for the sale of the Ferrari in an amount of no less than $215,000 which included a reserve price of $161,250. The claim now pressed by ANIT is for an order that the balance of the moneys held in Court following the sale should be paid to ANIT. Mr Shadat made no submission to the contrary.
217 Otherwise, ANIT seeks an order that Mr Shadat indemnify ANIT with respect to the FBT Liability in the sum of $51,763, which is an amount apparently assessed by Mr Huraira. In his witness statement, Mr Huraira gave evidence that Mr Shadat had failed to submit any FBT declarations to ANIT, that from 22 August 2018 until 31 March 2020 ANIT was liable for FBT in the amount of $51,763 because of Mr Shadat's exclusive personal use of the Ferrari, because Mr Shadat had not provided any employee declarations to the company in respect of his personal use of the Ferrari and, as such, Mr Shadat had made no contribution towards the FBT Liability of the company that ANIT 'may rely on to offset or reduce that FBT Liability.'
218 Mr Huraira then stated that s 137 of the Fringe Benefits Tax Assessment Act 1986 (Cth) 'holds that people like the plaintiff who receive benefits in the form of cash payments are deemed to be employees for the purposes of FBT. In any event, company directors are deemed to be employees even if no director's fees are paid to them'.
219 Mr Huraira then sets out his calculations of the company's FBT Liability before saying that ANIT was yet to submit its FBT returns for the 2018/2019 and 2019/2020 FBT taxed years to the ATO.
220 ANIT's company tax returns for FY 2019 and FY 2020 show no FBT expense. Nor do the FY 2019 and FY 2020 Financial Statements which were prepared by Russell & Partners.
221 ANIT's audited financial statements for FY 2021 in fact show an expense of $51,763 for FBT. In the audited financial statements for ANIT for FY 2022 however, this expense appears in brackets (that is ($51,763)), which suggests that the expense was reversed in FY 2022.
222 In the defendants' closing submissions, they state that Mr Shadat was asked to provide ANIT with FBT declarations for 31 March 2019 and 31 March 2020, but he has not done so, and that he refused to agree to provide such a declaration when asked in cross-examination (four times). The cited references that Mr Shadat had been asked to provide the company with FBT declarations for 31 March 2019 and 31 March 2020[12] misstates Mr Huraira's evidence, with the relevant paragraph reading: 'Notwithstanding that the plaintiff used the Ferrari exclusively as his personal motor vehicle, at all relevant times the plaintiff failed to submit any [FBT] declarations to the Company'. It also misstates Mr Shadat's reply evidence and his evidence in cross-examination. In fact, in the footnoted paragraph of Mr Shadat's reply witness statement referred to,[13] Mr Shadat agrees that he has not submitted any FBT declarations in respect of the Ferrari, says that he does not believe he has to do so, and says that neither Mr Huraira nor Mr Rahman ever spoke to him about FBT or suggested that he needed to submit any FBT declaration. He concludes by saying he does not believe that ANIT has any FBT Liability in respect of the Ferrari.
223 In relation to his alleged refusal four times in cross-examination that he was willing to provide such a declaration, viewed as a whole, Mr Shadat's evidence was to the effect that he acknowledged that he used the Ferrari for his own benefit, says he was never asked to provide a declaration, said that his use of the car occurred on the same basis as Mr Rahman's use of a car, and that Mr Rahman was never asked to provide a declaration. When it was put to Mr Shadat that because of his personal use of the car ANIT had been exposed to its FBT Liability, he answered, 'As far as I'm aware, the tax has never been declared or never been paid'. He said that he did not think there was any such liability on the company's books.
224 Contrary to Mr Huraira's evidence, s 137 of the Fringe Benefits Tax Assessment Act 1986 in fact reads:
(1) For the purpose only of ascertaining whether a person is an employee or an employer within the meaning of this Act, where:
(a) a benefit is provided by a person (in this subsection referred to as the first person) to, or to an associate of, another person (in this subsection referred to as the second person);
(b) but for this subsection, the benefit would not be regarded as having been provided in respect of the employment of the second person; and
(c) either of the following conditions is satisfied:
(i) if the benefit were provided by the first person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the first person to the second person;
(ii) all of the following conditions are satisfied:
(A) subparagraph (i) does not apply in relation to the benefit;
(B) the first person is an associate of a third person or the benefit is provided under an arrangement between the first person and a third person;
(C) if the benefit were provided by the third person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the third person to the second person;
a definition in subsection 136(1) applies as if the benefit were salary or wages paid to the second person by:
(d) in a case to which subparagraph (c)(i) applies--the first person; or
(e) in a case to which subparagraph (c)(ii) applies--the third person.
225 By email sent by Mr Baki to Mr Huraira and Mr Rahman on 15 June 2021, Mr Baki advised that, following an audit of ANIT's superannuation guarantee obligations, ANIT was required to pay $374,990 comprising a penalty of $202,401 together with the superannuation guarantee charge of $172,589. Contrary to the defendant's written submissions, the penalty of $202,401 did not equate to 200% of the SGC liabilities; the penalty amounted to 72.52%, as the email attachment makes clear. ANIT seeks to make Mr Shadat liable in respect of $106,433.56, which is said to be 'the portion of the penalty attributable to the period of Shadat's directorship for the quarters June 2018 to September 2019.'[14]
226 ANIT submits that Mr Shadat must have been aware of the obligation to pay superannuation, and refers to an email from an employee of PTE Brisbane dated 20 July 2017, which is said to 'seek payment of the employee's superannuation entitlement'. In fact, the email sets out the employee's payment details for the period 13 March 2017 to 4 June 2017, with the employee's gross pay, net pay, and superannuation charge. Mr Shadat appears to have forwarded this email on to Mr Huraira, who responded to Mr Shadat and Mr Tonmoy with the inquiry, 'Did we pay super?'.
227 When Mr Shadat was cross-examined, he conceded that he was not really familiar with the responsibilities and duties of being a director at the time he became a director of the company in 2015. He said this basically remained the case until this proceeding started and he became familiar with the duties of a director. He explained that was why they engaged professionals and hired accountants, so that they could take care of those things. He did say that he was aware that a director had a duty to act in the best interests of the company and to exercise powers for a proper purpose, and to ensure that the company kept accurate financial records. Mr Shadat, when cross-examined, in effect said Mr Huraira was responsible for paying employees' salaries, and Mr Shadat did not know that superannuation was not being paid.
The Financial Investment Schedule - in more detail
228 It is necessary to return to the Financial Investment Schedule and the underlying Substantiation Spreadsheets which Mr Shadat said were produced for the first time on or about 27 July 2021.
229 In Mr Rahman's witness statement, he refers to the Substantiation Spreadsheets at various stages.[15] To similar effect, Mr Huraira, in his witness statement, refers to various increases or decreases in his shareholder loans advanced to ANIT, but does so without referring to the relevant document, which purportedly shows the increases or decreases that Mr Huraira says occurred. In fact, the document referred to by Mr Rahman in his witness statement is identical to the document to which Mr Shadat refers to in his witness statement,[16] save that it ends as at 30 June 2017. Neither Mr Rahman nor Mr Huraira produced a document which evidenced the contemporaneous preparation of any of the investment schedules or earlier versions of the Substantiation Spreadsheets. In contrast, Mr Shadat, in his witness statement, refers to an email from Mr Rahman to Mr Shadat, copied to Mr Huraira, dated 20 September 2017, which attaches a spreadsheet showing the amounts invested by Mr Rahman and Mr Shadat for the period from 1 August 2016 to 31 December 2016. To the extent to which a reading of the witness statements of Mr Rahman and Mr Huraira suggests that the Substantiation Spreadsheets were prepared on a regular basis and distributed to Mr Shadat, I reject that evidence. There is no documentary evidence which supports it. The absence of such documentary evidence is also consistent with the fact that the FY 2019 Financial Statements were not prepared until after the orders were made on 3 September 2020 as well as the communications between Mr Shadat, Mr Rahman, and Mr Huraira in the first two months of 2020 by which they sought to determine a net investment figure for ANIT. I prefer Mr Shadat's evidence which is unequivocal and consistent with such documents as do exist and the inferences which can be drawn from the absence of such documents. Otherwise and more generally, I reject the defendants' submission that the absence of the documentary trail that would ordinarily be expected is explicable because the parties did not often communicate by email and that when they circulated spreadsheets, they circulated live documents that could be amended such that it is not later possible to produce the document created at the time. Whilst live documents appear to have been sent on some occasions, there are many instances where Mr Shadat has been able to produce emails between the parties including excel spreadsheets which support his case. What is clear though, is that there is a conspicuous absence of documentary records which support many aspects of the defendants' case. I do not accept that the absence of such documents is due to the fact that the protagonists rarely communicated by email or text or when they did it was in the form of live documents. This submission is belied by the many documents relied upon by Mr Shadat.
230 In any case, returning to the Substantiation Spreadsheets is helpful to set out some observations about how they have been prepared.
231 They commence with an identification of amounts which constitute investments. This correlates to investments made in ANIT by or on behalf of Mr Shadat, Mr Rahman, and Mr Huraira. The investments are accounted for in the balance sheet as loans made to ANIT and as such represent liabilities of ANIT to the investor/lender.
232 Thus, under the first sub-heading, 'Investment from Md Imtiaj Rahman', there is a listing of amounts contributed by Mr Rahman, with a description of how the amount has been invested. Generally, the investment takes the form of either a bank transfer or an expense of ANIT which has been paid by the investor. Thus, in the case of the investment from Mr Rahman for FY 2017, the total invested amount (lent to ANIT) is $51,203.20. The same applies with respect to the investment from Mr Shadat, whose investment is said to total $59,729, whilst Mr Huraira's investment is $45,016.28.
233 The next sub-heading is 'Investment from PTE Study Centre Pty Ltd' (which is PTE Melbourne). Underneath this sub-heading are the words 'Transfer to ANIT & ANIT Expense paid from PTE Study Centre Pty Ltd Bank Account & Cash'. The description is self-explanatory. What then follows are various moneys transferred apparently from PTE Melbourne to ANIT's bank account or, alternatively, expenses of ANIT apparently paid for by PTE Melbourne. An example of the latter kind is the payment on 17 January 2017 of $6,050 described as rent payment apportion for ANIT. For the period ended 30 June 2017, the investment from PTE Melbourne, insofar as it comprised transfers to ANIT and ANIT expenses paid from PTE Melbourne's bank account, totalled $155,736.68.
234 The next sub-heading, which also forms part of the investment from PTE Melbourne, appears as 'PTE Study Centre Pty Ltd Enrolment EFTPOS Deposited to ANIT Bank Account'. This apparently relates to payments for students enrolled at PTE Melbourne which were banked into ANIT's bank account. This rather unorthodox approach has been noted above. These amounts for the period ending 30 June 2017 total $53,565.00.
235 The next sub-heading is 'Investment from PTE Study Centre Adelaide Pty Ltd'. The amounts which appear under this sub-heading comprise various transfers or cash deposits into the ANIT account from PTE Adelaide and total $50,806.
236 The spreadsheet then moves to identifying investment returns made to Mr Shadat, PTE Melbourne, and Chinese PTE after which follows in brackets the words ('Mr Shadat's business') so as to align with the defendants' argument that Chinese PTE was an alter ego of Mr Shadat. Investment returns refer to payments made by ANIT to the investor or expenses of the investor which have been made by ANIT. They are then treated in the accounts as reductions in loans made to ANIT, thus reducing ANIT's liability to the investor and hence the liability in the balance sheet or if the balance is nil, as loans made by ANIT (which give rise to an asset in the form of a receivable owed to ANIT).
237 After the various investment returns have been identified and tabulated, they are offset against the investments made and are then combined so as to show a net investment from Mr Rahman of $51,203.20; from PTE Melbourne of $206,051.10; from PTE Adelaide of $50,806; from Mr Shadat of $37,603; from Chinese PTE of ($6,392.90);[17] and from Mr Huraira of $45,016.28.
238 These figures are then used as the basis for the figures in the Financial Investment Schedule, which in turn constitute the opening balances for the various loan accounts which are then carried through to the financial statements for FY 2020 and FY 2021.
239 It is important to note that in the balance sheets in the ANIT financial statements, the investments made by PTE Melbourne (or returns made to) are treated as having been made by Mr Rahman, as are investments made from PTE Adelaide (and investment returns). In contrast, investment returns to Chinese PTE (which are described as expenses for Chinese PTE paid from the ANIT bank account), are treated as if they are investment returns made (or loan repayments made) to Mr Shadat. This explains the wording 'Shadat's business' after the reference to Chinese PTE.
240 In FY 2018, the same process is followed. Thus, the Substantiation Spreadsheet shows various investments made by PTE Melbourne comprising moneys transferred from PTE Melbourne to ANIT, and ANIT expenses paid from the PTE Melbourne bank account, as well as PTE Melbourne enrolments, where the deposits have been paid into the ANIT bank account. The latter is significant, and totals $358,522.40 for FY 2018. In this financial year, Chinese PTE has apparently invested moneys in ANIT, hence the description, 'Investment from Chinese PTE' totalling $22,431, whilst PTE Brisbane invested $118,165, and PTE Sydney invested $82,400.
241 There is then the sub-heading 'Investment Return to SM Nazmus Shadat', which relevantly includes a $10,000 withdrawal apparently made by Mr Shadat on 3 May 2018 'for personal reasons', as well as the payments of $16,500 (together with a further payment of $1,100) made on 3 June 2018 and 17 May 2018 respectively for Lexica, which is described as Mr Shadat's brother's business. These are the Sohan Payments.
242 There is then a sub-heading for 'Investment Return to PTE Study Centre Pty Ltd', which is unexplained, but includes a series of matters which presumably relate to moneys paid out of an ANIT bank account for expenses of PTE Melbourne; the investment return to PTE Adelaide, the investment return to Chinese PTE (again described as 'Mr Shadat's business') which, in that financial year, totalled $98,692.62, an investment return to PTE Melbourne and, an investment return to PTE Sydney which totals $4,658.28.
243 Once again, those figures are totalled as at 30 June 2018 with the investments and investment returns netted off and then grouped so as to show as part of Mr Rahman's group, net investment by him for that year of nil but an investment by PTE Melbourne of $280,843.05 and by PTE Adelaide of $33,999.22. In the case of Mr Shadat's group, in that financial year they show an investment by Mr Shadat of ($27,600) (that is to say, Mr Shadat borrowed moneys totalling that amount from ANIT in that financial year) and [$76,261.62] in respect of Chinese PTE, and invested funds from PTE Brisbane of $116,665 and PTE Sydney of $77,741.72.
244 During FY 2019 there is an investment from PTE Melbourne totalling $526,419.56, an investment from PTE Adelaide totalling $100,137.45, an investment from PTE Brisbane totalling $300,725.39, and an investment from PTE Sydney totalling $425,427.
245 There are then investment returns to Mr Rahman of $5,400, to Mr Shadat totalling $293,589.36, to Mr Huraira of $20,000, to PTE Melbourne totalling $328,322.23, to PTE Adelaide totalling $16,350.91, to PTE Brisbane totalling $60,746.76, and to PTE Sydney totalling $40,533.21.
246 Once again the investment returns are set off against the investments made with the result that there are net investments in FY 2019 for the Rahman group by Mr Rahman of $5,400, PTE Melbourne of $198,097.33, and PTE Adelaide of $83,786.54.
247 In the case of the Shadat group there are net investments in FY 2019 by Mr Shadat of [$293,589.36]; PTE Brisbane of $239,978.63; and PTE Sydney of $384,893.79.
248 In the case of Mr Huraira, the Substantiation Spreadsheets show an investment by him in FY 2019 of $50,900 which are comprised of various transfers made by Mr Huraira to the company during FY 2019.
249 The investment made by PTE Melbourne and the investment return to Mr Shadat in FY 2019 require particular scrutiny. The investment from PTE Melbourne in FY 2019 once again encompasses amounts either transferred to ANIT or ANIT expenses paid from PTE Melbourne's bank account or cash. Overwhelmingly, the amounts which are said to constitute investments from PTE Melbourne in FY 2019 comprise amounts paid to Mr Shadat and his wife, Papia Afrin of consistent amounts on a fortnightly monthly basis, together with superannuation as well as PAYG payments which are evidently related to those payments as they are made with the same consistency as to amount and timing. The relevant notation which accompanies the spreadsheet is variously: 'Paid to Papia Afrin's Bank Account (or Mr Shadat's bank account) as an expense of ANIT';[18] 'Paid to AustralianSuper for Papia Afrin as an expense of ANIT' and 'PAYG Paid through BPAY for Papia Afrin as an expense of ANIT'.
250 In addition to these amounts being recorded as investments by PTE Melbourne (that is loans made by it to ANIT), they are also shown as investment returns to Mr Shadat (that is, a repayment of moneys owed by ANIT to Mr Shadat). The investment return to Mr Shadat for FY 2019 of $293,589.36 forms a subset of the investments made by PTE Melbourne.
251 According to Mr Shadat's evidence, he and his wife received a wage from PTE Melbourne from 2015 onwards before Mr Rahman stopped the wages being paid in January 2020. He gave evidence that he was not an employee of ANIT and it was never discussed that the salary he received from PTE Melbourne would be treated as a repayment of the loans (or investments) he had made to ANIT.[19]
252 Given that the Substantiation Spreadsheets were prepared by the defendants in 2021 and that the FY 2019 and FY 2020 Financial Statements had not been prepared prior to Mr Shadat being removed as a director of ANIT on 31 March 2020, the clear inference is that Mr Shadat and Ms Afrin received fortnightly payments from PTE Melbourne of salary and superannuation and that PAYG tax was withheld and paid by the employer PTE Melbourne, but that the total of these amounts was expensed in ANIT's profit and loss statement, hence the description 'as an expense of ANIT'. The effect of this is to reduce ANIT's profit in respect of which Mr Shadat owned 38% of the shares, but increase PTE Melbourne's profit, which Mr Rahman claims to own 100% of the shares in (as is recorded in the ASIC records). More pertinently for present purposes and despite being treated as expenses of ANIT and thus accounted for in its profit and loss statement, they are treated in the Substantiation Spreadsheets, hence the Financial Investment Schedule and thereby the balance sheet of ANIT for FY 2019 as both an investment from (that is a loan) made by PTE Melbourne to ANIT and an investment return (repayment of loans) that had been made by Mr Shadat. This purported loan repayment also extends to the evident payment of PAYG tax withheld by PTE Melbourne on behalf of Mr Shadat and Ms Afrin. PAYG tax is not ordinarily associated with the repayment of loans.
253 In FY 2020, once again, substantial amounts have alleged to have been invested (that is, loaned to ANIT) by PTE Melbourne for the purposes of funding ANIT's expenses in the form of the fortnightly payments of salary, superannuation, and tax paid to or for the benefit of Mr Shadat and Ms Afrin which are treated as expenses of ANIT, which are also treated as investment returns to Mr Shadat (repayments of loans that had earlier been made by Mr Shadat to ANIT).
254 It is also pertinent to note the entries that relate to the period from 13 January 2020 to 30 June 2020. 13 January 2020 is the date on which Mr Rahman emailed the various managers of the PTE businesses with his 'Vision 2020'[20].
255 PTE Melbourne made payments totalling $28,200 apparently for ANIT's rent for 19 February 2020 to 6 March 2020; there was no further investment from PTE Adelaide after 31 October 2019; no further investment from PTE Brisbane after 31 December 2019 and no further investment from PTE Sydney after 9 December 2019.
256 There were further investments by a new entity, QLD PTE Study Centre Pty Ltd, from 12 March 2020 to 11 June 2020 totalling $37,000, which apparently relate to ANIT'S rent for Brisbane which was paid by the new entity; there was also an investment return to Mr Rahman from 24 January 2020 to 5 June 2020 of $42,000. There was an investment return to PTE Melbourne which relevantly included payments from ANIT to PTE Melbourne from 28 January 2020 to 22 June 2020, which totalled $85,671.82. In addition, there was an investment return to the newly-created entity, NSW PTE Study Centre Pty Ltd, comprising payments made from 19 February 2020 to 19 May 2020, which totalled $35,021.90.
257 There was no investment return to Mr Shadat after 23 January 2020 but the 16 January 2020 Withdrawals which are the subject of ANIT's counterclaim have been accounted for as investment returns (loan repayments) to Mr Shadat. Otherwise, the investment returns to Mr Shadat largely comprise the Papia Afrin and Shadat fortnightly payments (recorded as expenses of ANIT) although these cease on 23 January 2020.
258 Overall then, in FY 2020, there was a net investment by the Rahman group of $77,952.92; PTE Melbourne $145,247.29; PTE Adelaide $70,773.27; QLD PTE Study Centre Pty Ltd $36,978.10; and NSW PTE Study Centre Pty Ltd $35,021.90. Combined, this amounts to $365,973.48 which means that the Rahman group took this amount out from ANIT in FY 2020.
259 Overall in FY 2020, the net investment by the Shadat group is ($281,769.14); PTE Brisbane ($52,393.37); and PTE Sydney ($126,926.22). When combined, this totals ($461,088.73).
260 A very substantial part of the investment return to Mr Shadat comprised the salary, superannuation, and PAYG tax paid to or for the benefit of Mr Shadat and his wife from PTE Melbourne which appears to have been expensed in ANIT's accounts, a corresponding portion of which represents an investment made by PTE Melbourne.
261 In addition, the investment returns made to Mr Shadat also include a substantial component of the Unauthorised Transactions and the Sohan Payments which are also claimed (again) by ANIT in its counterclaim.
262 In the case of Mr Huraira, there are investment returns to him (which repay his earlier loan to ANIT of $30,900), of $110,000 of which $45,000 are made in the period from 17 February 2020 to 15 May 2020. The net effect of these transactions is to leave Mr Huraira as a debtor of ANIT as at 30 June 2020.
263 The position becomes simpler for FY 2021, because there are no investments made by or to the so-called Shadat group and in any case there is no record of transactions after August 2020.
264 In the financial year ending 30 June 2021, the net investment by Mr Huraira was zero, whilst that made by the Rahman group was $5,000; $5,892.70 for PTE Melbourne; $3,226.32 for PTE Adelaide; $17,620 for QLD PTE Study Centre Pty Ltd; and $15,850.20 for NSW PTE Study Centre Pty Ltd.
265 As noted, Mr Rahman and Mr Huraira treat as investment returns to Mr Shadat, so-called investment returns to Chinese PTE in the amount of $6,392.90 in FY 2017 and $76,261.62 for FY 2018. This had the effect of reducing the amount owed by ANIT to Mr Shadat as shown in the Financial Investment Schedule and hence the FY 2020 Financial Statements by $82,654.52.
266 The defendants' approach rests upon the premise that 'Chinese PTE' was Mr Shadat's business and effectively an alter ego of Mr Shadat. In Mr Shadat's witness statement, he describes the Chinese PTE business as a component of PTE Melbourne, which operated using PTE Melbourne's ACN and ABN. The Chinese PTE business was to offer PTE training, catered to Chinese students. According to Mr Shadat, he, Mr Rahman, and Mr Huraira agreed to share equal profits from the Chinese PTE business component of the business separately, which, Mr Shadat said, distinguished the Chinese PTE business from the other PTE activities, where the businesses were owned equally by Mr Shadat and Mr Rahman.[21]
267 According to Mr Huraira and Mr Rahman, the idea for the Chinese PTE business came from Mr Shadat who said there was an opportunity to develop a business focusing on Chinese migrants to Australia, and that neither Mr Rahman nor Mr Huraira had any interest in the business, which they considered would be expensive to run and operate in a very competitive field. Mr Rahman and Mr Huraira said that ANIT could pay for some of the costs of Chinese PTE, provided that any payments would be treated as a reduction in the amount of Mr Shadat's loan to the company. According to them, Mr Shadat agreed with this. Both say they had no 'involvement or economic interest in the Chinese PTE business', or, in Mr Huraira's case, in the PTE business more generally.[22]
268 In Mr Shadat's reply witness statement, he deals with the Chinese PTE business at some length[23]. He refers to 49 pieces of correspondence which passed between Mr Shadat, Mr Rahman, and Mr Huraira, among others which he submits supports his evidence that Mr Huraira, Mr Rahman, and Mr Shadat were each actively involved in establishing the Chinese PTE business and were the equal owners of that business.
269 Many of the email exchanges involve Eddie Liu and Evan Liu. Evan's emails are sent with the signature line, 'Marketing Manager at Melbourne PTE Study Centre'.
270 Amongst the documents referred to by Mr Shadat are an email from Evan Liu to Eddie Liu, Mr Huraira, Mr Shadat and Mr Rahman dated 19 June 2017, with the subject line, 'Preparing to start', enclosing version 2 of the PTE course schedule and summarising course details for the upcoming Chinese PTE courses; a welcome email from Eddie Liu to Evan Liu, copied to Mr Huraira, Mr Shadat, and Mr Rahman, attaching the translated web content; an email from Evan Liu to Mr Huraira, Eddie Liu, Mr Shadat and Mr Rahman dated 20 June 2017, with the subject line, 'The PTE Website Content V2', and attaching the latest version of the website content; an email from Evan Liu to Mr Huraira, Mr Shadat and Mr Rahman, with the subject line 'The marketing proposal for the next month' and enclosing a marketing proposal for August; an email from Mr Rahman to Mr Shadat and Mr Huraira dated 8 August 2017, advising that he had just interviewed a female Chinese PTE trainer and expressing his opinion on her suitability for employment; an email from Evan Liu to Mr Huraira, Mr Shadat and Mr Rahman with the subject line, 'The location in Box Hill', attaching a heads of agreement for premises at 990 Whitehorse Road, Box Hill, which apparently related to possible occupancy of those premises; an email from Mr Huraira to Evan Liu, copied to Mr Shadat and Mr Rahman, with the subject line, 'Target for BTG 2017' (balance to go), which set out forecast enrolments for August to December 2017 and requests that Mr Liu work on a marketing strategy so Mr Huraira and Mr Liu could review it and then present it to the management team in mid-September. Mr Huraira provided recommendations as to the appropriate key areas to focus on for the purposes of the marketing strategy; an email from Mr Huraira to Mr Rahman and Mr Shadat dated 3 October 2017 with the subject line, 'Chinese PTE July-Sep 2017', attaching an Excel spreadsheet which apparently comprised financial reconciliation showing the performance of the Chinese PTE business for that period; an email from Evan Liu to Mr Shadat, Mr Rahman and Mr Huraira with the subject line, 'Chinese PTE Market Research', attaching an Excel spreadsheet headed, 'PSC Chinese Market Research 2017', which refers to his discussions with Mr Huraira that morning and his recent Chinese competitor analysis, and encloses some recommendations and selling points for the operation of the business; and an email from Mr Liu to Mr Shadat, Mr Rahman, and Mr Huraira dated 29 January 2018 with the subject line, 'The preparation List and Marketing Proposal 2018', which contained the file of preparation list and a new marketing proposal for 2018.
271 The documents evidence an active involvement on the part of Mr Huraira and Mr Rahman in the affairs of Chinese PTE. They are inconsistent with their evidence that they had no involvement in the Chinese PTE business. The documents provide no support for their evidence that Chinese PTE was Mr Shadat's business alone. It is tolerably clear that the business was conducted under the name of PTE Melbourne and that each of Mr Shadat, Mr Rahman, and Mr Huraira were involved in its activities.
The PTE Study Centre businesses - in more detail
272 The ownership of the PTE Study Centre businesses and their operations are important. Mr Shadat and Mr Rahman's business association commenced with the establishment of the private coaching business, PTE Melbourne, in January 2015, and it is clear that a substantial portion of the funding necessary to establish ANIT and fund its operations came from the PTE businesses.
273 In addition, the PTE businesses and ANIT operated from the same premises in each city. Whilst ANIT was the lessee of those premises, it seems that the PTE businesses used parts of the premises leased by ANIT at least on an informal basis, although Mr Shadat says that they sublet parts of the premises at all relevant times. The usage by the PTE businesses was accounted for in ways which are not entirely clear. It is however clear that staff members, among them Mr Huraira, who was the CEO of ANIT, were involved in the activities of the PTE companies, contrary to his evidence in his witness statement which I reject.
274 As noted above, in the Financial Investment Schedule, the defendants have treated funds invested by PTE Melbourne and PTE Adelaide as funds invested by Mr Rahman. Relatedly, they have assessed benefits provided by ANIT to those entities or other moneys paid to those entities by ANIT as investment returns or reductions of the loans made by Mr Rahman to ANIT.
275 Relatedly, in the Financial Investment Schedule, the defendants treated funds provided by PTE Sydney and PTE Brisbane as loans made by Mr Shadat, and investment returns or other benefits provided by ANIT to those entities as reductions in the loans made by Mr Shadat.
276 In adopting that approach, the defendants have acted concordantly with the records for the companies lodged with ASIC which, as noted above, show that, as from 17 December 2015, Mr Rahman was the sole director of PTE Melbourne and its sole shareholder, as he was with respect to PTE Adelaide from the time of its incorporation on 15 August 2017.
277 In Mr Shadat's case, he was the sole director and shareholder of PTE Brisbane and PTE Sydney, which were both also incorporated on 16 August 2017.
278 On the defendants' case, therefore, there was a difference in ownership and control of PTE Melbourne and PTE Adelaide on the one hand, which were entities owned and controlled by Mr Rahman, and PTE Brisbane and PTE Sydney on the other hand, which were entities owned and controlled by Mr Shadat.
279 Mr Shadat's evidence is that, notwithstanding the ASIC records, he and Mr Rahman were the owners of the PTE businesses in equal shares, including owners of each of the companies which operated in the various States.
280 Mr Shadat says that much as was the case with respect to the ownership and directorship of ANIT, the records maintained at ASIC did not reflect the underlying ownership and control of the entities, but rather were measures that were adopted expediently for various purposes.
281 In Mr Shadat's witness statement, he gave evidence that he and Mr Rahman discussed the establishment of a company to operate the Melbourne PTE Study Centre, which was implemented when PTE Melbourne was incorporated on 22 April 2015.
282 On Mr Shadat's account, he resigned as a director of PTE Melbourne on 17 December 2015 on the advice of Mr Huraira and Russell Rahman to the effect that it would be better for a home loan application for him and his wife that Mr Shadat was proposing to make if he was not recorded as a shareholder or a director of PTE Melbourne, because it was in a start-up phase at that stage. Mr Shadat said that he had a subsequent discussion with Mr Rahman and told him that he wished to temporarily resign as a director of PTE Melbourne and transfer his shares to Mr Rahman. According to Mr Shadat, he and Mr Rahman agreed that Mr Rahman would transfer the shares back whenever Mr Shadat wanted them.[24]
283 According to Mr Shadat, the establishment of the four separate PTE companies, PTE Adelaide, PTE Brisbane and PTE Sydney (in addition to the existing PTE Study Centre which operated the business in Melbourne) was Mr Huraira's idea and that it was Mr Huraira who suggested that Mr Shadat could be the director of PTE Brisbane and PTE Sydney, whilst Mr Rahman would be the director and shareholder of PTE Melbourne and PTE Adelaide.
284 According to Mr Shadat, he asked Mr Huraira why Mr Rahman and he would not simply be appointed as co-directors and equal shareholders of each entity, and that Mr Huraira's response was to the effect that if they were applying for home loans or other personal loans in the future, it would be better if they had an involvement in a lesser number of companies because it would reduce the number of questions that a bank would ask and the amount of paperwork that would be necessary to fill out. According to Mr Shadat, he said that was fine, as long as he and Mr Rahman owned the PTE businesses equally.
285 In his witness statement, Mr Rahman gave a very different account. He said that he insisted upon Mr Shadat's resignation as a director and shareholder of PTE Melbourne because Mr Shadat had lied to him about his tertiary qualifications and university education, having told Mr Rahman that he had a degree from Swinburne University, when in fact Mr Shadat only had a certificate from Swinburne University, but had obtained his degree from the Kaplan Business School.
286 According to Mr Rahman, when he confronted Mr Shadat about this, Mr Shadat apologised and agreed to give up his shareholding in PTE Melbourne and resign as a director, as long as he could continue working as a teacher for PTE Melbourne. Mr Rahman said that he agreed to this and Mr Shadat would continue to work for the PTE business as an employed teacher, provided that he resigned as a director and transferred his shares in PTE Melbourne to Mr Rahman. According to Mr Rahman, the terms on which Mr Shadat was to be employed did not include any royalty payable from the revenues or future profits of PTE Melbourne.
287 In his reply witness statement, Mr Shadat denied these conversations and maintained that his resignation as a director of PTE Melbourne and the transfer of his shares in PTE Melbourne to Mr Rahman had occurred on the advice of Mr Huraira and Russell Rahman. Otherwise, Mr Shadat maintained that he and Mr Rahman continued to manage PTE Melbourne together and to share profits equally.[25] Mr Shadat maintained that whilst he agreed there was a change in directorship and shareholding, this did not affect the way Mr Rahman and he managed PTE Melbourne, or for that matter all of the PTE entities.
288 During the course of Mr Shadat's cross-examination of Mr Rahman, Mr Rahman said that after Mr Shadat was removed from PTE Melbourne, he was too shocked to discuss how much Mr Shadat would be paid. He conceded that after a period of time, they agreed, around the end of January or February 2016, that Mr Shadat would be paid a salary of $120,000 per annum.
289 He then said that Mr Shadat later requested that he be given additional cash amounts because of personal reasons.
290 Mr Rahman's evidence as to Mr Shadat's entitlement to moneys from the PTE companies being limited to a salary of $120,000 following his alleged lie about his university alma mater and qualifications, was contradicted by various emails to which Mr Rahman was taken in cross-examination.
291 These emails showed Mr Rahman sharing revenue and expense figures with Mr Shadat for the PTE businesses, which in turn showed receipt by Mr Shadat of $233,355 in the first eight months of 2016, which compared with Mr Rahman's $202,791 over the same period and $400,000 having been received by Mr Shadat by 30 November 2016. Mr Rahman in seeking to explain in cross-examination, the payments to Mr Shadat being far higher than $120,000 then said that in around July/August 2017, he came to an agreement with Mr Shadat that Mr Shadat would take the PTE earnings for PTE Sydney and PTE Brisbane. Mr Shadat then took Mr Rahman to an email from Mr Rahman to Mr Shadat of 23 October 2017 with the subject line 'Brisbane Account -Invitation to Edit' which attached a spreadsheet for PTE Brisbane which showed that from June 2016 to December 2017, well before the alleged agreement, Mr Rahman had taken $149,661.27 and Mr Shadat $107,956, as well as an email from Mr Rahman to Mr Shadat dated 8 May 2016 with the subject line 'Accounts-2016' which showed the amounts each had taken for PTE Brisbane from 2016. This evidence showed that Mr Shadat and Mr Rahman were sharing the earnings from the PTE companies both after Mr Shadat's alleged enforced resignation as a director and shareholder of PTE Melbourne in December 2015 and before his appointment as the sole director of PTE Brisbane and PTE Sydney in August 2017. In short, the evidence as to revenue sharing is entirely consistent with Mr Shadat's account and destructive of that proffered by Mr Rahman.
292 When Mr Shadat asked Mr Rahman as to why Mr Rahman agreed to work with Mr Shadat in ANIT despite Mr Shadat allegedly lying about his qualifications with the result that Mr Rahman required Mr Shadat to give up his shareholding in PTE Melbourne, Mr Rahman said that he agreed to do so because Mr Shadat's wife was undergoing mental health treatment and Mr Shadat was rehabilitating his brother, Mr Sohan, in Brisbane and so he agreed to Mr Shadat's request that he be allowed to continue working with him so that he could receive money to support them.
293 Mr Shadat then cross-examined Mr Rahman about the 13 January 2020 email in which Mr Rahman advised all recipients (who were the managers of the PTE businesses in the various states) that Mr Rahman had decided to step down from the management role of two States and relinquish his stakeholding, and take up the whole management and whole stakeholding of the other two States. Mr Shadat highlighted that part of the email where Mr Rahman wrote that Mr Rahman advised that he would no longer look after two States and would solely look after the other two States. Mr Shadat suggested to Mr Rahman that this was not consistent with Mr Rahman's claim in the case that Mr Shadat was the 100% owner of PTE Brisbane and PTE Sydney. In his answers, Mr Rahman drew a distinction between shareholding and stakeholding (stakeholding being his interest and the like in the businesses and not ownership), saying that he was entitled to a royalty from each PTE Brisbane and PTE Sydney of 30% and that this constituted a stakeholding which he was happy to give up. He also said that he owned the business names PTE Brisbane and PTE Sydney and that Mr Shadat's ownership was limited to the companies and that Mr Rahman's ownership of the business names explained the royalties. Mr Rahman maintained that his businesses were those run in Melbourne and Adelaide, and Mr Shadat's were in Brisbane and Sydney, but that he had a stakeholding in the latter two businesses in the sense that he had an entitlement to a 30% royalty and that this was what he was referring to in his 13 January 2020 email.
294 Following this part of Mr Shadat's cross-examination of Mr Rahman, Mr Rahman referred to a 'fall out' and said that Mr Shadat was severely oppressing him and Mr Huraira at that time, and was treating them as his personal assistant. He said that Mr Shadat required Mr Rahman and Mr Huraira to stand up in honour of Mr Shadat whenever Mr Shadat entered the office, as well as requiring Mr Rahman and Mr Huraira to call Mr Shadat's wife, Papia Afrin, 'Madame Afrin'. Mr Rahman said that he had never seen such a culture in an Australian work environment.
295 Mr Rahman's agreement to pay additional moneys to Mr Shadat on account of his wife and brother's alleged health issues had not previously been mentioned by Mr Rahman in his witness statement or in his further evidence-in-chief. Nor had Mr Shadat's demands that Mr Rahman and Mr Huraira rise when Mr Shadat entered the room or refer to his wife as Madame Afrin. Understandably, none of this had been put to Mr Shadat. Whilst Mr Rahman had made brief reference in his witness statement to a commission payable by Mr Shadat on sales from PTE Brisbane and PTE Sydney of 20%, in cross-examination Mr Rahman referred to a rebate not a commission, but more importantly and putting that distinction to one side, said the figure was 30%.
Further observations about the evidence of Mr Huraira and Mr Rahman
296 As noted above, I formed a very dim view of the evidence of Mr Huraira and Mr Rahman. Mr Huraira's witness statement exemplified many of the worst features that can attach to the preparation of written evidence tendered as the witness's evidence-in-chief. It became apparent in cross-examination that Mr Huraira had only a passing familiarity with its content. It clearly did not reflect his recollection. It was riddled with internal inconsistencies; for example, in paragraph [123], Mr Huraira gave evidence of a conversation between him and Mr Rahman to the effect that he would be paid a full-time salary of $120,000 per annum as CEO of the company, the equivalent of which was $7,217 per month after tax, whereas in paragraph [154], he said that on or around 17 July 2018 he started to be paid a part-time salary by the company of $36,400 per annum; contrastingly, in paragraph [387], he says that on 8 April 2020, he had a discussion with Mr Rahman to the effect that his part-time salary should increase to $54,600 per annum.
297 His original witness statement dated 23 January 2023 was amended in very significant respects upon him entering the witness box some 19 months after it had been filed and without notice being given to Mr Shadat. Just prior to Mr Huraira adopting his witness statement and attesting to its accuracy, senior counsel for the defendants adduced further evidence from Mr Huraira so as to add in some additional words to two paragraphs of that witness statement. The first change involved the addition of the words underlined below to paragraph 137 of the witness statement such that the paragraph read:
Between 28 March 2018 and 15 November 2019, I paid the following amounts totalling $251,300 to the plaintiff and Mr. Sohan or to other people on their behalf by means of payments that were directed to or through my personal bank accounts being my account held in my name solely at the NAB with the BSB and account number 083144 17-335-0682 ("NAB Account") and my account held in my name jointly with Mrs. Sumana at CBA with the BSB and account number 063894-10342220 ("CBA Account") redacted copies of which are ... and each of which payments constituted Shadat Wages or (in the case of payments from my NAB account), other returns to Shadat.
298 Words were also added to paragraph 144 of the statement such that the paragraph in the form of the witness statement as tendered included the further words underlined as set out below:
299 The change to paragraph 144 in particular was very significant; the original version was evidence in relation to part of the Unauthorised Transactions counterclaim which alleged that Mr Shadat had taken money from ANIT's bank accounts totalling $90,400 via a series of branch withdrawals. The version of events adopted by Mr Huraira in the witness box upon the tender of the statement in its amended form was one to the effect that it was Mr Huraira who had made the withdrawals (not Mr Shadat) and that Mr Huraira then handed over the money to Mr Shadat or deposited the money into bank accounts as directed by Mr Shadat. Mr Huraira's witness statement in amended form said nothing about the directions given by Mr Shadat, why Mr Huraira acted on the alleged directions, whether he discussed the transactions with Mr Rahman or many other questions which arose from this version of events.
300 Despite being a novice cross-examiner, over the course of two days Mr Shadat effected a forensic defenestration of Mr Huraira's evidence. It became apparent during cross-examination that Mr Huraira was unfamiliar with key aspects of his witness statement. In other instances, parts of the statement were irreconcilable with aspects of the documentary evidence, including aspects of the documentary evidence referred to in the statement itself. During closing oral submissions, senior counsel for the defendants accepted that it was open to the Court to find that Mr Huraira was an unreliable witness. In both oral submissions and the written closing submissions, the defendants sought to explain away the deficiencies in the reliability of Mr Huraira's evidence by noting that his evidence-in-chief had been given by way of witness statement rather than viva voce. This submission was not expanded upon, but insofar as it is implied that the witness statement prepared on Mr Huraira's behalf did not reflect his actual recollection of events but amounted to an account that the drafter of the statement considered advanced the defendants' case as opposed to actually having taken place, the observation was apt. None of this excuses Mr Huraira; as is customary, the witness statement contains an attestation by him that it is true and correct and he adopted it as his evidence and affirmed that it was true and correct at the commencement of his evidence.
301 Further, paragraphs [144], [190], [194] and [241]-[245] set out an account of events which painted Mr Shadat in the most unflattering of ways, inferring that Mr Shadat has engaged in highly irregular conduct. After cross-examination had occurred, the content of those paragraphs was so unsustainable that the allegations relating to the Unauthorised Transactions made in the counterclaim against Mr Shadat based on those paragraphs were abandoned in closing submissions.
302 Among other unsatisfactory aspects of the evidence, paragraph [245] of Mr Huraira's witness statement was drawn in a wholly misleading fashion, suggesting that somehow the credits effected to the company's bank account on 11 October 2019, 14 October 2019, and 18 October 2019 constituted the entire source of funds necessary to make the impugned payments as set out in the table at paragraph [245]. This table conveniently left out numerous other payments made from the account during the period the subject of the table. The table also includes payments that Mr Shadat was able to establish were made into Mr Rahman's account (for example, the payment on 28 October 2019) and to or for the benefit of PTE Melbourne and PTE Adelaide which, Mr Rahman and Mr Huraira contend in this proceeding were owned by Mr Rahman alone (namely, the payment of $65,000 to Melbourne on 11 October 2019, the payment to the ATO on 14 October 2019, and the payment made to PTE Melbourne of $22,838.30 on 14 October 2019).
303 The witness statement is replete with conclusions including about subject matter about which it was obvious that Mr Huraira knew little. For example, in paragraph [300] of his witness statement, Mr Huraira says that 'all money of the company held by ANIT Aus was held on trust for the Company'. Mr Rahman's witness statement said exactly the same thing. Although Mr Shadat neither objected to or cross-examined either of them on that part of their statement, the clear impression I obtained after observing both Mr Rahman and Mr Huraira in the witness box was that neither was remotely qualified to give that evidence and most likely had no idea about the finer points of the distinction between legal and equitable interests.
304 Even where Mr Huraira purported to set out the content of a document to which reference had been made, the content of the document has often been misstated, vis the description of the PTE Brisbane-Capital Finance Agreement, the PTE Brisbane- BoQ Agreement and the PTE Sydney-BoQ Agreement, which wrongfully suggest that the terms of those agreements were ones whereby the relevant lender would advance funds to the PTE company for the purchase of certain office equipment. In fact, as the surrounding invoices make clear, the financier paid the money to the equipment supplier, and the financier then rented the equipment to the relevant PTE entity.
305 More importantly, when Mr Huraira referred to Mr Rahman's email to Mr Shadat dated 17 January 2020, he misstated the content of the email in a quite misleading way; the obvious purpose of justifying the establishment of the new company, ANIT Aus, without Mr Shadat's knowledge and meanwhile suggesting that monies needed to be secured from Mr Shadat. In paragraph [296(d)] of Mr Huraira's statement, he purported to summarise the 'effect' of that email as follows:
(d) advising the plaintiff that the balance of the Company's funds (ANIT's funds) would be moved to another account to secure them from him, [Mr Shadat] and that the funds would be held for "safekeeping" and continue to be available to meet the Company's obligations.
306 In fact, the relevant paragraph in the email read:
For hedging purposes, and to protect PTE Businesses from your further personal ill intention, I have decided to transfer and secure a chunk of money from PTE Accounts, which are described as safe keeping in the transaction details. These amounts are readily available for PTE needs.
307 Clearly, Mr Rahman was referring to PTE funds, not ANIT's funds; a point emphasised by his reference to the Albright account where amounts were to be transferred back in the following paragraph of the email.
308 Otherwise, Mr Huraira's witness statement was replete with assertions as to the content of documents despite the documents not being appropriately identified and, it would appear in many cases, non-existent.
309 During the course of his cross-examination of Mr Huraira, Mr Shadat was able to expose the majority of the shortcomings, inconsistencies, illogicalities, and falsehoods contained in Mr Huraira's statement. Mr Huraira was reduced to near incoherence as it became apparent to him that the story told in his witness statement had been exposed in large parts as a falsehood.
310 In the circumstances, I cannot accept any aspect of Mr Huraira's witness statement, and his evidence overall must be approached with extreme caution, and can only be accepted where it is corroborated by reliable third party documentation. In the event of a conflict, between his evidence and that of Mr Shadat, I prefer Mr Shadat's evidence.
311 Mr Rahman's evidence suffered from many of the same deficiencies and, as noted above, Mr Rahman too made significant changes to his witness statement before he adopted it as his evidence-in-chief.
312 If a witness seeks to revise a witness statement after the witness has become aware of documents which the witness had forgotten at the time of giving instructions for the original statement or if the documents reveal that a witness's recollection as to the sequence of events set out in the statement is mistaken, such that by the time the witness enters the witness box, the witness can no longer say that the witness's statement is true and correct, it is appropriate for the witness to change the statement prior to it being adopted in the witness box. In such circumstances, a change in the witness's account is entirely explicable.
313 However, the changes in the account given by Mr Rahman were of a materially different character. As was the case with Mr Huraira, before adopting his witness statement as his evidence-in-chief in the witness box, Mr Rahman also made a number of significant changes to the version of the witness statement served. Notice of these changes was not provided to Mr Shadat until such time as Mr Rahman gave evidence.
314 Two key paragraphs, being paragraphs 163 and 166 were deleted, whilst additional wording was added to paragraph 164 of the witness statement. The two deleted paragraphs were materially identical to paragraphs in Mr Huraira's witness statement about which Mr Huraira who had been cross-examined first had been subjected to an excoriating and highly effective cross-examination by Mr Shadat. The relevant paragraphs which Mr Rahman withdrew with only the vaguest of explanation are set out below and the new words added to paragraph 164 are shown in underline:
...
- The plaintiff provided neither the second defendant nor me with any advance notice of the money deposited by Together I.T. into the respective bank accounts of the Company and PTE Study Centre, or of the subsequent payments, withdrawals and transfers processed by the plaintiff from those bank accounts.
315 By the deletions of paragraphs 163 and 166, Mr Rahman could now be taken to accept that an important conversation, that he had earlier given notice had occurred, had not in fact taken place. In the case of the addition of the new words to paragraph 164, Mr Rahman's evidence was now to the effect that some unspecified number of the Unauthorised Transactions arising from payments initiated by Mr Shadat from ANIT's bank account had not been made by Mr Shadat at all, but had in fact been made by Mr Rahman, apparently on instructions from Mr Shadat. No detail of the instructions were given. No explanation was given as to why Mr Rahman considered that he had to act on the alleged instructions. Each of these changes was very significant.
316 Further, senior counsel also adduced new oral evidence-in-chief from Mr Rahman. The new evidence was potentially material and had not been the subject of earlier notice to Mr Shadat. The new evidence sought to explain aspects of the Financial Investment Schedule and otherwise was to the effect that Mr Shadat had owed Mr Rahman amounts of money because Mr Shadat had withdrawn moneys from the bank accounts of PTE Melbourne and PTE Adelaide which were both wholly owned by Mr Rahman. The amounts taken, when it occurred, when Mr Rahman knew, what he did or didn't do, and why Mr Shadat had access to the bank account of companies that on Mr Rahman's version of events, Mr Shadat had no interest in, was simply not addressed. Many an experienced cross-examiner would have been discomforted by the deletions and new evidence. Mr Shadat however was unfazed.
317 Mr Rahman, like Mr Huraira, had apparently earlier instructed his solicitors that after $100,000 had been paid by Together I.T. into ANIT's bank account, he and Mr Huraira had a conversation with Mr Shadat at the Queen Street Property in which they asked Mr Shadat 'What is this money and what does it have to do with the company?'. He then attributed to Mr Shadat an answer to the effect that Together I.T. had cancelled its invoices for equipment being financed under the equipment rental agreement and was paying the company moneys that had been advanced by a lender for the purposes of acquiring office equipment, not for the purpose of acquiring that equipment, but by paying them to the company. He then attributed to Mr Shadat a statement to the effect that Mr Rahman and Mr Huraira were not directors or shareholders of the company, so should not be worried at all about this.
318 It is quite clear that Mr Rahman was intent on portraying an account which reflected poorly on Mr Shadat, and suggested that Mr Shadat was involved in some untoward dealing which involved obtaining money from a financier for a purpose other than that set out in the underlying loan agreement. This was false, as Mr Rahman's withdrawal of the particular paragraphs in his witness statement recognised. But in effectuating the withdrawal of that paragraph, Mr Rahman was also seeking to withdraw his evidence as to a conversation which had allegedly taken place with Mr Shadat. This is not something about which Mr Rahman could have been mistaken only to have his recollection refreshed by being provided with relevant documents. The account set out in his witness statement prepared 19 months earlier and withdrawn without notice and belatedly after Mr Shadat had been cross-examined about it and after he had exposed its falsity in his cross-examination of Mr Huraira.
319 There were other aspects of Mr Rahman's evidence which were of the same character and are equally troubling. His evidence given under the scrutiny of cross-examination about intensely private matters concerning Mr Shadat's wife and brother were given for the first time in cross-examination when Mr Rahman was under some pressure with his account of the removal of Mr Shadat as a director and shareholder of PTE Melbourne in return for a salary of $120,000 per annum being under attack. I do not believe that evidence. It was never put to Mr Shadat, and its private and sensitive nature is obvious. I consider it probable that it was said to embarrass and discomfort Mr Shadat.
320 Such conduct by Mr Rahman is also consistent with his Facebook post, celebrating ANIT's repossession of the Ferrari driven by Mr Shadat. The criticisms made by Mr Shadat's solicitors of this post and its inaccurate and embarrassing nature were entirely well-founded.
321 Further, Mr Rahman's evidence, given for the first time in cross-examination, not given by Mr Huraira and not put to Mr Shadat in cross-examination, that Mr Shadat had 'severely oppressed' him and had required Mr Rahman and Mr Huraira to stand when Mr Shadat entered the room and required them to call his wife 'Madame Afrin', was most unpersuasive and unlikely to be true. It had a comedic character, and was entirely inconsistent with the ruthless way in which Mr Rahman, along with Mr Huraira, had exited Mr Shadat from ANIT and his subsequent dealings with Mr Shadat, including the Facebook post concerning the Ferrari. It is inconsistent with Mr Shadat's contemporaneous assertions made in his 6 February 2020 email[26] as to how he was treated at the 20 January 2020 board meeting and his complaints about constantly facing threatening behaviour which were not responded to. I reject the explanation made in oral closing submissions by counsel for the defendants that Mr Rahman's failure to raise the topic any earlier was because of cultural sensitivity. There is no evidence to support that, and it is inconsistent with the overall course of dealings between Mr Rahman and Mr Shadat.
322 In another illuminating piece of evidence, Mr Shadat also cross-examined Mr Rahman about paragraphs [165], [167], [168], and [169] of his witness statement. In those paragraphs, Mr Rahman had given evidence to the effect that Mr Shadat had made payments from a bank account in the name of PTE Melbourne to various other bank accounts. These payments from the bank account of PTE Melbourne were said to have been sourced from the money deposited by Together I.T. as a result of the transactions the subject of paragraphs [161] and [162] of Mr Rahman's witness statement and which had led, originally, to the conversation with Mr Shadat on 10 October 2019, which Mr Rahman apparently now accepted did not take place.
323 The fact that Mr Shadat had continued access to, and the ability to make transfers from a bank account in the name of PTE Melbourne, given that he had been compelled to dispose of his shareholding and resign his directorship back in December 2015, is at odds with Mr Rahman's account to the effect that he owned PTE Melbourne on his own. Putting that to one side, Mr Shadat then cross-examined Mr Rahman with respect to various other payments made from that account, which showed payments to Rahat Ahmed, Riswan Ahmed, who is the brother of Rahat Ahmed, and Shasul Azim. Mr Shadat then asked Mr Rahman whether he knew Mr Azim; I observed Mr Rahman hesitate before answering cautiously, 'It's a common acquaintance of me and Mr Shadat'. Mr Shadat then asked him whether Mr Azim was known by any nickname. Again, Mr Rahman answered cautiously, 'Um I think he's known by Azim'. Mr Shadat pressed him by asking him, 'Are you sure he is not known by any other name?'. Mr Rahman, was clearly unsure where this question was going, was pressed by Mr Shadat whether he was sure that Mr Azim was not known by any other name, to which Mr Rahman again answered cautiously, 'Ah might be'. Mr Shadat then asked Mr Rahman directly, 'Is he known by [the name] Ronnie?', and again Mr Rahman hesitated before answering cautiously, 'Ah he might be. I'm not too sure', before stating that he knows him as Shasul Azim. Mr Shadat then showed Mr Rahman social media posts of Mr Rahman with a group of people including Mr Azim which were tagged with the tagline, 'Ronnie Aryan is feeling fantastic', dated 14 August 2023. Moreover, in answers to subsequent questions shortly afterwards Mr Rahman referred to 'Ronnie Aryan' without hesitation and with evident familiarity, saying that he and Ronnie Aryan had studied at the same university. Mr Rahman further conceded that the two were still friends or at least, had 'common gatherings.'
324 Ultimately, Mr Rahman accepted that payments had been made from the PTE Melbourne bank account to these three gentlemen. Mr Rahman said that he had obtained the bank account details for his friends' accounts from them and provided them to Mr Shadat who had transferred the money to those individuals. The account struck me as utterly implausible, and Mr Rahman's reticence in acknowledging his friendship with the three recipients of the moneys was obvious and suggestive of a witness who was minded only to tell a story which he perceived advanced his case. Of course the fact that Mr Shadat was transacting on the PTE Melbourne bank account is itself entirely at odds with Mr Rahman's evidence about his 100% ownership of PTE Melbourne as a result of what Mr Rahman says was Mr Shadat's enforced resignation in late 2015, all of which are denied by Mr Shadat.
325 There was another aspect of Mr Rahman's evidence which was also troubling. Mr Shadat was cross-examining Mr Rahman on the loans allegedly made by PTE Melbourne to ANIT and was seeking to establish how PTE Melbourne had described those transactions in its books of account. Mr Shadat put to Mr Rahman that 'If your company (for the purpose of the question, PTE Melbourne) was giving a loan to another company (ANIT), it should be recorded as a loan on both companies' books'. Mr Rahman did not accept that this was so, saying that it was a matter for the discretion of the lender, and was a matter entirely up to the director of that company. The tone of his answers conveyed a degree of stress. If Mr Rahman truly believed this is appropriate accounting practice, it reveals a troubling mindset from a director of a company now turning over just under $30 million, particularly for a director with accountancy qualifications. I do not accept that Mr Rahman genuinely believed that this represented appropriate accounting practice. I consider it probable that he knew that there was an inconsistency between how the transaction had been accounted for in the books of PTE Melbourne[27] on the one hand and ANIT on the other.
326 I also consider that Mr Rahman gave untrue evidence about why the ANIT Aus bank account was not closed until two years after Mr Shadat had been removed as a director of ANIT. In his opening submissions, Mr Shadat pointed out that the ANIT Aus bank account had remained open for over two years well after Mr Shadat had been removed as a director of ANIT on 31 March 2020. Mr Shadat said this was inconsistent with the defendants' case that ANIT Aus had been established and a bank account created in its name to protect ANIT's income from Mr Shadat, who as a director was an authorised signatory on the ANIT bank account. By adverting to this argument in his opening, Mr Shadat, in a rare forensic misstep, put the defendants on notice of this potential line of attack.
327 When Mr Shadat cross-examined Mr Rahman on this topic some days later, Mr Rahman explained that the ANIT Aus bank account was kept open for two years because students generally studied with ANIT for a period of two years and their fees covered that two year period. His explanation continued that because the students had been provided with the details of the new bank account in ANIT Aus's name, there was the potential for confusion if ANIT had to tell the students that their fees would be transferred to a new bank account. This explanation had not been referred to in either the witness statement of Mr Rahman or that of Mr Huraira. I found the evidence entirely unpersuasive and consider it untrue. There are at least two problems with it; as Mr Shadat's evidence made clear and the ANIT Aus' bank statements confirmed, student income was paid into the ANIT Aus bank account in two ways; first, by an internal transfer from the ANIT bank account and secondly by the student directly. In the case of the internal transfers, Mr Rahman's explanation made no sense as there is no evidence that the student would have been aware of the second bank account. The documentary evidence includes enrolment forms after the establishment of ANIT Aus which nominate the ANIT bank account details, not that of ANIT Aus. The transfer that then occurred was of the very nature that Mr Rahman said motivated the keeping open of the ANIT Aus bank account. Secondly, the explanation only holds good if all students commenced their two year course on the same day. In fact, as the ANIT Aus bank statements make clear, moneys continued to be paid directly into the ANIT Aus bank account at least until some time in 2021. In such a case, the two year time issue that Mr Rahman raised would re-start.
328 Overall, therefore, I consider that Mr Rahman was an untruthful witness. I cannot accept any part of his witness statement except where it is non-controversial and corroborated by a reliable contemporaneously created document. In the event of a conflict, between his evidence and that of Mr Shadat, I prefer Mr Shadat's evidence.
329 Against the background of the evidence relied upon by the parties, and my consideration of the respective reliability of the evidence of Mr Shadat, Mr Rahman, and Mr Huraira, it is necessary to set out some factual findings about some key matters. Those factual findings will be material to the resolution of Mr Shadat's oppression claim and the counterclaim brought against him by ANIT.
330 First, I accept Mr Shadat's evidence that he and Mr Rahman decided to set up PTE Melbourne and that his transfer of shares in that entity and his resignation as a director of PTE Melbourne in 2015 was to simplify his home loan application and occurred on Mr Huraira's advice and with Mr Rahman's knowledge. I accept that it was not intended to alter the underlying effective ownership of PTE Melbourne which was to be equally owned by Mr Rahman and Mr Shadat. Mr Huraira had resigned as a director of ANIT in 2018 and transferred his shareholding himself for the very same reason, which makes it likely that he gave the same advice to Mr Shadat. It is also consistent with the receipt by Mr Shadat of broadly equal amounts to those received by Mr Rahman in the period after Mr Shadat's resignation. It is consistent with Mr Shadat remaining a signatory on the PTE Melbourne bank account. It is consistent with the overall thrust of the evidence, which reveals that Mr Shadat and Mr Rahman, together with Mr Huraira's assistance, operated or, at the very least, were involved in the operation of the PTE Study Centre businesses throughout Australia. Mr Rahman's account to the effect that Mr Shadat was to receive a salary of $120,000 only is inconsistent with Mr Shadat's receipt of moneys vastly in excess of that amount; his evidence that he was so shocked by Mr Shadat misstating the university at which he obtained his degree is both implausible given the extent of the alleged misstatement and the consequential lack of trust that Mr Rahman attests to is entirely inconsistent with Mr Shadat and Mr Rahman thereafter agreeing to establish ANIT less than eight months later on 8 August 2016. It is inconsistent with Mr Rahman acquiescing in Mr Shadat becoming the sole shareholder and director of ANIT. Mr Rahman's account does not withstand the slightest scrutiny.
331 Secondly, and relatedly, I accept Mr Shadat's evidence that the underlying substantive ownership of the PTE Study Centre businesses was that they were owned equally by Mr Shadat and Mr Rahman, and that the state managers received a profit share as part of their remuneration. I therefore accept Mr Shadat's evidence that the designation of Mr Shadat as the sole shareholder and director of PTE Sydney and PTE Brisbane and Mr Rahman as the sole shareholder and director of PTE Adelaide entitled the managers, as part of their remuneration, to be entitled to a profit share. In other words, I do not accept that the fact that Mr Shadat was the sole director and shareholder of PTE Brisbane and PTE Sydney, whilst Mr Rahman was the sole director and shareholder of PTE Adelaide was anything other than for perceived administrative convenience. The disconformity between the ASIC records and the underlying ownership and control of the PTE companies as being the product of perceived administrative advantage mirrors that which all three of the protagonists agreed took place with ANIT. It did not mean that Mr Shadat owned the PTE Brisbane and PTE Sydney companies, whilst Mr Rahman owned the PTE Melbourne and PTE Adelaide companies. The profit distribution and the operational control of the companies in the various States showed that each of them were involved in broadly equal terms in all operations in each of those States. Among other things, Mr Shadat was a signatory on the PTE Melbourne bank account and Mr Rahman was a signatory on Mr Tonmoy's bank account into which part of the revenues earned by PTE Brisbane were banked. In addition, equipment hired through various equipment finance leases were allocated to PTE entities in accordance with their needs and were not allocated only to the premises used by the particular PTE entity which was the hirer. Further, it is incongruous for Mr Shadat's brother, Mr Sohan to have managed PTE Adelaide which Mr Rahman said was owned by him and not one of the entities allegedly owned by Mr Shadat. Importantly, the demarcation of PTE Sydney and PTE Brisbane on the one hand, and PTE Adelaide and PTE Melbourne on the other is completely inconsistent with Mr Rahman's email to managers of 13 January 2020 in which Mr Rahman stated that he would give up his stake in two unspecified States and retain 100% ownership of the other two unspecified States, given that on his account he had no interest in PTE Brisbane and PTE Sydney. It is also inconsistent with Mr Rahman's 2 March 2020 email in which he proposes a final offer to Mr Shadat on a take it or leave it basis in which he purports to deal with PTE Brisbane and PTE Sydney which are entities on his case that he has no interest in. Mr Rahman's evidence that he was distinguishing between a stakeholding and a shareholding is entirely unpersuasive and was advanced for the first time during cross-examination. His evidence in his witness statement that he was entitled to a commission on sales of 20% is not supported by any other evidence nor a single document and is inconsistent with Mr Rahman's other version in cross-examination which I also reject of a royalty of 30%.
332 Thirdly, notwithstanding that the ASIC records showed that Mr Shadat was the sole director and shareholder of ANIT from 23 May 2018 to 28 November 2019, the change was not intended to, and did not alter the agreement between the directors as to the underlying ownership and control of ANIT which remained throughout with each of Mr Shadat, Mr Rahman, and Mr Huraira.
333 Fourthly, I do not accept that somehow Chinese PTE was Mr Shadat's business and/or an alter ego of Mr Shadat. It is tolerably clear that it was a division of PTE Melbourne and that each of Mr Shadat, Mr Rahman, and Mr Huraira were involved in its activities as was agreed between the three of them.
334 Fifthly, it follows accordingly that the Financial Investment Schedule and the Substantiation Spreadsheets which I find were prepared by Mr Rahman and Mr Huraira after this proceeding had been commenced, are inaccurate and cannot be relied upon as they have been prepared on a series of false premises. This means that the financial statements for ANIT and, in particular, the balance sheets prepared for FY 2019 and FY 2020 are inaccurate. The audited financial statements for FY 2021, FY 2022 and FY 2023 are also infected by these inaccuracies as the balances for each of the loan accounts in those years are same as at FY 2020 (for Mr Shadat). They are defective because of the manner in which they have treated grouped loans made by PTE Melbourne and PTE Adelaide as being loans made by Mr Rahman and loans made by PTE Brisbane and PTE Sydney as being loans made by Mr Shadat. They are also erroneous in a number of other respects, including insofar as they treat the payment by PTE Melbourne of salary and superannuation and withheld PAYG tax for Mr Shadat and Ms Afrin as both loans made by PTE Melbourne to ANIT and as repayments by ANIT of loans made by Mr Shadat. The only reason the payments by PTE Melbourne of the salary of Mr Shadat and his wife have any relationship to ANIT is because payments were treated in ANIT's profit and loss statement as expenses, hence that description in the Substantiation Spreadsheets prepared by the defendants. Whilst the recording of the payments as loans made by PTE Melbourne may well be appropriate, the recording of payments to or for the benefit of Mr Shadat and his wife as repayments of loans Mr Shadat had made to ANIT (i.e. a balance sheet item) as well as expenses (a profit and loss statement item) is fundamentally incorrect and erroneously reduces the amount owed by ANIT to Mr Shadat.
335 Sixthly, I accept that there was some discussion between Mr Shadat and Russell Rahman about Mr Rahman effectively acquiring a Lamborghini in substantially the same way as he had acquired a Range Rover and Mr Shadat had effectively acquired a Ferrari, that is to say, by a finance arrangement being entered into by one of their associated entities (in this case, PTE Adelaide, being the proposed counterparty). As Mr Shadat concedes, I am satisfied that Mr Shadat was not in favour of that arrangement, and that he conveyed that to Russell Rahman. I consider Mr Rahman and Mr Huraira's version of the events to the effect that Mr Shadat offered some sort of bribe to Russell Rahman to prevent the transaction from going ahead as highly implausible, but it is conceivable that Mr Shadat's opposition to Mr Rahman obtaining the Lamborghini played a part in the decision of Mr Rahman, in early January 2020, to wish to no longer be in business with Mr Shadat, whether it be in ANIT or in any of the PTE Study Centre businesses. There is no doubt that other factors also contributed to this aspiration.
336 Seventhly, I am satisfied that Mr Rahman, with Mr Huraira's acquiescence, decided by no later than early January 2020 to sever their interests both in ANIT and the PTE Study Centre businesses from Mr Shadat. I reject any suggestion to the effect that they were motivated by the 16 January 2020 Withdrawals. Mr Rahman's plan was first foreshadowed on 13 January 2020.
337 Eighthly, as part of Mr Rahman's attempt to disengage from Mr Shadat, I am satisfied that he and Mr Huraira procured the incorporation of ANIT Aus, a company wholly owned by Mr Rahman, and opened a new bank account in the name of ANIT Aus. As the evidence of Mr Rahman and Mr Huraira that this was set up on Russell Rahman's advice was not corroborated by the evidence of Russell Rahman, I am not prepared to accept their evidence that it was instigated upon professional advice. Advice of this kind from a chartered accountant is most unlikely, as any legitimate concerns as to the security of moneys in the account could have been addressed by far less extreme measures, such as requiring two signatories on any transaction involving one of ANIT's accounts. The conduct was also undertaken in secret. As noted above, the email of Mr Rahman to Mr Shadat of 17 January 2020 neither disclosed the establishment of ANIT Aus, nor advised that funds in ANIT's bank account would be moved to another bank account for safekeeping. In any event, the need to keep the money safe from Mr Shadat ceased on 31 March 2020, when he was removed as a director of ANIT, and yet the ANIT Aus bank account remained operative for a further two years. I am not persuaded by the defendants' argument that the timing of the establishment of ANIT Aus (5:32pm on 16 January 2020) in the context of Mr Shadat effecting the 16 January 2020 Withdrawals between 3:37pm and 3:39pm supports the defendants' account, at least not in the absence of evidence from Russell Rahman. Given the fact that the withdrawals resulted in there being less than $10,000 in the ANIT bank account, there was no obvious reason why the defendants needed to act with such alacrity. On the defendants' case, they must have noticed the transactions undertaken by Mr Shadat, spoken to Russell Rahman and obtained advice from him and procured the incorporation of a new company in a little under two hours. Such an expedited timeline in circumstances of no real urgency gives rise to the possibility that the decision to establish ANIT Aus was in fact unrelated to the 16 January 2020 Withdrawals which they later discovered had occurred at about the same time. It is just as conceivable that the incorporation of ANIT Aus was of the same character as Mr Rahman's incorporation of QLD PTE Study Centre Pty Ltd and NSW PTE Study Centre Pty Ltd on 28 January 2020 and constituted an element of Mr Rahman's strategy to separate from Mr Shadat[28]. Mr Rahman's evidence that the incorporation of the QLD and NSW PTE entities (which were the two states in which Mr Shadat was the sole director of the existing PTE entities) without notice to Mr Shadat was to protect PTE and his intellectual property was vague, entirely unparticularised and uncorroborated, illogical and is rejected.
338 Ninthly, I am satisfied that there was an agreement between Mr Shadat, Mr Rahman, and Mr Huraira to the effect that Mr Shadat would receive the use of a Ferrari on the same basis as Mr Rahman had been entitled to the use of a Range Rover. That is to say, that a company would enter into the underlying finance arrangement, that the user would pay for the vehicle, and that, in the case of the Ferrari, the company that was to enter into the finance agreement was ANIT.
339 Against the background of those key findings, I shall now return to the oppression claim by outlining, in the first instance, some key principles, and then applying the facts as found (and some further facts that need to be found), in order to resolve those claims.
340 Mr Shadat contends that the conduct of ANIT's affairs has been oppressive to, unfairly prejudicial to, or unfairly discriminatory against him, within the meaning of s 232(e) of the CA.
341 Section 232 is to be read broadly, without being confined by technical distinctions.[29] Further, although the words of the statute are not confined by reference to categories created by existing cases, previous cases can provide helpful reminders of matters that can be relevant to whether oppression is made out.[30]
342 The expression 'oppressive to, unfairly prejudicial to, or unfairly discriminatory against' in s 232(e) is a compound expression, concerned with commercial unfairness.[31] The phrase's individual elements 'should be considered merely as different aspects of the essential criterion, namely 'commercial unfairness'.[32] 'Commercial unfairness' is assessed objectively from the perspective of a reasonable commercial bystander and, in the case of the conduct of a director, the perspective of a reasonable director in the circumstances.[33]
343 The presence, or absence, of a reasonable commercial justification is relevant in assessing commercial fairness,[34] but the offending party's motive is irrelevant.[35] It is the effect of the relevant acts that is material.[36] 'The test is objective and focusses on the impact of the conduct on the victim. There is no mental element required'.[37] Thus it is not necessary for a plaintiff to demonstrate a lack of probity, want of good faith or breach of contract.[38] Further, a plaintiff may make its case by reference both to individual items of conduct and the cumulative effect of that conduct.[39]
344 Fairness is not to be assessed in a vacuum, but in the context where the relevant conduct occurred. This includes not only the business, but the nature of the relationship between the people participating in it. In many cases, there will be an agreement or understanding between those engaged in the business:
Such an agreement or understanding will often be important in assessing whether the conduct in question constitutes oppression. Such agreements or understandings may result in the aggrieved party having a "legitimate expectation" about the basis upon which he or she should participate in the management of the company.
345 In determining whether conduct is commercially unfair, regard may be had to the following principles:
(a) fairness is not assessed in a vacuum, and depends on context, which context includes the nature of commercial relationships;[40]
(b) fairness is assessed in relation to what is known at the time of the conduct and not to what subsequently transpires;[41]
(c) the court will balance competing interests rather than solely assessing the matter from one member's point of view;[42]
(d) the concept of fairness, as a criterion for relief, confers a wide power in the courts to do what is just and equitable;[43]
(e) some courts have viewed fairness through the lens of equitable considerations including by referring to 'legitimate expectations' of members of the company;[44] and
(f) in assessing unfairness, it is appropriate to consider the behaviour of the person making the allegation of oppression.[45]
346 While the language of 'legitimate expectation' may require caution,[46] it remains useful[47] recognising that an applicant under s 232 does not have to show a breach of promise or unlawful conduct by the company or its directors; the denial of a legitimate expectation arising from the parties' dealings may suffice.[48] Such dealings may include understandings or agreements between them as well as a course of conduct adopted by them over time.[49]
347 Many instances of oppression involve exclusion from a company's management of a person with a legitimate expectation of being involved in it. Courts have held that exclusion or removal of a person from a 'management role' may constitute oppression where that exclusion or removal:
(a) is in breach of a shareholders' agreement;[50]
(b) takes place otherwise than in accordance with 'agreed processes by which minority shareholders were to participate in management';[51] and/or
(c) where it is inconsistent with a common understanding between members outside the company's constitution which gives rise to a member's legitimate expectation of participating in management.[52]
348 There are numerous cases where removal of management has been found to be oppressive and in the overwhelming majority of those cases removal has been from a 'salary position' with the company or a directorship.[53]
349 Following the House of Lords decision of Ebrahimi v Westbourne Galleries Ltd,[54] courts have held that failure to meet the 'legitimate expectations' of a member or shareholder of a company formed as a 'quasi partnership' could amount to oppression in circumstances where the corporation was formed based upon one such understanding and it would be inequitable to permit departure therefrom.[55]
350 The terminology of both 'quasi partnership' and 'legitimate expectations' has been questioned, but continues to be in use in judicial decisions. In context:
(a) a quasi-partnership has been described as 'a majority controlled business requiring mutual cooperation and a level of trust between the members';[56] and
(b) the term 'legitimate expectation' refers to 'an understanding or expectation of a member which, because of equitable considerations, can make it unfair for a party to exercise legal rights.'
351 Oppressive conduct may occur where a controller diverts business from a company to another enterprise in which the controller has an interest but the applicant does not.[57]
352 Past conduct which constitutes oppression but which has been brought to an end may give rise to an entitlement to relief where the effect of the conduct has continued as to the date of the hearing of the proceeding.[58] I note in addition that s 232(b) of the CA specifically allows for orders to be made remedying past acts and omissions.
353 The refusal to grant access to information can constitute oppression in certain circumstances.
354 In Re Dernacourt Investments Pty Ltd,[59] Powell J said:
The use of s 320 [s 232] to achieve inspection for the purpose of determining whether there are grounds for further [oppression] proceedings under s 320 cannot be regarded as an improper use of s 320...provided that the circumstances in which inspection was refused in themselves disclose oppression of the shareholder within the meaning of s 320.[60]
355 Whilst there is no overriding requirement that the applicant must have clean hands, improper conduct on the part of an applicant may make the opponent's conduct not unfair or may affect the relief that the court may give.[61]
357 I will turn now to assess the instances of oppression alleged by Mr Shadat against the background of the principles set out above.
358 I am satisfied that the Exclusion Conduct, the Financial Statements Inaccuracy and the ANIT Aus Establishment was commercially unfair in the sense that it amounted to conduct which was oppressive to, unfairly prejudicial to, or unfairly discriminatory against Mr Shadat.
359 The removal of Mr Shadat as a director of ANIT and the subsequent production by the defendants of the Financial Investment Schedule which was prepared on the basis of the Substantiation Spreadsheets and which resulted in the inaccurate recording of Mr Shadat's loan account balances in the financial statements of ANIT for FY 2019, FY 2020, FY 2021, FY 2022 and FY 2023 constituted conduct on the part of Mr Rahman and Mr Huraira by which they sought to exit Mr Shadat from the conduct of ANIT's affairs and to then understate the amounts owing by ANIT to Mr Shadat.
360 Whilst Mr Shadat had no operational role in ANIT's affairs as the day-to-day running of ANIT was left by Mr Shadat and Mr Rahman to Mr Huraira, this does not mean that it was not commercially unfair to remove Mr Shadat as a director of ANIT.
361 ANIT's business cannot be viewed in isolation from the business of the PTE companies. In a practical sense, the PTE companies and ANIT constituted part of the same broad enterprise. Mr Shadat, Mr Rahman, and Mr Huraira shared the one office at the Queen Street Premises which were leased by ANIT but used by both ANIT and PTE Melbourne. Mr Huraira looked after ANIT whilst Mr Shadat and Mr Rahman looked after the PTE companies, but each were involved in the affairs of each company in the broader enterprise. Staff members employed by the PTE companies provided services to ANIT and vice versa; tuition fees payable to the PTE companies were banked into ANIT's bank account and apparently treated as income of ANIT; equipment the subject of equipment finance leases entered into by one or more of the PTE companies was used in part for ANIT's activities; the funding required to establish and then support ANIT's business was provided by the PTE companies by loans made by those entities to ANIT. The fact that the primary focus of Mr Huraira's attention was on ANIT's operations whereas Mr Shadat and Mr Rahman continued to focus their attention primarily on the operations of the PTE companies conveyed no more than an agreed division of operational responsibility as a convenient way to manage the enterprise's affairs. The overall enterprise operated as a quasi-partnership which involved the establishment and operation of a business which required mutual cooperation and a level of trust between the shareholders.
362 ANIT was established by Mr Shadat, Mr Rahman, and Mr Huraira. The closeness of the relationship between each of the shareholders and the company is evidenced by the choice of name which was based on the first letters of their first names.
363 Although Mr Shadat and his wife received payments of salary from PTE Melbourne, in the profit and loss statements that were subsequently prepared by ANIT after Mr Shadat's enforced removal as a director, the salaries of Mr Shadat and his wife were expensed as salaries of ANIT. In ANIT's profit and loss statements therefore, Mr Shadat and his wife were in fact treated as employees of ANIT with the removal of Mr Shadat as a director following on from the effective cessation of employment of Mr Shadat and his wife by Mr Rahman effective 23 January 2020. Ironically this treatment by the defendants of the salaries of Mr Shadat and his wife as expenses of ANIT (whilst at the same time treating it as a repayment of Mr Shadat's loan), renders moot the argument made in both opening and closing submissions that the exclusion of Mr Shadat as a director, did not constitute oppressive conduct because Mr Shadat had no legitimate expectation of a management role in ANIT. In addition to being a director, and despite receiving salary from PTE Melbourne, ANIT later treated the salaries of Mr Shadat and his wife as part of ANIT's expenses.
364 Further, Mr Shadat was a director of ANIT from its incorporation on 8 August 2016 and along with Mr Rahman held the largest parcel of shares in the company. Mr Shadat, Mr Rahman, and Mr Huraira were content in fact for Mr Shadat to be shown as the sole director and sole shareholder of ANIT for a substantial part of that period.
365 In those circumstances, Mr Shadat had a legitimate expectation that the company would be managed and controlled by the three of them as it had been on a basis of mutual trust, not as one managed and controlled by Mr Rahman and Mr Huraira who would, control access to the company's books and records and later produce financial statements without Mr Shadat's input and which would substantially understate the extent of Mr Shadat's financial contributions to ANIT in the five years of its operations.
366 I otherwise accept that the manner in which the defendants prepared the Financial Investment Schedule and the Substantiation Spreadsheets deliberately understated the extent of the contribution made by Mr Shadat to ANIT and hence the amount owing by ANIT to Mr Shadat. This conduct was oppressive to, unfairly prejudicial to, or unfairly discriminatory against Mr Shadat. As I have found above, the PTE entities were effectively owned by Mr Shadat and Mr Rahman in equal shares such that the investments made by the PTE entities to ANIT and the returns by ANIT to those entities should have been treated in ANIT's accounts as having been loans made by (or payments made in reduction of those loans to) Mr Shadat and Mr Rahman equally.
367 More particularly, the amounts said to have been repaid by ANIT (or more accurately lent by ANIT to Chinese PTE) or for the purposes of establishing Lexica, should not have been treated as repayments of loans made by Mr Shadat, nor should the salaries paid by PTE Melbourne to Mr Shadat and his wife including superannuation and the PAYG tax relating to their employment all of which are apparently treated in ANIT's profit and loss statements as expenses of ANIT, be treated as repayments of loans made by Mr Shadat.
368 The Financial Investment Schedule also deliberately treats substantial parts of the Unauthorised Transactions counterclaim as repayments of the amounts advanced by Mr Shadat to ANIT. The appropriate abandonment of this part of the counterclaim in closing submissions means that this aspect of the Financial Investment Schedule is correlatively inaccurate.
369 Mr Shadat also asserts that the Financial Statements were inaccurate on other bases such as the understatement of income in FY 2019 in the amount of $179,095, the understatement of income in FY 2020 by $1,356,589.63, the understatement of commission expenses in FY 2019 and FY 2020, and the understatement and overstatement of rental expenses in FY 2019 and FY 2020. I accept that there is a reasonable basis to be sceptical about the accuracy of the amounts recorded as income and expenses in those financial years, but with one exception which I am not able to quantify. I do not accept that any discrepancies exhibit the necessary degree of commercial unfairness such as to entitle Mr Shadat to oppression relief.
370 During this period Mr Shadat was a director of ANIT and indeed, according to the records maintained at ASIC, was the sole director until 28 November 2019. Accordingly, in that capacity it was Mr Shadat who signed the relevant quarterly BAS which on his case must have included the understatement of income for FY 2019 and may have in part included part of the inaccuracies in FY 2020 and FY 2021. Whilst Mr Shadat rightly emphasises that Mr Huraira had primary operational responsibility for ANIT, Mr Shadat was a director throughout (indeed on the ASIC records the only director) and he too, must bear responsibility for the various matters which have given rise to some questionable matters in the financial statements.
371 With the exception of part of any understatement of income in FY 2020 relating to the period after the establishment of ANIT Aus, I do not consider that Mr Shadat has established that any of these matters constitute oppressive conduct, viz a viz himself.[64]
372 That is not to say that I do not have concerns about the accuracy of the financial statements in FY 2019 and FY 2020. The prevalence of cash transactions, the lack of timely preparation of financial statements for ANIT in FY 2019 and FY 2020, the unorthodox use of numerous bank accounts in the name of various individuals to act as repositories for the receipt of moneys, the number of transactions between the PTE companies and ANIT and the apparently informal nature of the arrangements between them as it pertained to the occupancy of premises, and the usage of equipment all had the potential to give rise to discrepancies in the financial statements in any particular financial year.
373 A part of Mr Shadat's complaints with respect to the handling of cash transactions concerned the absence of a cash transaction report for the period from January 2018 to October 2018. I accept that absent such a report, there could be no confidence with respect of the accuracy of the financial statements for FY 2019. I also accept that the substantial discrepancy between the tuition fees as recorded in RTO Manager and the amount banked in ANIT's bank accounts also requires explanation, and I further accept that the explanation offered by the defendants to the effect that RTO Manager was not a reliable indicator of revenue explains only part of the story. However, some of the potential discrepancies are likely to have resulted from aspects of the manner in which ANIT collected its tuition fees, which involved the fees being handed over by agents who effectively recruited the students in return for a commission payment. As Mr Shadat rightly observed, and Mr Heywood's evidence confirmed, the appropriate recording of that transaction is for the full fee payable or paid to be recorded as income with the amount of commission recorded as an expense. Mr Huraira's evidence was to the effect that on occasions and in circumstances where the student had paid in cash, the commission agent would deduct his commission and remit the payment to ANIT. This is incorrect in an accounting sense, but it is of limited consequence given that the educational product sold by ANIT was GST-free and the expense charged by the commission agent would only give rise to an input tax credit if the commission agent was registered for GST in respect of which there was no evidence.
374 Likewise, with respect to the rent expense, I have some scepticism about the accuracy of the rental expense in ANIT's profit and loss statement which varies substantially for reasons which are not readily apparent. In FY 2019, ANIT's rent expense was $327,936 whilst in FY 2020, the rent expense was $1,299,745, before reducing to $612,522 in FY 2021, before jumping again to $1,299,000 in FY 2022.
375 The most probable explanation for the rent expense jumping around in this fashion is that it is tied up with the somewhat unclear arrangements for the sharing of premises between ANIT and the PTE entities and that in some years the PTE entities were paying more of the rent than others, with ANIT's rental expense reduced accordingly.
376 Mr Shadat is correct to observe that ANIT's rental expense ought to equate to that the subject of its rental obligations under the head leases that it has entered into with the lessors of its various premises and that it should be accounting for the moneys paid to it by the PTE companies as income, but absent more detailed information as to the breakup of the rental expense items, and evidence in the financial statements of the PTE companies as to how those companies were treating the payments that they were making with respect to their occupancy of the premises, it is not possible to make any conclusions with respect to those matters to the question of the alleged overstatement of rental expenses.
377 The one aspect of the understatement of income which falls into a different category and which did adversely discriminate against his interests viz a viz those of Mr Rahman and Mr Huraira is the establishment by Mr Rahman of ANIT Aus and the receipt of student fee income into the bank account of ANIT Aus, certainly for the last quarter of FY 2020 and the first quarter of FY 2021 (that is to say the quarters ending 30 June 2020 and 30 September 2021). In each of those quarters, ANIT Aus lodged its own BAS which reported income which was paid by students who had enrolled in courses being offered by ANIT. The diversion of business from one company to another company in which only one of the shareholders has an interest is a clear instance of oppressive conduct.
378 Mr Huraira and Mr Rahman advance two answers to that part of the claim. First, they say that ANIT Aus was established as a protective measure and upon the advice of Russell Rahman. I do not accept that ANIT Aus was established on the advice of Russell Rahman. As I have stated above, I do not accept any of the evidence of Mr Rahman and Mr Huraira unless it has been corroborated by a third party or an objectively reliable contemporaneous document.
379 When Russell Rahman was called as a witness by Mr Shadat, Mr Shadat did not ask him any questions about his alleged advice to Mr Rahman and Mr Huraira. Nor was Russell Rahman asked any question about that alleged discussion by senior counsel for the defendants in cross-examination.
380 I was curious but was not minded to explore the matter directly in circumstances where the parties might have declined to answer any question for their own forensic reasons. However, I did ask Russell Rahman an open question, 'What can you recall about the creation of ANIT Aus?' Russell Rahman answered by saying, 'The client instructed me to open a company for the education business and so I did that based on their instruction.' I then asked Mr Rahman whether that was all that he could remember about the creation of ANIT Aus, and he answered 'yes'.
381 Senior counsel for the defendants then declined to ask Russell Rahman any questions about that in cross-examination.
382 Mr Shadat did, however, ask Mr Rahman about the BAS that he had prepared for ANIT Aus which showed that it had received income. Although Mr Rahman's answers were not particularly clear, its essential gist was unremarkable: if the company had zero sales it should put in a BAS showing zero income, but if there was income coming in and the directors of the company said that there was income, the BAS would show otherwise.
383 Senior counsel for the defendants did cross-examine Mr Baki, the new accountant of ANIT who had been called by Mr Shadat. Mr Baki confirmed that he was instructed to and did lodge amended BAS returns for ANIT Aus lodged in 2022 which showed a nil return and that he also prepared and lodged a BAS for ANIT Aus for 30 June 2020 which showed zero income. The effect of Mr Baki's evidence is that ANIT Aus lodged revised BAS in 2022 for the June 2020 and September 2020 quarters which showed zero income. Neither Mr Rahman nor Mr Huraira gave any evidence at all with respect to these matters.
384 Mr Baki was not asked and hence did not give evidence as to the reason why he lodged the revised BAS. Correlatively, he did not give evidence explaining why the initial BAS returns were in error or explaining how the nil return could be reconciled with the receipt of fee income into the bank account of ANIT Aus. Nor was Mr Baki asked to review the original ANIT BAS for the June 2020 and September 2020 quarters.
385 The lodgement of revised zero return BAS for ANIT Aus with no revisions to the ANIT BAS for the corresponding periods means that there is either an understatement of reported income because income that was originally reported in ANIT Aus but not ANIT, was not then reported in either entity or that the originally reported ANIT Aus income had already been reported as income by ANIT and as such was double reported.
386 Despite Mr Baki not being asked any questions that would assist the resolution of the two possibilities, he impressed as a competent and honest professional. I am satisfied that he would not have prepared revised zero returns for ANIT Aus without seeking to satisfy himself that this was appropriate.
387 However, there are some aspects of the evidence overall which give pause for thought. As noted above, the payments into the ANIT Aus bank account took two forms; first, transfers out of the ANIT bank account where students had paid their fees into the ANIT bank account and secondly, directly by the students. In the case of the former, it is conceivable and perhaps probable that the fees deposited into the ANIT bank account were recorded as income in ANIT's profit and loss statements. If the original ANIT Aus BAS were prepared by reference to the amounts deposited into the ANIT Aus bank account without differentiating between the two forms of deposits, this would give rise to a double counting of income to the extent to which the students fees were first paid into the ANIT bank account and then transferred to the ANIT Aus bank account, but not for those directly paid into the ANIT Aus bank account. If that is so, there is likely to have been an understatement of ANIT income for those quarters, although it is not particularly significant.
388 In fact, in the ANIT Aus bank statements, there is some evidence of the names of those students whose fees were paid directly into the ANIT Aus bank statements. In the working papers for the June 2020 and September 2020 ANIT BAS, the names of the students who had paid fee income to ANIT are revealed. The students who had paid directly into the ANIT Aus bank account are not listed in the working papers for the ANIT BAS.
389 Given that neither Mr Rahman nor Mr Huraira nor anybody else gave evidence with respect to that matter, I am not inclined to draw the inference favourable to the defendants to the effect that the ANIT Aus statements as originally lodged were incorrect on the basis that the income had already been reported by ANIT. However, the understatement of income diverted to ANIT Aus is not at all significant as the reported ANIT Aus income for the two quarters was only $154,065 and $120,972 and a fair portion of this, although probably not all of it, was most likely accounted for as ANIT's revenue as well in any case.
390 In relation to Mr Shadat's complaint about the Denial of Information which occurred from January 2020 until 3 September 2020, I am satisfied that there was an unfair denial of access to the company records by Mr Rahman and Mr Huraira to Mr Shadat from about mid-February 2020 when Mr Shadat's access to MYOB and Xero, PRISMS and RTO Manager was shut off (having earlier been reinstated on 10 February 2020).
391 I am also satisfied that it was unreasonable in the sense of being commercially unfair for the solicitors for the defendants to have denied Mr Shadat's request made 28 July 2020 for access to the company's books and records.
392 Nothing however arises as a consequence of either aspect of this denial of access to information because the Court made orders on 3 September 2020 for the provision of financial statements and other books and records of the company.
393 Any oppressive conduct ceased to have effect as and from that point and accordingly I am not prepared to grant any relief as a consequence.
394 That leaves the Huraira Transactions. These transactions fall into three categories; first, there are the transfers which were apparently made by Mr Huraira from the company's bank account into Mr Huraira's own personal account on 8 December 2019, 10 December 2019, 15 December 2019, 18 December 2019, and 21 December 2019, a series of payments made to and from Mr Huraira's bank account during the period February 2018 to December 2019 and during the period September 2017 to December 2019, and the fact that payments of salary to Mr Huraira occurring in the financial year ending 30 June 2018 and 30 June 2019 either do not appear in the payroll activity summaries subsequently issued by the company for the financial year ending 30 June 2018 or the amounts paid based on bank records substantially exceed the amount reported in the payroll activity summary schedules for the year ending 30 June 2019.
395 I am not satisfied that the matters complained of by Mr Shadat amount to a conclusion that Mr Huraira has engaged in oppressive conduct.
396 Whilst again I have some scepticism about the accuracy of the financial records for FY 2018 and FY 2019 and the manner in which the payments made of salary to Mr Huraira may have been recorded, I am not satisfied that it is a matter which was oppressive to Mr Shadat who was a director of ANIT at that time, who was aware of and acquiesced in the payment of salary to Mr Huraira, and who was one of the persons who as a director should have ensured that the books and records of the company were kept in an appropriate manner. Further, Mr Shadat was aware, or alternatively ought to have been aware, of the unorthodox deployment of Mr Huraira's bank account and the joint account of Mr Huraira and his wife as some sort of repository for the receipt of part of the moneys paid by students or other counterparties and also for the payment of various other expenses of ANIT.
397 To the extent to which these unorthodox practices resulted in the maintenance and financial records which are unclear or inaccurate, it is not a matter which was oppressive to Mr Shadat and it is a matter for which Mr Shadat along with Mr Huraira and Mr Rahman bears responsibility. Accordingly, the Huraira Transactions do not amount to oppressive conduct such as to entitle Mr Shadat to relief.
398 I do not accept the defendants' submission that Mr Shadat should be denied relief on the basis of the 16 January 2020 Withdrawals and/or because the defendants had offered to buy out Mr Shadat's shares on the terms of the open settlement offer made 5 June 2024. The settlement offer was desultory and was based on unreliable and unaudited FY 2019 and FY 2020 Financial Statements and assumed that the relevant date of assessment of fair value for Mr Shadat's shares was the date of his exit or the date of commencement of proceedings. This is a contestable proposition and in any event given my findings, the offer was wholly inadequate to address the oppression found. Whilst Mr Shadat should not have effected the withdrawals in an ill-advised and futile form of self-help, ANIT has reduced his loan account by the amount of the withdrawals which in any event are significantly outweighed by the extent of the oppressive conduct I have found.
399 In the result, I accept that Mr Shadat's oppression complaints are made out with respect to the Exclusion Conduct, the Financial Statements Inaccuracy, and the ANIT Aus Establishment, but not with respect to the Huraira Transactions and I would not grant relief with respect to the Denial of Information because that conduct ceased to be of operative on 3 September 2020.
400 Each of ANIT's counterclaims is dismissed with the exception of one part of the counterclaim relating to the Ferrari.
401 The dismissal of the counterclaim with respect to the Unauthorised Transactions alone is not sufficient to remedy the injustice affected to Mr Shadat, as substantial components of the Unauthorised Transactions counterclaim had already been taken into account by ANIT as reductions of the amount owed by ANIT to Mr Shadat. The dismissal of the counterclaim with respect to the Unauthorised Transactions needs to be accompanied by a recognition of the wrongful reductions in Mr Shadat's loan account which proceeded on the basis that the Unauthorised Transactions are made out. This will be dealt with in the declarations that I will make in respect of Mr Shadat's oppression claim.
402 The Equipment Finance Claims fail. First and insofar as the claims seek damages or compensation as they do with respect to the alleged PTE Brisbane-BoQ Agreement repayments in the sum of $75,512.91 and $70,075 with respect to the PTE Sydney-BoQ Agreement repayments, those claims must fail because the Financial Investment Schedule and the Substantiation Spreadsheets already take account of those repayments as investment returns to PTE Brisbane and to PTE Sydney. ANIT's liability to each of these entities has therefore been reduced by the amount of those payments. The reduction of ANIT's liability to PTE Brisbane and PTE Sydney produced a benefit to the company of an amount equivalent to the amount paid. The benefit is the reduction in amounts owed to PTE Brisbane and PTE Sydney which have been treated as a reduction in amounts owed to Mr Shadat.
403 Secondly, I am not in any event satisfied that Mr Shadat breached his statutory or fiduciary duties owed to ANIT in respect of either of those equipment finance leases. Relevantly, in the case of the PTE Brisbane-BoQ Agreement repayments and the PTE Sydney-BoQ Agreement repayments, the claim rests on ANIT establishing that Mr Shadat caused ANIT to make the payments.
404 There was no evidence that this was so; in fact, and having regard to Mr Huraira's position as the Chief Executive Officer and the limited operational role played by Mr Shadat, it is near inconceivable that Mr Shadat did so. It is overwhelmingly likely that the payments were made by Mr Huraira or by another operational staff member acting under Mr Huraira's direction.
405 Thirdly, I am satisfied in any event that any decision made with respect to the making of payments by ANIT in respect of the underlying obligations pursuant to the PTE Brisbane-BoQ Agreement and the PTE Sydney-BoQ Agreement was a decision made jointly or at least with the acquiescence of each Mr Shadat, Mr Rahman, and Mr Huraira recognising that the equipment rented under the relevant equipment finance leases was made available to and was used by ANIT in part.
406 Fourthly, I am also satisfied that Mr Shadat's execution of the guarantee in the name of ANIT with respect to PTE Brisbane's obligations under the equipment finance lease entered into by PTE Brisbane with Capital Finance did not amount to a breach of his statutory and/or fiduciary duties because the equipment provided to PTE Brisbane under that equipment finance lease was at least in part utilised by ANIT and, in any event, it was in ANIT's interest for PTE Brisbane to obtain that equipment so as to, among other things, assist in ANIT's application for the approval of additional spaces for its Brisbane premises, to assist PTE Brisbane in the conduct of its affairs generally, and hence enable PTE Brisbane to provide continued financial support to ANIT. It was also agreed to or acquiesced by each of the shareholders Mr Shadat, Mr Rahman, and Mr Huraira that regardless of the data shown on the ASIC record, each of them were in effective management and control of ANIT at that time.
407 Further and in any event, ANIT has not suffered any loss and damage under the PTE Brisbane-Capital Finance Agreement and there is no evidence before me that suggests that it might do so or that it otherwise is denying any liability that it might have such as would render it useful to make a declaration to the effect that ANIT would be liable under that guarantee and that some form of relief should be directed against Mr Shadat.
408 Further, had I been satisfied that Mr Shadat had breached any of his statutory or other obligations, I would have granted relief under s 1317S and/or s 1318 of the CA as I am satisfied that in the circumstances Mr Shadat acted honestly and, having regarding to all the circumstances of the case, he ought to be excused for any breach of duty. The entering into of the relevant agreements or the making of payments by ANIT was agreed to by Mr Shadat, Mr Rahman, and Mr Huraira and was in ANIT's interests in any event for the reasons set out above. ANIT suffered no loss.
409 In respect of the counterclaim for the Unauthorised Transactions, in closing submissions senior counsel for ANIT advised that this part of the counterclaim was not pressed save insofar as it related to the Sohan Payments.
410 That part of the counterclaim that related to the Unauthorised Transactions was the subject of paragraphs 137, 144, 190 and 194 of Mr Huraira's witness statement. As noted above, paragraphs 137 and 144 were the subject of significant amendment by Mr Huraira before he entered the witness box.
411 Moreover and in any event, paragraphs 137 (in its amended form), 144, 190 and 194 of Mr Huraira's evidence were entirely unsupported by any form of corroborating evidence beyond Mr Huraira's assertions (save to the limited extent to which Mr Shadat acknowledged receipt of certain moneys in which case he provided a cogent explanation of the circumstances).
412 When senior counsel informed the Court that those parts of the counterclaim were not pressed, he observed that they were in fact alternative claims as some of them had already been taken into account in the Financial Investment Schedule and the Substantiation Spreadsheets in reduction of Mr Shadat's loan account.
413 They were not pleaded as such and this was the first occasion on which they were so characterised. On various occasions, Mr Shadat had pointed out that amounts claimed against him in the counterclaim or at least parts of them had also been taken in the reductions effected on his loan account, but the full extent of the overlap only becomes apparent on close line-by-line analysis of the Substantiation Spreadsheets. Once the link between the Substantiation Spreadsheets, the Financial Investment Schedule and Mr Shadat's loan account as recorded in the Financial Statements is fully appreciated, it becomes apparent that the counterclaim and the loan account reductions are not in fact alternative claims. Rather, the fact that ANIT has already taken account of those payments or withdrawals as reductions in Mr Shadat's loan account and prepared the Financial Investment Schedule, the Substantiation Spreadsheets, and the Financial Statements accordingly, means that ANIT has not suffered any loss. Despite this, ANIT was seeking to recover for a second time the very same amounts that it had already relied upon to effect reductions in Mr Shadat's loan account. Thus, even if the transactions amounted to unauthorised withdrawals or unauthorised transactions more broadly, they were not properly the subject of a counterclaim because ANIT had not suffered the loss and damage claimed.
414 To have already affected a reduction in the moneys owed by the company to Mr Shadat and then to have pursued Mr Shadat for those same moneys in the counterclaim is double counting and a form of abuse of process.
415 More pertinently, in significant respects, and notwithstanding the dropping of this part of the counterclaim (appropriate given the absence of supporting evidence), the associated reduction in the balance of Mr Shadat's loan account remains part of the company's records and appears in its balance sheet in the Financial Statements. This will be addressed in the declarations relating to Mr Shadat's loan account.
416 The counterclaim relating to the Sohan Payments which is pressed, is also rejected. Lexica was not Mr Sohan's business and as stated above, the payments of $17,600 made by ANIT were made by ANIT in payment of an invoice rendered to it and as such, in the discharge of an obligation imposed on ANIT. One presumes that the payment of the invoice rendered to ANIT has formed part of the expenses taken into account by ANIT in its profit and loss statement. Despite this, the $17,600 has also been taken into account as a reduction in Mr Shadat's loan account. ANIT seeks a monetary remedy against both Mr Shadat and Mr Sohan for $17,600 where it has already obtained a benefit from those payments having been made by effecting a reduction in the amount owed by the company to Mr Shadat. At the same time, it has also most likely expensed the payment in its profit and loss statement appropriately recognising that it is an expense of ANIT. The reduction in Mr Shadat's loan account for $17,600 was therefore inappropriate and unwarranted.
417 The counterclaim with respect to the Ferrari is also dismissed, save that I accept that it is appropriate that the moneys that are held in Court following the sale of the Ferrari are to be paid to ANIT as ANIT is the registered owner of the car and took out the finance which was necessary to acquire the vehicle.
418 Otherwise, I am satisfied that there was no breach of duty on the part of Mr Shadat in entering into the agreement for the Ferrari in ANIT's name in circumstances where each of Mr Shadat, Mr Rahman, and Mr Huraira agreed that that was appropriate. In any event, I would have otherwise granted Mr Shadat dispensation under s 1317R and s 1318 of the CA.
419 Further, it is not appropriate to make any order against Mr Shadat in relation to the FBT Liability. ANIT has not in fact incurred any liability. There is no evidence that Mr Shadat has ever been asked to complete any relevant document or that his failure to submit any FBT declaration has somehow caused loss to ANIT.
420 The SGL Claim is also dismissed. The claim brought against Mr Shadat with respect to this matter alleges a breach of his statutory duties in failing to exercise his powers and discharge his duties in good faith and act in the best interests of the company, in improperly using his position to gain an advantage for PTE Brisbane, and in improperly using information to gain an advantage for someone else (being PTE Brisbane) and causing detriment to the company.
421 In fact, there would appear to be no involvement or relevance of PTE Brisbane at all to the complaint made.
422 Rather, to the extent to which the claim has any degree of plausibility, it would appear to be a claim that Mr Shadat failed to comply with the statutory obligation of exercising care and diligence imposed by s 180 of the CA and owed to ANIT.
423 That was not however the claim brought and accordingly I would not be prepared to grant relief on the basis of a claim not advanced. In any event, it would have been determinative of any such claim that it was Mr Huraira, not Mr Shadat, who was responsible for the operational issues concerning ANIT which extended to payment of superannuation.
424 Likewise, the claim that Mr Shadat is liable to ANIT with respect to the 16 January 2020 Withdrawals is also dismissed because those amounts have already been recovered by ANIT by its reduction of the amount owing by it to Mr Shadat by those amounts.
425 Section 233(1) of the CA empowers the Court to make 'any order ... that it considers appropriate in relation to the company'. It confers 'extensive powers, so that the remedy will eliminate the oppression and enable the causes of any future oppression to be avoided'.
426 A remedy must be tailored to relieving the oppression[65] and must be the least intrusive remedy available. In granting relief, the Court must seek to reverse all effects of the oppressive conduct by placing the oppressed party where it would have been but for the conduct, 'erring, if there is to be any erring, on the side of the oppressed'.[66]
427 In the present case, Mr Shadat seeks a wide variety of forms of relief, some of which are sought in the alternative.
428 First, Mr Shadat seeks an order that he, as the minority shareholder, buy out the shares held by the majority (Mr Rahman and Mr Huraira) at fair value.
429 Further, Mr Shadat seeks an order for the company to be required to prepare financial statements for the years which precede 30 June 2021 and which are then subject to an independent audit.
430 Alternatively, Mr Shadat seeks an order that the company be wound up.
431 Relevantly, Mr Shadat does not seek an order that his shares be bought out at fair value by the majority.
432 In closing submissions, the defendants submitted that if the Court was satisfied that instances of oppressive conduct had occurred, the Court nevertheless had a discretion to grant relief in a form otherwise than that sought by Mr Shadat. Specifically, the defendants submitted that if the Court found that oppressive conduct had occurred, the appropriate form of order which was the least intrusive, and which was most appropriate in all the circumstances, was for an order to be made that the defendants purchase Mr Shadat's shares at fair value, that the fair value be determined by reference to the value at the date of commencement of the proceeding, with the prospect of some adjustment so as to compensate for any oppressive conduct found. The defendants submitted that in the event that the Court considered that there was insufficient material before it to determine the question of fair value, the Court should simply do the best that it could do on the evidence available.
433 Against that background, it is necessary to examine the legal principles which inform the grant of relief so as to relieve the oppression as found and, in that context, to consider the relevant principles for the assessment of fair value and relevant circumstances in which the Court would be disposed to make an order that the minority buy out the majority.
434 The available relief includes making an order 'for the purchase of any shares by any member.'[67] Although the CA does not identify the basis upon which the price is to be fixed if a buy-out order is made,[68] the Court's task is to fix a price that is fair in all the circumstances having regard to the value that the shares would have had, but for the oppressive conduct. The price to be paid is compensatory in nature, aimed at redressing the wrong done so the price is not confined to ordinary valuation principles and will not always reflect the real worth of the shares.[69]
435 There is no firm rule about when shares should be valued for the purposes of a buy-out order. The Court's discretion to determine the valuation date 'is wide and absolute, subject to the requirement that it be exercised judicially, and is to be informed by the justice and fairness of the particular situation'.[70] 'In some cases the price has been fixed at the value that the shares would have had at the commencement of the proceedings, but for the effect of the oppressive conduct. In other cases, a date other than the date of commencement of the proceedings has been fixed'.[71] In Scottish Cooperative Wholesale Society Ltd v Meyer,[72] the purchase price was fixed at the share market value at the date of commencement of the proceeding; see also Joint v Stevens [2008] HCA 2; (2008) 26 ACLC 1, 467 [154]-[156]. However, the date of proceedings is not always appropriate. In Tomanovic v Global Mortgage Equity Corporation Pty Ltd,[73] the court said the date for valuation should be 'a date that is comparatively recent'.
436 In Re DR Chemicals Ltd[74] and Roberts v Walter Developments Pty Ltd,[75] the valuation was at the date of the court's order. In Mopeke Pty Ltd v Airport Fine Foods Pty Ltd,[76] the appropriate date was as close as possible to the date of judgment: see [96]. In Dynasty Pty Ltd v Coombes,[77] the date was immediately before the act of oppression. In United Rural Enterprises Pty Ltd v Lopmand Pty Ltd,[78] it was the latest date for which a balance sheet of the company was available.
437 When it comes to valuation, where oppression or exclusion of the minority is established, it is generally not appropriate to apply a discount to the value of the minority shareholder's shares where they are ordered to be purchased as a result of oppression.[79] Recently, Delany J has said:
The law is clear that if oppression is established there should be no discount on account of the interest being a minority interest.[80]
438 In Slea Pty Ltd v Connective Services Pty Ltd & Ors,[81] Robson J made orders that the minority shareholder buy out the interest of the majority. Although his Honour's decision was overturned on appeal, there was no challenge to the principles set out by his Honour, who distilled and summarised the following principles:[82]
(a) The making of an order for the minority to buy out the majority has been variously described as 'comparatively unusual',[83] 'atypical',[84] or 'unusual'.[85] In other cases, the rarity or otherwise of such an order is not mentioned, even in ex parte Shooter, the first reported decision in which a minority buy-out order was made.[86]
(b) The approach indicated by the cases is to determine whether the court's discretion is sufficiently broad to accommodate an order for a minority buy out of the majority, and then to justify the direction of the buy-out on the basis of all the circumstances in the case and what the justice of the case requires.[87]
(c) Although some cases refer to 'repeated' behaviour or a 'pattern of ... management',[88] there is no attempt to formulate a rule or otherwise define the circumstances in which a minority buy-out order might be made by reference to this factor.[89]
(d) Minority buy-outs were ordered in cases where the majority was found to have acted without bad faith or dishonesty, as well as cases where it had acted dishonestly.[90]
(e) Some cases contained express findings that the majority were unfit to continue running the company and, in others, the reasons strongly suggested that the majority were unfit.[91] In no case, however, is there any attempt to formulate a rule or otherwise define the circumstances in which a minority buy-out order might be made by reference to this factor.[92]
(f) The relevant oppressive conduct of the majority which contributed to a minority buy-out and, in some cases, a conclusion that the majority was unfit, was broad and varied across the cases, and included: repeated ignorance of company formalities;[93] the majority treating the company as its own to the detriment of the minority;[94] the exposure of the company to claims;[95] conduct damaging to the company's interests including frustrating further investment[96] and delaying payments to creditors;[97] and dishonesty.[98] A cautious approach to comparing fact circumstances in oppression cases is necessary, as such comparisons might be helpful in identifying potentially relevant matters but not in laying down an absolute rule.[99]
(g) In Re Brenfield, the possible triggering of the minority's right to purchase the majority's shares in accordance with pre-emption provisions was a relevant factor.[100] As noted above, however, I have found that in the case of the pre-emptive rights clauses in the constitutions of Services and OSN, failure to observe the pre-emptive rights does not give rise to a right to purchase the transferred shares.
(h) In three cases, the court expressly considered that the oppressor should not benefit from their conduct.[101]
(i) Whether the majority (or oppressor) can afford to buy out the minority (or oppressed) interest can be relevant.[102]
439 Further, his Honour observed that both parties accepted that the court should choose the least intrusive remedy.[103]
440 The appropriate relief is one tailored to address the consequences of the oppression which has occurred, which in this case comprises the Exclusion Conduct, the Financial Statements Inaccuracy and the ANIT Aus Establishment.
441 Mr Shadat argues that the Financial Statements Inaccuracy justifies orders for the independent preparation and subsequent audit of the FY 2019 and FY 2020 Financial Statements.[104]
442 Whilst inaccuracy in the FY 2019 and FY 2020 Financial Statements is necessarily past conduct, Mr Shadat correctly submits that the conduct has an on-going effect in that it must necessarily infect the financial statements in the years which follow FY 2019 and FY 2020.
443 The Financial Statements Inaccuracy which I have found largely relates to the understatement of ANIT's liability to Mr Shadat for the loans made by Mr Shadat to ANIT. This understatement is the result of three broad matters; treating loans made by or repayments made by various PTE entities as loans made by or repayments to Mr Shadat or Mr Rahman depending on the particular PTE entity, treating Chinese PTE as an alter ego of Mr Shadat, and wrongfully reducing Mr Shadat's loan by the matters alleged in the counterclaim which were either abandoned or have not been made out and by salary, superannuation payments, and PAYG payments in respect of the salary of Mr Shadat and Ms Afrin. These inaccuracies all affect ANIT's balance sheet and specifically understate ANIT's liability to Mr Shadat and overstate ANIT's liability to Mr Rahman.[105]
444 Whilst I have very little confidence in the accuracy of the FY 2019 and FY 2020 Financial Statements, I largely did not accept Mr Shadat's complaints that the understatement or overstatement as the case may be of the items which affect the profit and loss statement amounted to oppressive conduct. There was evidently a lack of proper record-keeping in each of those two financial years, and a lack of appropriate systems in place to validate the transactions that occurred. As such the preparation of financial statements by an independent person and their subsequent audit would inevitably prove problematic.
445 Otherwise, the inaccuracies which affect the balance sheet for FY 2019 and FY 2020 insofar as relating to the understatement of the balance of Mr Shadat's loan account can be sufficiently and more appropriately dealt with by the declarations which I propose to make with respect to the improper calculation of the balance of Mr Shadat's loan account.
446 The ANIT Aus Establishment also affects the accuracy of the profit and loss statement for FY 2020 and FY 2021. However, the conduct gives rise to a fairly trifling understatement of revenue which is not in any event able to be calculated for FY 2020. An order for the preparation of independent audited financial statements for FY 2020 based on that understatement of income would be a wholly disproportionate remedy and any revised financial statements would in any event be deficient for the same reasons identified above. To the extent that any remedy is required to address that conduct, a declaration suffices.
447 The more problematic issue which arises is with respect to the appropriate relief to address the Exclusion Conduct.
448 Mr Shadat without expressing any preference, seeks either an order that he (the minority shareholder) buy out the shares held by the majority (Mr Rahman and Mr Huraira) at their current value, alternatively, an order that ANIT's business be sold with Mr Shadat, Mr Rahman, and Mr Huraira each being able to bid to acquire the business, or an order that ANIT be wound up either pursuant to s 233(1)(a) or s 461 (1)(k) of the CA.
449 The applicable principles in respect of the winding up of a company on the just and equitable ground pursuant to s 461(1)(k) have been set out in numerous cases. They were recently summarised by Jackman J in Read-Zorn v Origin Distillers Group Pty Ltd,[106] where his Honour stated:
Winding up on the just and equitable ground has been recognised as applicable in a number of conventional categories, such as where the substratum of the company has failed, where management of the company's affairs is in deadlock or disagreement, where the company's formation involved fraud, where there has been misconduct on behalf of the company's directors, where there is a constitutional or administrative vacuum in the company's management, and where there is a lack of fairness, confidence and commercial morality in the company's affairs: Catombal Investments Proprietary Limited [2012] NSWSC 775 at [19] (Brereton J).
450 Whether winding up is just and equitable is a question of fact, in respect of which each case will depend on its own circumstances. A well established circumstance is where mutual cooperation and a level of trust are essential for the smooth running of the company's day-to-day management. As Barrett J said in Nassar v Innovative Precasters Group Pty Ltd:[107]
Winding up is the characteristic remedy in circumstances where a working relationship predicated on mutual co-operation, trust and confidence has broken down.
451 Similarly, in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd[108] the New South Wales Court of Appeal said that the jurisdiction to order winding up on the just and equitable ground may be exercised in circumstances that do not amount to oppression, unfair prejudice or unfair discrimination, particularly so where 'irreconcilable difference' between shareholders has led to an irretrievable breakdown in a 'personal relationship involving mutual confidence'.
452 Similarly, in Mudgee Dolomite & Lime Pty Ltd v Murdoch,[109] a company which was established on the basis of a relationship of mutual confidence suffered irreconcilable differences emerging between the members. In that case, the personal relationship between the parties failed and, ultimately, actions such as unwillingness to sign documents or attend meetings caused the disintegration of the relationship and, subsequently, a reason for the Court to wind up the company on the just and equitable ground.
453 Notably, the relief sought by Mr Shadat does not extend to an order that his shares be acquired by Mr Rahman and Mr Huraira for fair value. This is the most common form of relief granted in cases where a minority shareholder establishes that the majority has conducted the affairs of the company in an oppressive manner.
454 Mr Shadat did not explain why he was disinclined to seek such an order. During the lead up to the trial and during its course, the defendants had consistently maintained that any buy-out of Mr Shadat's shares had to be at a value as at August 2020. The defendants had made an open settlement offer by letter dated 5 June 2024 where they offered to purchase Mr Shadat's shares in ANIT for the sum of $45,220 (exclusive of any GST payable). This offer was expressly framed by reference to the valuation carried out by Mr Waterhouse who determined that the business carried on by ANIT had a value of $119,000 exclusive of GST. This valuation was in turn based on adjusted financial statements as at August 2020.
455 Faced with the risk that a buy out of his shares by Mr Rahman and Mr Huraira may have resulted in a payment of such a desultory amount, it is entirely possible that Mr Shadat considered that in that event, he would prefer to remain a 38% shareholder of a company that now had a turnover in excess of $28 million.
456 As the authorities noted above recognise, it is in fact not the case that the relevant date for the assessment of fair value of the exiting shareholder will be the day of exit. The appropriateness or otherwise of that date will depend on various factors including the accuracy of the financial statements as at the date of exit. In this case, where there are real doubts as to the accuracy of ANIT's financial statements certainly prior to FY 2021, any assessment of fair value predicated by reference to the financial statements that relate to the date of exit or commencement of the proceeding is highly problematic.
457 Irrespective of Mr Shadat's motivations, the manner in which he has framed his desired relief, either that he buys out the shares of the majority, or that the business of the company be sold or that the company be wound up, gives rise to the question as to whether it is open to the Court in exercising the broad discretion under s 233(1) to make an order that the shares of the minority (Mr Shadat) be bought out by the majority, notwithstanding that this is not the relief that the minority seeks.
458 The defendants submitted that the Court's jurisdiction to grant relief was not fettered by the nature of the relief advocated for by the applicant. The defendants emphasised the broad discretion given to the Court and the range of remedies available under s 233(1) as well as emphasising that the relief sought in the amended statement of claim extended to 'such further or other relief or remedy as the Court deems appropriate'. I accept the defendants' submissions and consider that it is open to me to grant the most appropriate form of relief which I determine is appropriate to address the oppression which I have found, even if such form of relief is not expressly sought by Mr Shadat. This extends to both a buy out of Mr Shadat's shares by the majority and declarations as to the proper amount of his loan account.
Buy out by the majority is the most appropriate form of relief
459 Against that background, I consider that there are more appropriate and less intrusive remedies available than the orders sought by Mr Shadat for the sale of the business or winding up of the company.
460 Mr Shadat's submission to the effect that the Court should make orders facilitating the sale of the business has some similarities to the orders for a 'silent auction', as was the case in Russell v Lee Holdings Pty Ltd (No 3)[110] where each party was given the opportunity of submitting a bid to acquire a parcel of shares.
461 One difficulty with that approach is that it necessarily gives rise to the possibility of control of the business being passed from the participants who have been involved with the operation of ANIT from its inception and in particular, Mr Rahman and Mr Huraira who have been operating the company since 2020 to a third party. Accordingly, there is a risk that if that process is followed, the business of an operating entity which is currently providing educational services to a vast range of students will be transferred to a third party. Current employees, current students and others who are currently dealing with the company have the potential to be disrupted by such a transaction. Whilst that consequence will also arise if a buy out by Mr Shadat of the majority's shares is ordered, this outcome is more appropriately considered in the context of considering the appropriate direction of the buy out. The only real advantage of ordering a sale rather than a buy out is if there is some impediment to determining a fair price which could only be addressed effectively by allowing the market to determine value. I will return to the appropriateness of this form of relief later in the context of considering the buy out and the determination of fair value.
462 The considerations which mitigate against the sale of the business apply even more strongly with respect to Mr Shadat's submission that the company should be wound up.
463 Winding up is a drastic remedy. It is commonly referred to as a remedy of last resort and which ought not to be granted if some other less drastic form of relief is available and appropriate.[111]
464 Generally speaking, Courts are 'extremely reluctant to wind up a solvent company' including for reasons such as the potential adverse effect of winding up on employees.[112]
465 There is no real reason why the more drastic remedy of winding up should be ordered given that there are less intrusive alternatives available such as a buy out or if that is not appropriate, a sale of ANIT's business.
466 Buy out is the most common remedy ordered in oppression cases, particularly in the case of companies involving a small number of shareholders where one shareholder has been excluded from participation in the management and operation of the company. Provided that the question of value can be appropriately addressed, this case is a paradigm case in which a buy out will be ordered. The real question is the direction of the buy out and the determination of fair value and in that context the date upon which fair value should be assessed.
467 In Slea, where Robson J ordered that the minority buy out the majority, his Honour, after summarising the relevant principles[113] concluded that:
... it is apparent that the approach to be adopted is for the Court to direct its attention to granting relief that is appropriate and would best remedy the oppression found in all the circumstances of the particular case. The suggestion that there is a judge-made test which needs to be satisfied before a minority buy-out order can be made should be rejected.
468 In determining that the appropriate remedy in Slea was for the minority to buy out the majority, Robson J found that:
(a) the distinguishing feature in determining the remedy was that significant elements of the majority shareholders' oppressive conduct were intended to enable them to buy [the minority's] shares at less than their true value and therefore it was not appropriate to allow the majority defendants to achieve the object of their oppressive conduct;
(b) [the majority] had been dishonest and deceitful in their oppressive conduct and their behaviour in conspiring to oppress [the minority] with the object of buying its shares at less than true value and that this involved serious blameworthy conduct;
(c) [the majority] had engaged in a decade-long campaign to eliminate [the minority] as a shareholder and actively sought to conceal critical aspects of their oppressive conduct from [the minority];
(d) the majority had inflicted financial hardship on the minority in the hope of being able to acquire its shares cheaply; and
(e) the majority were unfit to act as company directors, and had:
(i) repeatedly displayed willingness to act dishonestly;
(ii) consciously refused to comply with Court orders;
(iii) destroyed relevant documents;
(iv) not complied with discovery obligations;
(v) made a false affidavit;
(vi) deliberately concealed information;
(vii) invoked the Court's processes for a collateral purpose and as a vehicle for oppression.
469 In Re Renex Founder Hold Co Pty Ltd,[114] Matthews J endorsed the summary principles and the general approach set out by Robson J in Slea. I too, accept that general approach.
470 Arguably, many of the features that Mr Shadat complains of and which have been substantiated in this proceeding bear similarity to the matters to which his Honour had regard in Slea, particularly those in (a), (b), (d), and (e)(v) above.
471 Here, Mr Rahman and Mr Huraira sought to exclude Mr Shadat from ANIT during the first three months of 2020 and achieved that objective at the board meeting on 31 March 2020 when they removed him as a director. They then prepared the Financial Investment Schedule and the Substantiation Spreadsheets on a variety of fundamentally unsound premises which had the effect of understating ANIT's debt to Mr Shadat. At the same time, Mr Rahman stopped the payment of fortnightly salary and superannuation to Mr Shadat and his wife from 23 January 2020 which they had been receiving from PTE Melbourne, albeit that this was later accounted for as an expense in ANIT's profit and loss statement and was also egregiously treated by ANIT as a loan by Mr Rahman[115] to ANIT and a repayment by ANIT of the loans made by Mr Shadat to ANIT. The treatment of the salary as a loan had the effect of increasing Mr Rahman's loan to ANIT whilst reducing the loans made by Mr Shadat to ANIT and thus was one of the matters that facilitated the extraction of around $600,000 by Mr Rahman in purported repayment of his loan by ANIT in just over three years from 31 March 2020 to 30 June 2023.
472 Further, in this proceeding, I have found that Mr Rahman and Mr Huraira have both made witness statements and given evidence which is full of falsehoods and that aspects of their conduct gives rise to concern as to their fitness to act as company directors.
473 Accordingly, Mr Shadat's submission that the appropriate course is for orders to be made permitting him to buy out the shares held by the majority has considerable force.
474 Nevertheless, I do not consider that the most appropriate form of relief is to order that Mr Shadat purchase the shares of Mr Rahman and Mr Huraira. An order that the majority buy Mr Shadat's shares at a price which is fair in all the circumstances coupled with appropriate declarations as to Mr Shadat's loan account is the most appropriate way in which to address the core aspect of the oppressive conduct which I have found, which fundamentally is the exclusion of Mr Shadat whilst keeping his capital locked in the company. Subject to the matters identified below, I consider that it will be possible to fix a price for Mr Shadat's shares which is fair in all the circumstances.
475 First, Mr Shadat holds only 38% of the shares compared with the 62% held by Mr Rahman and Mr Huraira. Whilst Robson J made an order in favour of the one third shareholder in Slea, later reversed on appeal, the imbalance in shareholding is a relevant consideration in determining the direction of the buy-out and the present case is one which is some way away from cases where a buy out by the minority of the interest of the majority has been ordered such as Lantsbury v Houser.[116] It is relevant to consider that two of the three founding shareholders wish to continue the business of the company together.
476 Secondly, one of the two, Mr Huraira, has been the CEO of ANIT since commencement. Despite holding the smallest shareholding, it is not in contest that he has been far more hands-on in ANIT's affairs and has played a far more operational role than either Mr Rahman or Mr Shadat. A buy out by Mr Shadat would result in the exit of ANIT's CEO.
477 Thirdly, Mr Rahman and Mr Huraira have been in control of ANIT since 31 March 2020. Since then, ANIT has grown into a far larger and more significant undertaking and its revenues have expanded accordingly. Whilst Mr Rahman and Mr Huraira should not benefit from their wrongful conduct in excluding Mr Shadat, the substantially larger size of the business in its current state nevertheless remains a relevant factor in favour of a buy out by the majority as opposed to a buy out by Mr Shadat, as the latter will be more disruptive given the period of time which has elapsed since Mr Shadat's exit.
478 Fourthly, it is important to distinguish between the oppressive conduct by Mr Rahman and Mr Huraira and their conduct as litigants in this proceeding. Put another way, in the determination of the appropriate relief, care must be taken not to conflate the oppression found with the manner in which Mr Rahman and Mr Huraira gave their evidence and their overall approach to this proceeding. To do so would be to grant relief not to ameliorate the oppression found, but to punish them for their evidence in this case.
479 Fifthly, and relatedly, whilst Mr Rahman and Mr Huraira's evidence in the proceeding was most unsatisfactory and untruthful, this conduct in and of itself does not mean that they are so dishonest to be unfit to act as directors of the company such as would justify a buy out by Mr Shadat. Some of the conduct of ANIT's affairs which is of concern such as the use of multiple bank accounts in the name of other parties, the failure to prepare financial statements on a timely basis, the informal and somewhat illusory nature of the arrangements between ANIT and the PTE companies, and the fact that the register of shareholdings and directorships at ASIC did not reflect the underlying agreement between the participants was conduct to which Mr Shadat was party as well as Mr Rahman and Mr Huraira.
480 The conduct of Mr Rahman and Mr Shadat relating to the understatement of Mr Shadat's loan account and the correlative proffering of inaccurate financial statements falls into a different category and is more concerning. However, there is merit in the defendants' submission that the defendants have learned a great deal during the course of this proceeding about the appropriate administrative, financial and governance requirements associated with being company directors. Senior counsel rightly emphasises that subsequent to Mr Shadat's departure, Mr Rahman and Mr Huraira retained new accountants who attended to the preparation of outstanding BAS returns and tax returns, regularised the affairs of ANIT Aus by shutting down that company and arranged audited accounts for ANIT for FY 2021 to FY 2023. I accept that Mr Rahman and Mr Huraira are likely to have a significantly greater appreciation of the proper role, responsibilities and appropriate way to conduct themselves as directors of companies than they previously did. I have little doubt that this applies to Mr Shadat as well.
481 Sixthly, whilst it is important and necessary to have made the findings that I have about the evidence given by Mr Rahman and Mr Huraira and their conduct generally vis a vis Mr Shadat, it is equally important not to lose sight of the fact that less than 15 years ago, Mr Rahman arrived in Australia from Bangladesh and did not pass the PTE until 2014. The company conceived of by him and Mr Shadat now turns over nearly $30 million. This is to his enormous credit and that of Mr Huraira (and for that matter also Mr Shadat). In addition, the company provides educational opportunities to numerous students and no doubt offers employment to a great number of people. A balanced assessment of Mr Rahman and Mr Huraira's suitability to act as company directors in the context of determining which way a buy out order should operate, requires recognition of this significant achievement as well as less satisfactory aspects of their behaviour.
482 Seventhly, since his enforced exit, Mr Shadat and his wife have established another RTO, Leeds International. Although there was little evidence about Leeds International, Mr Huraira gave evidence to the effect that it was a competitor of Albright. Mr Shadat did not dispute this. Further, having regard to the common background of Mr Shadat, Mr Rahman and Mr Huraira, it appears likely that Mr Shadat and his wife have targeted the same or a similar market to that in which Albright operates. There is a risk therefore that a buy out in favour of Mr Shadat of the interests of Mr Rahman and Mr Huraira, or a winding up as Mr Shadat also seeks, would have the effect of eliminating one active player in the same market and hence arguably produce a windfall benefit to Mr Shadat, his wife and Leeds International.
483 Overall then, I consider that the most appropriate form of remedy is one where Mr Shadat's interest is bought out by Mr Rahman and Mr Huraira.
484 The next question is to determine the price at which the shares should be acquired. The price is one which must represent fair value in all the circumstances.
485 The defendants submit that if an order is made to buy out Mr Shadat's shares, then the price is one which should reflect the fact that Mr Shadat's shares are worth 'little if anything'. The defendants point to the FY 2020 Financial Statements (unaudited) which record net assets of $11,939 and rely upon Mr Rahman's evidence, said to be unchallenged, that as at 2020 ANIT was struggling financially and facing an alleged downturn due to changes in government policy and had a bank account of almost zero.
486 The defendants submit that there is 'unchallenged evidence' that the total shareholder loan balance as at March 2020 was no more than $545,000 as set out in the 2 March 2020 email from Mr Rahman and propose that an appropriate adjustment to remedy any oppressive conduct (which is denied) is for Mr Shadat to be allowed half of that amount, reflecting his claim that half of the PTE entities belong to him, in which case a fair price to be acquired for his shares would be $272,500.
487 There are various premises which underly this submission, each of which I reject. It assumes that the appropriate date for the assessment of the value of Mr Shadat's shares is either at the time of his exit on 31 March 2020 or when he commenced proceedings. The defendants submit that the valuation of shares is regularly done at the date on which proceedings commence as the petition date is the date at which the claimant elects to claim the remedy and equity leans against a dilatory claimant gaining benefits in an expanding business.
488 It is helpful to set out the relevant paragraphs in the cited reference[117] in Re Renex in full so as to fairly and accurately present the defendants' submission:
If there were to be such a thing as a general rule, I myself would think that the date of the order or the actual valuation would be more appropriate than the date of the presentation of the petition or the unfair prejudice. Prima facie an interest in a going concern ought to be valued at the date on which it is ordered to be purchased. But whatever the general rule might be it seems very probable that the overriding requirement that the valuation should be fair on the facts of the particular case would, by exceptions, reduce it to no rule at all. That that is so is already suggested by such authorities as there are on this question.
Chernov JA then observed that in London School of Electronics, Nourse J concluded that fairness in that case required that the shares be valued as at the date of the presentation of the petition.
The date on which proceedings commence is a date regularly used for valuation of shares in oppression proceedings.
In Rankine v Rankine, the Queensland Court of Appeal observed that factors favouring the date on which proceedings commence as the valuation date include:
(a) the petition date is the point at which the claimant elects to claim the remedy; and
(b) equity leans against a dilatory claimant gaining benefits in an expanding business.
- Other commonly used dates for valuation include as at the date of the order, immediately before the acts of oppression, and as at the date of the last balance sheet.
489 Turning next to the proposition that there was unchallenged evidence that ANIT was struggling as at 2020, that submission rests upon acceptance of Mr Rahman's evidence in circumstances where I consider his evidence wholly unsatisfactory and cannot be relied upon absent any corroboration. It was in any event denied by Mr Shadat. It is also entirely at odds with a number of other matters which suggest a rather different circumstance. Notwithstanding the exhortations by the defendants that their actions in January to March 2020 were prompted by a concern to save ANIT's business, beyond those assertions (which were reflected in their communications sent to Mr Shadat in the first three months of 2020) the following matters suggest that ANIT's business was rather rosier than the defendants sought and still seek to portray:
(a) Despite Mr Shadat's objection, in November 2019, Mr Rahman procured the entering into of a lease by PTE Adelaide of a Lamborghini for Mr Rahman's sole personal use in circumstances where ANIT was dependent upon the PTE companies, including PTE Adelaide, for sharing expenses and otherwise providing necessary funding for ANIT's activities;
(b) Despite the assertions made by Mr Rahman and Mr Huraira that in and around March 2020 ANIT required a substantial cash injection in order to survive and cover its liabilities of around $750,000, in the period from Mr Shadat's exit on 31 March 2020 to 30 June 2020 there was no financial injection by Mr Rahman or Mr Huraira at all. In contrast, they both took money out of ANIT as did Mr Rahman's newly established NSW PTE Study Centre Pty Ltd which took out $35,021.90 in FY 2020. To be fair, the money taken out by NSW PTE Study Centre Pty Ltd is largely offset by the $37,000 injected by Mr Rahman's newly incorporated QLD PTE Study Centre Pty Ltd which lent ANIT $37,000 by five payments made from 12 March 2020 to 11 June 2020. Nevertheless, in the first six months of 2020, Mr Rahman took out $42,500 of which $20,500 was taken out after Mr Shadat's exit, whilst Mr Huraira took out $55,000 of which $20,000 was taken out after Mr Shadat's exit. This is illustrated by the below tables:
(ii) NSW PTE Study Centre Pty Ltd:[118]
490 The taking out of money from ANIT by Mr Rahman and Mr Huraira in the first six months of 2020 is inconsistent with the asserted need for a large capital injection in order to survive and the submission that ANIT was struggling financially at the time of Mr Shadat's exit such that there was little or no value in his shares at the time.
491 Further, on 13 December 2018, shortly after ANIT had started trading under the Albright name, Mr Huraira signed an exclusive sales authority for the sale of the ANIT business with an authorised price of $2 million. When Mr Huraira was cross-examined about the sales authority, his evidence was to the effect that he did not think that the business should be put on the market at that time, but that it was favoured by Mr Shadat and Mr Rahman Whilst there is no evidence as to the level of interest at that price, the fact that two of the directors of ANIT were minded to explore a sale of the business after less than 12 months of operation at an asking price of $2 million and the third was opposed to a sale at that stage because it was not a good time to sell, sits uneasily with the suggestion that Mr Shadat's 38% shareholding was of little or no value two years later when the business operated by the company was deriving significantly increasing revenue.
492 Another premise is that it is common ground that the shareholder loans as at March 2020 were no higher than $545,000. That too, is contradicted by the defendants' own documentary evidence which relevantly includes the Substantiation Spreadsheets as well as the unaudited FY 2020 Financial Statements which show the total shareholder loan balance as at 30 June 2020 at $766,797. The $766,797 is a net figure which assumes that the balance of Mr Shadat's loan account was a mere $5,551 which took into account numerous reductions of Mr Shadat's loan account which were the subject of the failed (indeed abandoned counterclaim) and which ought not to have been made.
493 The remaining premise that ANIT's bank account was near zero ignores the practice of warehousing ANIT's money in bank accounts of various third parties.
494 A more appropriate date for the assessment of fair value is the date of the orders for the buy out of Mr Shadat's shares. In that case, any assessment of the fair value of the shares will necessarily be informed by a consideration of the financial circumstances of ANIT at the date of the order. This in turn is best revealed by the most up-to-date audited financial statements of the company. Ideally, this would be the FY 2024 financial statements, but they are not in evidence and nor did the evidence establish that the FY 2024 financial statements have been finalised much less audited. In the case of the FY 2023 financial statements, the audit certificate was not issued until 8 February 2024. Similarly, for the FY 2022 financial statements the audit certificate was not issued until 31 March 2023. As such, there is every chance that the FY 2024 financial statements may not have been completed, or if they are that the audit has not been completed. There is a mutuality of interest in bringing about the finalisation of this proceeding in a timely manner. There will be some delay to finalisation in any case given the course that I propose adopting to assist in my assessment of a fair price for the shares. I am minded to minimise the delays to the greatest extent possible. In the circumstances, I consider that in this case that my assessment of fair value should be carried out as at 30 June 2023 which is the date of the last set of audited financial statements in evidence.
495 Accordingly, an expeditious resolution consistent with the determination of a price for the shares which is appropriate in all the circumstances points to the assessment of fair value being carried out against the backdrop of the FY 2023 audited financial statements.
496 The assessment should not be carried out as at the date of Mr Shadat's exit or the commencement of the proceeding. The most proximate set of financial statements relevant to those dates is the FY 2020 Financial Statements. They are unsigned and unaudited and their preparation only came about following the court orders made 3 September 2020. The same applies to the FY 2019 Financial Statements, which are also unsigned and unaudited. Both are unreliable in respect of the profit and loss statement and the balance sheet. The balance sheet deficiencies have been set out above in the analysis of the Substantiation Spreadsheets. I also have no confidence with respect to the accuracy of the profit and loss statement. Overall, there was a significant degree of immaturity and unorthodoxy about ANIT's administrative and financial affairs as at 30 June 2020 which, among other things, renders the FY 2020 (and FY 2019) Financial Statements as unreliable and a wholly inapt basis upon which to determine the question of fair value. There were significant cash receipts as well as other payments routed through a miscellany of bank accounts. There was no cash book recording cash payments and receipts from January 2018 to October 2018, the absence of which impacts on the reliability of the carry forward balances from 1 July 2019. The evidence of Mr Rahman and Mr Huraira that Mr Shadat was responsible for this deficiency is rejected; it is entirely uncorroborated and was never asserted by them in response to Mr Shadat's requests for a copy of the cash book in early 2020,[119] and is inconsistent with other parts of their evidence which was to the effect that Mr Shadat had no operational role in the company and could not be trusted. The FY 2020 Financial Statements reveal expense items which have jumped around significantly compared to the previous and following years (for example, commissions in FY 2020 were 37.48% of receipts but only 24% in FY 2019; rent in FY 2020 was nearly $1 million higher than in FY 2019, but had then halved in FY 2021). The immaturity of ANIT's operations was noted by the auditor in the FY 2021 audited financial statements and led to the qualified opinion with the auditor noting that the company was in the early stage of its operations and was developing an effective system of internal control over gross revenue and unearned income.
497 ANIT's immaturity with respect to its administrative and financial affairs and appropriate controls was a product of and therefore extended to the fact that the business more generally was in its early stages. At the time of Mr Shadat's exit, ANIT was still a relatively new entrant in the education market. Although it had been incorporated on 8 August 2016, it only commenced trading in January 2018 which meant that it had only been trading for a little over two years at the time of Mr Shadat's exit. Like many a start-up entity, there is a strong basis for considering that some time is required before it establishes a history and reputation in the marketplace that enables it to obtain the necessary number of students to facilitate the derivation of significant revenue. So much would appear to be the case here where ANIT's revenue jumped from $2,431,891 in FY 2019 to $5,371,729 in FY 2020, to $6,881,762 in FY 2021 and then significantly to $15,486,889 in FY 2022 and $28,043,669 in FY 2023.
498 Whilst the defendants argue that Mr Shadat ought not derive benefit from the growth in the company after his departure, there is no suggestion that there was any change in the direction of the business or some new revenue stream conceived by Mr Rahman and Mr Huraira such that it would be unfair for Mr Shadat to obtain the benefit of the growth in the company post his exclusion. The student numbers had by 27 April 2020[120] less than a month after Mr Shadat's removal strongly suggests that the growth was reflective of latent potential in the newly established business rather than any special skill on the part of Mr Rahman and Mr Huraira.
499 One thing is clear; there was no capital injection effected by Mr Rahman and Mr Huraira after Mr Shadat's exit. In fact, ANIT's financial affairs were such as to facilitate the repayment of the entirety of the debt which ANIT purportedly owed Mr Rahman of $607,246 as at 30 June 2020 over the ensuing three years. The company's debt to Mr Huraira of $75,900 purportedly owed as at 30 June 2019[121] was repaid such that by 30 June 2022, Mr Huraira was a debtor of the company in the amount of $30,957, although Mr Huraira had discharged that debt by 30 June 2023. In any case, the fact that ANIT was able to repay loan capital that had been provided by Mr Rahman and Mr Huraira of in excess of $600,000 over as little as three years from 30 June 2020 speaks to the latent robustness of the business as at 30 June 2020, not to its imminent demise.
500 The capital that arguably did contribute to ANIT's growth over that period was the loan funds provided by Mr Shadat. Although only recorded in ANIT's balance sheet at $5,551, this substantially understated the extent of the financial contribution made by Mr Shadat, which is just under $500,000[122].
501 The calculation is delineated in some detail in the declarations with the resultant calculation being reflected in the adjusted balance owed by ANIT to Mr Shadat once the wrongful reductions in his loan account are reversed.
502 Further, any determination of a fair value for Mr Shadat's shares as at 30 June 2020 ought to have regard to any latent potential of the company, given that it was very much in its early phase of operations. A common form of assessment is one which has regard to anticipated future earnings. The estimate of future earnings is inherently subject to uncertainty particularly in the early stages of a company where there is no established record. The existence of audited accounts for FY 2021, FY 2022 and FY 2023 removes any uncertainty of a forward looking estimate carried out as at 30 June 2020. A fair value assessment at 30 June 2023 can now have regard to actual figures which have been audited and therefore have a greater degree of reliability than otherwise would be the case.
503 Having determined that 30 June 2023 is the appropriate date, it becomes necessary to assess the price for Mr Shadat's shares which is fair in all the circumstances.
504 The defendants in their submissions emphasise that Mr Shadat had numerous opportunities to put on valuation evidence but did not do so. In those circumstances, they submit that where the Court does not have the benefit of expert valuation evidence before it, the Court should do the best it can with the evidence before it.[123]
505 In the present case, I do have sufficient evidence before me to determine the fair value of Mr Shadat's shares in the company as at 30 June 2023. The task requires me to determine a fair value for a 38% shareholding in a company with a turnover of nearly $30 million, albeit with limited profitability but nevertheless one with sufficient capacity to largely retire around $600,000 in shareholder debt over the previous three years.
506 Whilst there is substance in the submission that Mr Shadat did not seek to adduce any valuation evidence despite having the opportunity to do so, I do not consider that the absence of such evidence should result in fair value being assessed either nominally or by an assessment which would be little more than a guess. The latter could work an injustice on the buyer or the seller.
507 It is common in oppression cases for the trial to proceed on effectively a two-stage basis with the first stage determining whether the oppression has occurred and the second stage determining the fair value on any buy out order that results.[124]
508 If that were not the case, then both parties would be put to the cost and expense of adducing valuation evidence on a variety of bases both as to different dates, and on various assumptions depending upon the extent of the oppression found.
509 That disadvantage is particularly pertinent here where the effect of the defendants' conduct has clearly had an adverse effect on Mr Shadat's financial resources. Moreover and perhaps more particularly, Mr Shadat did not seek an order that his shares be bought out by the majority. As noted above, the relief that Mr Shadat sought was of a different nature, namely that he buy out the majority or that there be a winding up or that there be a sale. Had I accepted Mr Shadat's submission as to the appropriate relief by way of winding up or sale, then valuation evidence was unnecessary. If I ordered a buy out in his favour, its absence may have worked to his advantage as the absence of valuation evidence may have prompted a submission by him that the absence of valuation evidence should lead to the fixing of a nominal price. In fact, Mr Shadat's submission was more measured and appropriate as inherent in the submission that he ought to be able to buy out the majority's shares at their current value, which was a recognition of the need for further evidence of value.
510 My decision to grant Mr Shadat relief in the form that his shares be bought out by Mr Rahman and Mr Huraira is based on my acceptance of the defendants' submission that this is the appropriate remedy if I found that oppressive conduct had taken place, and that such a course was open because of the broad powers given to me under s233(1) of the CA and facilitated by paragraph F of Mr Shadat's prayer for relief.
511 Just as I accept that it is an appropriate exercise of power to make an order that Mr Shadat's shares be bought out by the majority despite Mr Shadat not asking for such relief, those same broad powers give me the ability to call for such further evidence as is necessary to properly assess the fair value of the shares.
Appointment of an expert under s 65M of the Civil Procedure Act 2010 (Vic)
512 In the circumstances, I consider that the most appropriate course consistent with the interests of justice is to appoint an expert to assist the Court pursuant to s 65M of the Civil Procedure Act 2010 (Vic) ('the CPA') and to inquire into and report as to the value of ANIT's business as well as the market value of a 38% shareholding in ANIT as at 30 June 2023.
513 Section 65M provides:
Court appointed experts
(1) A court may make an order appointing an expert -
(a) to assist the court; and
(b) to inquire into and report on any issue in a proceeding.
(2) The court may make an order appointing a court appointed expert at any stage of the proceeding.
(3) In making an order to appoint a court appointed expert, the court must consider -
(a) whether the appointment of a court appointed expert would be disproportionate to -
(i) the complexity or importance of the issues in dispute; and
(ii) the amount in dispute in the proceeding;
(b) whether the issue falls within a substantially established area of knowledge;
(c) whether it is necessary for the court to have a range of expert opinion;
(d) the likelihood of the appointment expediting or delaying the trial;
(e) any other relevant consideration.
514 The regime I intend to impose with respect to the preparation of a report pursuant to s 65M is firstly to invite the parties to submit the names of appropriate experts for my consideration; secondly, I intend to make directions that would facilitate the parties if so advised in making submissions to the expert as to various questions which may impact on value; thirdly, I intend to make orders that the costs of the valuation be paid by the defendants which accords with the normal course where the oppressor pays for the cost of valuation[125]; fourthly, upon the obtaining of a report under s 65M I will list the matter for further hearing on as expedited a basis as practicable, at which time I will hear submissions from the parties as to what price should be assessed as fair value in light of the report.
515 It will be appropriate for the expert to have regard to such extent as the expert may be advised as to the FY 2023 audited financial statements of ANIT. The provision of audited accounts can provide the expert with a measure of comfort as to the reliability of those figures. That does not mean that the parties are precluded from making submissions to the expert as to various items in the profit and loss statements to the extent to which they consider that the matters raised may affect value. There are a range of valuation methodologies which may be deployed by the expert. To the extent to which the expert deems future maintainable earnings to be an appropriate methodology, an expert accountant is well equipped to and commonly does strip out or reduce expenses which they consider do not reflect arm's length recurring expenditure of the entity the subject of assessment, particularly where the subject entity is part of a loose grouping of entities where expenses may be shifted between entities in the group. The parties are not precluded from directing the expert's attention to those items as they may be advised. There are a number of expense items which vary significantly from year to year such as cleaning sub-contractor, depreciation, rent, salary and wages, annual leave and long service leave, travel and accommodation, general office expenses and write offs, which may warrant consideration.
Relief to address the Financial Statements Inaccuracy
516 The Financial Investment Schedule records the following net investments (loans by or loans made) relating to ANIT in FY 2017:
517 As earlier explained, in the Financial Investment Schedule, the Substantiation Spreadsheets and the annual financial statements, loans made by PTE Melbourne and PTE Adelaide are treated as if they were loans by Mr Rahman alone.
518 Given my conclusion that Chinese PTE was not an alter ego of Mr Shadat, the ($6,392.90) has been wrongfully applied as a reduction in Mr Shadat's loan account.
519 For FY 2018, the Financial Investment Schedule shows net investments as follows:
520 The $280,843.04, the subject of the investment by PTE Melbourne is a net figure. The Substantiation Spreadsheets identify investments from PTE Melbourne in FY 2018 comprising transfers to ANIT as well as ANIT's expenses paid by PTE Study Centre 'and cash' totalling $180,479.89 plus PTE Melbourne enrolment fees received by ANIT 'on behalf of PTE Study Centre' which total $358,522.40. It also includes investment returns to PTE Study Centre totalling $258,159.24. The figure of $280,843.04 represents the net of the loans less the returns (or repayments).
521 The balance of the loan made by Mr Shadat has been reduced by $76,261.62 on the basis that Chinese PTE is the alter ego of Mr Shadat. Given my conclusion that that was not the case, this reduction had no basis and ought to be reversed.
522 The balance of Mr Shadat's loan account has been further reduced by $27,600. The Substantiation Spreadsheets show that the first of the payments comprising this reduction was the payment of $10,000 made 3 May 2018 which appears in paragraph 40C of the counterclaim. This part of the claim lacked merit and was abandoned. Accordingly, this reduction in Mr Shadat's loan account had no basis and ought to be reversed. The remaining two payments comprise payments made 17 May 2018 and 3 June 2018 of $1,100 and $16,500 respectively. Each relates to payments made by ANIT relating to Lexica which is said to be Mr Sohan's business. These payments are the Sohan Payments referred to in the counterclaim.[128] As noted above, Lexica was not the alter ego of Mr Shadat or Mr Sohan and I have rejected the defendants' evidence that there was some sort of argument that Mr Shadat or Mr Sohan would be liable for expenses relating to Lexica. Accordingly, the reduction of Mr Shadat's loan account by $27,600 had no basis and ought to be reversed.
523 For FY 2019, the Financial Investment Schedule shows net investments as follows:
524 As can be seen, the balance of Mr Shadat's loan account was reduced by $293,588.54 in FY 2019.
525 As the Substantiation Spreadsheet establishes, a substantial portion of this relates to the payments of Ms Afrin's salary and Mr Shadat's salary, their superannuation and PAYG tax instalments paid on their behalf by their employer. The total of these amounts is $109,789.95 (rounded).[129]
526 As noted above, accounting for the payment of salary which has been treated apparently in ANIT's profit and loss statement as an expense, as a loan repayment to Mr Shadat lacks foundation and ought to be reversed.
527 Save for Mr Shadat's admitted receipt in reduction of his loan account of $4,738 on 26 September 2018, $5,000 on 25 October 2018 and $10,000 on 21 January 2019, the remaining transactions relied upon so as to substantiate the reduction in Mr Shadat's loan account as particularised in the Substantiation Spreadsheets are overwhelmingly transactions the subject of the counterclaim in paragraph 40 which lacked merit and in any event has been abandoned. Of these payments there are three of which Mr Shadat acknowledges receipt; $22,000 on 22 August 2018, $2,000 on 12 October 2018 and $3,000 on 15 October 2018. Mr Shadat says these payments were payments by Mr Huraira to Mr Shadat of the latter's entitlement to a share of the profits from PTE Brisbane. I accept Mr Shadat's evidence. In any case, they should not have been accounted for as reductions of Mr Shadat's loan account balance. Accordingly, the only investment returns to Mr Shadat in FY 2019 which should have been the subject of a reduction in his loan account balance are the payments of $4,738 on 26 September 2018, the payment of $5,000 on 25 October 2018 and the payment of $10,000 on 21 January 2019. Accordingly, the reduction in the balance of Mr Shadat's loan account during FY 2019 which should have been reflected in the company's financial statements was $19,738, not $293,588.54.
528 For FY 2020, the Financial Investment Schedule shows net investments as follows:
529 As was the case in FY 2019, a substantial component of the asserted investment return to Mr Shadat which was accounted for as a reduction in the balance of his loan account was the payment of the salary, superannuation and PAYG tax for Ms Afrin and Mr Shadat. The total of these amounts was $83,318.38.[130]
530 For the same reasons as earlier explained, it was wrong to treat this as a reduction in Mr Shadat's loan account. Accordingly, this $83,318.38 reduction needs reversal.
531 The remaining reductions in Mr Shadat's loan account total $198,450.76.
532 Of this, $69,000 relates to the 16 January 2020 Withdrawals. It is appropriate to have accounted for this as a reduction in Mr Shadat's loan account. To this extent, the reduction in Mr Shadat's loan account balance is entirely proper.
533 The remaining $129,450.56 in reductions in the balance of Mr Shadat's loan account are also the subject of the counterclaim. Mr Shadat admits receiving a payment of $599 on 9 October 2019, $1,001 on 10 October 2019, $2,950 on 15 October 2019, $218.20 on 19 October 2019 and $6,000 on 15 November 2019 (a total of $10,768.20). Otherwise and aside from these reductions where the reduction in the balance of his loan account are proper, there was no satisfactory evidence that Mr Shadat received the payments, which he denies. The counterclaim lacked merit and was abandoned, not only because the payments had already been taken into account in reduction of Mr Shadat's loan account. The reductions in Mr Shadat's loan account balance were wrongful and ought to be reversed.
534 The only reductions in the balance of his loan account that were proper in FY 2020 were the $69,000 for the 16 January Withdrawals and the $10,768.20 which Mr Shadat admits receiving. The total of the appropriate reductions is $79,768.20. Given that the total reductions that have been effected is $281,768.94, the excessive or wrongful reductions which require reversal total $202,000.74.
535 In addition, as noted above, the Financial Investment Schedule and hence ANIT's financial statements, treat certain of the PTE entities as Mr Rahman's and certain of the PTE entities as Mr Shadat's.
536 Having regard to my conclusion above, this lacked any proper foundation. The balances of Mr Rahman and Mr Shadat's respective loan accounts should, given my findings above, be calculated on the basis that 50% of the net funds advanced by each of the PTE entities constitutes an advance by Mr Rahman as to 50% and the remaining 50% by Mr Shadat.
537 Based on the Financial Investment Schedule, the net financial investments by the PTE entities is as follows:
Chinese PTE/PTE Study Centre Melbourne[1]
538 These figures do not include the entities established by Mr Rahman alone in January 2020 without Mr Shadat's knowledge, being QLD PTE Study Centre Pty Ltd and NSW PTE Study Centre Pty Ltd.
539 The net amount invested by the PTE entities therefore totals $1,194,745[1]. Half of this is $597,373. Appropriate investment returns to Mr Shadat (reductions in Mr Shadat's loan account) are $19,738 in FY 2019, $69,000 in FY 2020 to account for the 16 January 2020 Withdrawals and the further admitted receipt in FY 2020 of $10,768.20. The total of the appropriate reductions in his loan account balance is therefore $99,506.
540 On my calculations and having regard to the findings I have made, the balance of Mr Shadat's loan account as at 30 June 2020 is $597,373 less $99,146 which is $497,867.227.
541 Mr Rahman and Mr Huraira were not compelled to remain in business with Mr Shadat. The vice with their conduct is that they removed Mr Shadat as a director of a company of which he was a co-founder, excluded him from its management and affairs, ceased payment of salary and superannuation to him and his wife and at the same time kept Mr Shadat's capital trapped in the company.
542 Mr Rahman and Mr Huraira's entrapment of Mr Shadat's capital understates things. By a combination of reducing the balance of Mr Shadat's loan account to trivial levels via a series of unjustified reductions, and assertions that Mr Shadat's 38% shareholding was near worthless despite the company now turning over just under $30 million and repaying its debt to Mr Rahman by circa $600,000 over three years, Mr Rahman and Mr Huraira sought to extirpate Mr Shadat's debt and equity investment in ANIT. Having prepared financial statements which reflected the desultory debt said to be owing by ANIT to Mr Shadat, Mr Rahman and Mr Huraira then procured the bringing of a counterclaim against Mr Shadat by ANIT in which it sought to recover the very same amounts that the company had already appropriated without any proper basis as reductions in the loan account.
543 The subsequent prosecution by Mr Shadat of his oppression claim has not been without difficulty. He has changed solicitors on a number of occasions and in the end represented himself at trial, where he was opposed to three members of counsel including Senior Counsel, who were assisted by experienced and well-organised solicitors.
544 Notwithstanding the imbalance in resources, Mr Shadat has substantially succeeded in his oppression claim and the counterclaim has failed save in a very minor respect.
545 Despite Mr Shadat's preference that he should be allowed to purchase the shares of the 62% majority at a price which reflects current value, I have determined that the appropriate remedy is for the majority to buy out Mr Shadat's shares at a price to be fixed, after the Court has the benefit of a valuation of ANIT, its business and Mr Shadat's shares as at 30 June 2023, which is the most recent date of the audited financial statements of the company in evidence.
546 Subject to hearing from the parties as to the precise form of orders and declarations, the declarations and orders that I propose to make are to the following effect:
1. Declare that the conduct of the affairs of ANIT Australia Pty Ltd ('ANIT') by its directors and shareholders, MD Imtiaj Rahman ('Mr Rahman') and MD Abu Huraira ('Mr Huraira'), has been oppressive to, unfairly prejudicial to and unfairly discriminatory against SM Nazmus Shadat ('Mr Shadat') within the meaning of s 232(e) of the Corporations Act 2001 (Cth) by reason of:
(a) the establishment and operation of ANIT Aus Pty Ltd in the period from 16 January 2020 to about September 2022;
(b) the exclusion of Mr Shadat from participation in the management and affairs of ANIT and in particular:
(i) from 31 March 2020 by removing him as a director of ANIT;
(ii) from January 2020 by ceasing the payment of salary and superannuation to him and to his wife, Papia Afrin ('Ms Afrin');
(iii) preparing and adopting financial statements for ANIT including from 30 June 2020 and each financial year thereafter which wrongly understated the extent of ANIT's liability to Mr Shadat by effecting reductions of Mr Shadat's loan account so as to reduce the amount owing by ANIT to him without a proper basis by:
(y) treating as repayments of loan funds advanced by Mr Shadat, payments of salary and superannuation to Mr Shadat and to Ms Afrin and PAYG tax instalments notwithstanding that each of those expenses had been expensed in ANIT's profit and loss statement;
(z) alleged cash withdrawals and other amounts improperly taken by Mr Shadat from ANIT more particularly identified in paragraph 40 of the defendants' counterclaim dated 16 July 2021.
2. Declare that the balance of Mr Shadat's loan account should be calculated on the basis that:
(a) 50% of the net investment made by PTE Study Centre Pty Ltd, PTE Study Centre Adelaide Pty Ltd, PTE Study Centre Brisbane Pty Ltd and PTE Study Centre Sydney Pty Ltd is treated as if it was a loan made by Mr Shadat;
(b) the balance of Mr Shadat's loan account should not be calculated on the basis that the net investment by Chinese PTE constitutes investments made by Mr Shadat or investment funds returned to Mr Shadat, but rather should be accounted for as if they were investments made by or returns effected to PTE Study Centre Pty Ltd.
3. Declare that the balance of Mr Shadat's loan account as at 30 June 2020 and thereafter is not $5,551, but is $497,867.
4. The 38 shares owned by Mr Shadat in ANIT ('the Shadat shares') shall be purchased by Mr Rahman and Mr Huraira in such proportion as may be agreed by Mr Rahman and Mr Huraira for a price to be fixed in accordance with these orders.
5. Mr Rahman and Mr Huraira shall pay the price for the Shadat shares within 30 days of the fixing of the price subject to Mr Shadat transferring the Shadat shares free of all encumbrances to them.
6. In the event that Mr Rahman and Mr Huraira do not pay the price as fixed within 30 days of the fixing of the price, ANIT shall be wound up and a liquidator shall be appointed.
7. For the purpose of assisting the Court in fixing the price of the Shadat shares, the Court appoints an independent person pursuant to s 65M of the Civil Procedure Act 2010 (Vic) as an independent expert ('the Expert') for the purpose of assisting the Court in enquiring into and reporting to the Court on the value of ANIT, the value of the business conducted by ANIT, and the value of the Shadat shares as at 30 June 2023 and otherwise according to the terms set out in a letter of instruction[13] ('the instructions').
8. The appointment of the Expert will be subject to the Expert providing consent to the appointment pursuant to s 65M(4) of the Civil Procedure Act 2010 (Vic).
9. Once appointed, the Expert will confirm his or her acceptance of the appointment by notifying the parties and the Commercial Court Registry (by email to commercialcourt@supcourt.vic.gov.au) in writing.
10. Within 21 days of the date on which the Expert confirms his or her acceptance of the appointment (the 'Acceptance Date'), the parties shall if so advised deliver to the Expert, a submission not exceeding 20 pages which sets out any matter that the parties consider is relevant to the Expert's task.
11. During business hours on the giving of reasonable notice by the Expert, the parties must:
(a) permit the Expert to have full access to inspect all books and documents of ANIT; and
(b) comply with any reasonable requests of the Expert including for the provision of any information or documents (including copy documents).
12. The costs of the Expert shall, subject to further order, be paid by the first and second defendants.
13. The Expert shall deliver to each of the parties as soon as practicable a statement of proposed remuneration for the appointment with such statement setting out:
(a) the hourly rate; and
(b) the estimate of total fees or quote for work undertaken up to and including the valuation report (the 'Estimate').
14. Within 14 days of the Estimate, provided no party objects to the Expert's estimate within 7 days of its receipt, the first and second defendant shall provide to the Associate Judge who is the Senior Master, by payment into Court, security for the Expert costs of appointment in the initial amount of the Expert's estimate ('the Expert's security').
15. The Expert's security shall be provided by the first and second defendants.
16. No portion of the Expert's security shall be disbursed otherwise than pursuant to an order of the Court.
17. The Expert has liberty to apply, if so advised, for:
(a) an order for payment of remuneration (or a portion thereof) from the Expert's security;
(b) an order to increase the amount of the Expert's security, including on account of any further instructions to assist the Court;
(c) for any other direction or matter that the Expert considers is necessary or desirable in order to finalise the report.
18. During business hours on the giving of reasonable notice by the Expert, Mr Shadat and the defendants must provide written answers to questions posed by the Expert.
19. Within 120 days of the Acceptance Date, or such other period as is ordered by the Court, the Expert shall make a report in writing to the Court with a copy to each of the parties stating the Expert's opinion.
20. The moneys paid into Court pursuant to paragraph 6(e) of the orders made 15 September 2023 following the sale of the Ferrari together with any interest earned thereon shall be paid to the third defendant/plaintiff by counterclaim.
21. The counterclaim shall otherwise be dismissed.
22. The further hearing of the proceeding shall otherwise be adjourned to a date to be fixed after 31 March 2025.
23. Liberty to apply is reserved generally and to the Expert.
547 The parties will be given the opportunity to check the calculations which underpin the proposed declarations, the form of the directions, orders and instructions more generally and be heard as to the name of the appropriate expert. I shall also hear the parties on the question of costs, but my preliminary view is that Mr Shadat should be entitled to an order for payment of his standard costs to date.
548 The orders that I shall make today therefore are as follows:
(1) For the purpose of appointing an independent expert as proposed in these reasons, within 7 days of the date of these orders the plaintiff and the defendants shall:
(a) each submit to the Court the names and addresses of any person(s) not exceeding three in number, who they consider is an appropriate person to be appointed as the expert:
(b) inform the Court if they have any objection, and if so the basis of such objection, to the appointment of any of the following persons as the expert:
(i) Owain Stone of Alvarez and Marsal;
(ii) Dawna Wright of FTI Consulting;
(iii) Paul Lom of PKF Melbourne Corporate;
(c) provide any mark ups to the proposed letter of instructions to the Expert a copy of which is annexed hereto.
(d) provide any mark ups to the proposed orders and declarations referred to in these orders if so advised and any submissions in support.
(2) Following the receipt of the responses of the parties referred to in paragraph 1 hereof, the Court shall appoint the Expert at the further hearing in this matter fixed for a convenient date in November 2024, and otherwise make orders to the effect proposed in these reasons and as to costs to date.
(3) The further hearing of this proceeding is adjourned to the next convenient date in November 2024.
[1] Russell Rahman and MD Imtiaj Rahman are not related. For ease of understanding, Russell Rahman is referred to in these reasons as Russell Rahman whilst MD Imtiaj Rahman is referred to as Mr Rahman.
[2] See, inter alia, Bugeja v R [2010] VSCA 321; (2010) 30 VR 493; R v Morrow [2009] VSCA 291; (2009) 26 VR 526.
[4] Although Mr Shadat's email referred to a cash file for January 2018 to October 2018, Mr Huraira's response referred to a period starting February 2018. Nothing turned on the difference in dates.
[5] Figures shown in brackets represent negative amounts ie -$357,269.
[8] Where there is an operating loss, the relevant figure is in brackets
[9] In fact, according to the financial statements as at 30 June 2019, the company owed Mr Rahman $899,387 which had been reduced to nil by 30 June 2023. Thus, over a four year period Mr Rahman had received $819,387 in full repayment of his alleged loans made to ANIT.
[11] See Paragraph 241 of Mr Huraira's witness statement.
[12] See paragraph [184] of Mr Huraira's witness statement.
[13] See paragraph [225] of Mr Shadat's reply witness statement.
[14] See closing submissions of Defendants and Plaintiffs by Counterclaim at paragraph [214].
[15] See, for example, paragraphs [83]- [84] of Mr Rahman's witness statement.
[16] See paragraph [337] of Mr Shadat's witness statement.
[17] A figure in brackets records net payments made by ANIT to the investor which gives rise to a receivable in ANIT's balance sheet (or as it is sometimes recorded, a negative liability).
[19] See Mr Shadat's reply witness statement at paragraph [68].
[20] The 13 January 2020 email; see paragraph [92] above.
[21] See Mr Shadat's witness statement at paragraphs [104]-[105].
[22] See Mr Huraira's witness statement at paragraphs [105]-[108] and Mr Rahman's witness statement at paragraphs [89]-[92].
[23] See Mr Shadat's witness statement at paragraphs [46]-[50].
[24] See Mr Shadat's witness statement at paragraphs [40]-[42].
[25] See Mr Shadat's reply witness statement at paragraphs [21]-[22].
[27] The financial statements of PTE Melbourne were not in evidence.
[29] Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304, 334 [72] (French CJ); Solanki v Cufari [2014] VSC 345, [54] (Elliott J).
[30] Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310, 354-355 [178], [185] (Campbell JA with whom Macfarlan and Young JJA agreed).
[31] Knight's Quest Pty Ltd v Daiwa Can Company [2018] VSCA 349; (2018) 366 ALR 557, 588 [130] (Beach, Kyrou and Hargrave JJA), cited in Parker v Auswild [2022] VSCA 8; (2022) 403 ALR 111, [128] (Ferguson CJ, Kennedy JA and Garde AJA).
[32] Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 704 (Young J); Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459, 472 - 473 (Brennan J).
[33] Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459, 473 (Brennan J).
[34] Re Spargos Mining NL [1990] WASC 32; (1990) 3 ACSR 1, 44 (Murray J).
[35] Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304, 360 [176] (Gummow, Hayne, Heydon and Kiefel JJ).
[36] Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55, [9] (Siopis, Rares and Davies JJA).
[37] Parker v Auswild [2022] VSCA 8, [130] (Ferguson CJ, Kennedy JA and Garde AJA).
[38] Knight's Quest Pty Ltd v Daiwa Can Company [2018] VSCA 349; (2018) 366 ALR 557, 588 [130] (Beach, Kyrou and Hargrave JJA).
[39] John J Starr (Real Estate) Pty Ltd v Robert R. Andrew (A'asia) Pty Ltd (1991) 6 ACSR 63, 67 (Young J); Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd (2006) WAR 1, [29] (Martin CJ).
[40] O'Neill v Phillips [1999] UKHL 24; [1999] 2 All ER 961.
[41] Chase Corp (Aust) Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1, 26 (Cohen J).
[42] Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692; Thomas v HW Thomas Ltd [1984] 1 NZLR 686.
[43] O'Neill v Phillips [1999] UKHL 24; [1999] 2 All ER 961.
[44] Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667, [49] (Black J); Hunter v Organic and Natural Enterprise Group Pty Ltd (2012) 92 ACSR 183; [2012] QSC 383, [120] (Dalton J).
[45] Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, [388] (Priestly JA), [676] (Fitzgerald JA); Hunter v Organic and Natural Enterprise Group Pty Ltd [2012] QSC 383; (2012) 92 ACSR 183, [105] (Dalton J); Exton v Exton Pty Ltd [2017] VSC 14; (2017) 53 VR 520, [50] (Sifris J) citing Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 706.
[46] Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310, [166]-[171] (Campbell JA).
[47] Re SRW Nominees Pty Ltd [2019] VSC 547, [52] (Robson J).
[48] Mopeke Pty Ltd v Airport Fine Foods Pty Ltd [2007] NSWSC 153; (2007) 61 ACSR 395, [45] (Brereton J).
[49] See Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, 683 [59] where Spigelman CJ said: 'it may be that the longevity of a particular mode of decision making will, of itself, create something in the nature of an expectation, the frustration of which may constitute oppression or unfair prejudice'.
[50] Re Courtesy Real Estate (NSW)Pty Ltd (2013) 96 ACSR 593; [2013] NSWSC 1666, [19] (Black J); Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304 (Campbell JA).
[51] Allways Resources Holdings Pty Ltd v Samgris Resources Pty Ltd (2017) 121 ACSR 1; [2017] QSC 74.
[52] Re Treadtel International Pty Ltd (No 2) [2016] NSWSC 791, [103] (Robb J).
[53] Hogg v Dymock (1993) 11 ACSR 14; Yazbek v Aldora Holdings Pty Ltd (2003) 45 ACSR 53; [2003] NSWSC 330; Smith Martis Cork and Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153; (2004) 207 ALR 136; Mopeke Pty Ltd v Airport Fine Foods Pty Ltd [2007] NSWSC 153; (2007) 61 ACSR 395; Campbell (2009) 238 CLR 304; Vigliaroni v CPS Investment Holdings Pty Ltd (2009) 74 ACSR 282; [2009] VSC 428.
[55] Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343; McMillan v Teleo Enterprises International Pty Ltd (1995) 18 ACSR 683, 614; Tomanovic [2011] NSWCA 104; (2011) 288 ALR 310, [199].
[56] MMAL Rentals Pty Ltd & Ors v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167, [71] (Spigelman CJ).
[57] Scottish Cooperative Wholesale Society Ltd v Meyer [1959] AC 324; Re Bright Pine Mills Pty Ltd [1969] VicRp 121; [1969] VR 1002; Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282; Vadori v Aav Plumbing [2010] NSWSC 274; (2010) 77 ACSR 616; Re Hollen Australia Pty Ltd [2009] VSC 95 at [158]-[159].
[58] Re Spargos Mining NL [1990] WASC 32; (1990) 3 WAR 166; Re East West Promotions Pty Ltd (1986) 10 ACLR 222; Re Kenyan Swansea Ltd [1987] PCLC 514, 521.
[59] (1990) 20 NSWLR 588, [605].
[60] Shum Yip Properties Development Ltd v Chatswood Investment Development Co Pty Ltd [2002] NSWSC 13; (2002) 40 ACSR 619.
[61] Re London School of Electronics Ltd [1985] 3 WLR 474, 482; Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 706; Hunter v Organic and Natural Enterprise Group Pty Ltd [2012] QSC 383; (2012) 92 ACSR 183.
[62] Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452; Patterson v Humphrey [2014] WASC 446; (2014) 291 FLR 246.
[63] Western Ventures Pty Ltd v Resource Equities Ltd [2005] WASC 53; (2005) 53 ACSR 568.
[64] Corbett v Corbett Court Pty Ltd [2015] FCA 1176; (2015) 109 ACSR 296, [130].
[65] Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282, 306 [68].
[66] ES Gordon Pty Ltd v Idameneo Pty Ltd (1994) 15 ACSR 536, 54.
[67] Corporations Act 2001 (Cth) s 233(1)(d).
[68] Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304, 360-61 [178].
[69] Re Scientific Management Associates Pty Ltd [2019] NSWSC 1643; (2019) 141 ACSR 115, [309] (Rees J) and the cases there cited.
[70] Foody v Horewood (2007) 62 ACSR 576, [35]; see also Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304, [178], where the High Court said that power to make a compulsory share purchase order 'should not be hedged about by implied limitations'.
[71] Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304, [178].
[73] [2011] NSWCA 104; (2011) 84 ACSR 121, [298].
[79] Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667, [66]-[71].
[80] Joint v Program IT Pty Ltd [2020] VSC 867, [4].
[83] Re Brenfield [1996] 2 BCLC 184, 190 (Rattee J).
[84] Oak Investments [2009] EWHC 176 (Ch), [327], in which Sales J contextualised the statement by saying that, 'it is more usual that the petitioner is seeking an order that his interest be bought out by the respondent'.
[85] Ample Source (No 6) (2011) 285 ALR 488, [330] (Robertson J).
[86] ex parte Shooter [1990] BCLC 384; Catalano (No 2) [2013] FCA 672; Knowles v Bayly (High Court of South Africa, Horn J, 8 November 2008).
[87] ex parte Shooter [1990] BCLC 384, 394; Re Brenfield [1996] 2 BCLC 184, 190-1; Oak Investments [2009] EWHC 176 (Ch) [326]-[330]; Oak Investments (on appeal) [2010] EWCA Civ 23; [2010] 2 BCLC 459, [117], [121]; Catalano (No 2) [2013] FCA 672, [240]-[244] (overturned on different grounds); Munstermann [2017] NSWSC 133, [22]; Lantsbury [2010] EWHC 390.
[89] Fexuto (on appeal) (2001) 37 ACSR 672, [166] (Spigelman CJ).
[90] Fexuto (on appeal) (2001) 37 ACSR 672, [164] (Spigelman CJ). See ex parte Shooter [1990] BCLC 384, 395, where Harman J expressly acquitted Mr Kelly of any bad faith or intent to do harm; Re Brenfield [1996] 2 BCLC 184, 187-9, where Rattee J assessed the credit of the witnesses and referred to dishonest concealment. The majority's conduct in other cases has been described as 'disgraceful, and inexcusable': Oak Investments (on appeal) [2010] 2 BCLC 459, [120].
[91] ex parte Shooter [1990] BCLC 384, 395 (Harman J), 'unfit to exercise control in law'; Lantsbury [2010] EWHC 390, [79] (Moss J), 'any continued involvement of FH in the running of the Company carries a serious risk to the public, since he is plainly not a fit person to hold the office of director in a limited liability company'; Oak Investments (on appeal) [2010] 2 BCLC 459, [120] (Rimer LJ, Rix J and Moses LJ agreeing), 'his conduct was underhanded and unconstitutional, it was damaging to the group and its business ... his deliberate frustration of [an investment offer] was probably the most direct cause of [the] subsequent collapse into administration'; Catalano (No 2) [2013] FCA 672, [243] (Flick J) (overturned on different grounds), 'it was open to question whether the manner in which [Mr Nathan Catalano] was conducting the business would have been in the best interests of [the company] in the end'.
[92] Koh Keng Chew [2016] SGHC 140, [105].
[96] Oak Investments [2009] EWHC 176 (Ch), [249] (Sales J); Oak Investments (on appeal) [2010] EWCA Civ 23; [2010] 2 BCLC 459, [120].
[97] Munstermann [2017] NSWSC 133, [51]-[72].
[98] Re Brenfield [1996] 2 BCLC 184, 189; Oak Investments [2009] EWHC 176 (Ch), [31] (Sales J); Lantsbury [2010] EWHC 390.
[99] Tomanovic [2011] NSWCA 104; (2011) 288 ALR 310, [234] (Campbell JA).
[101] See Oak Investments [2009] EWHC 176 (Ch), [249] (Sales J). Note that his Honour's comments were made in the context of considering whether it was reasonable for Oak Investment Partners to reject a pre-trial offer by Mr Boughtwood to purchase its shares. As a matter of principle, however, the statements could equally apply to the result of a court-ordered buy-out. Catalano (No 2) [2013] FCA 672, [243] (Flick J) (overturned on different grounds), '[t]o so order would be to permit them to benefit from their oppressive conduct and to forever exclude Messrs Kurth and Hepner from the business they had first established'; Ample Source (No 6) (2011) 285 ALR 488, [334] (Robertson J).
[102] See, eg, Re Brenfield [1996] 2 BCLC 184, 190-1; Oak Investments (on appeal) [2010] 2 BCLC 459, [102]; Lantsbury [2010] EWHC 390, [78]; Ample Source (No 6) (2011) 285 ALR 488, [331] (Roberston J). But see Re Jermyn Street [1970] 3 All ER 57, 69 (Pennycuick J); Territory Realty [2009] FCA 292, [321]-[323] (Mansfield J); Patterson v Humfrey [2014] WASC 446; (2014) 291 FLR 246, [203]-[204], where the majority's financial capacity is in question, the majority will be given the first opportunity to buy out the minority, failing which the minority may buy out the majority.
[103] Munstermann [2017] NSWSC 133, [22(iv)]; Lukaszewicz [2019] NSWSC 446; (2019) 3709 ALR 698, [14].
[104] Audited financial statements have been prepared for FY 2021, FY 2022 and FY 2023.
[105] The correlative entry is an adjustment of Mr Rahman's loan account so as to reduce the debt owed by Mr Rahman which having regard to the repayments made by ANIT to Mr Rahman based on the wrongful overstatement of his loan balance, it will result in Mr Rahman owing money to ANIT.
[106] [2023] FCA 280, [19].
[108] [2001] NSWCA 97; (2001) 37 ACSR 672, [89].
[111] Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247; 3 ACLC 74. See also Fexuto Pty Ltd v Boznjak Holdings Pty Ltd (1998) 28 ACSR 688; [1998] NSWSC 413.
[112] Exton v Extons Pty Ltd [2017] VSC 14, [89], referring to International Hospitality Concepts Pty Ltd v National Marketing Concepts Inc [No 2] (1994) 13 ACSR 368, 372; Short v Crawley [No 30] [2007] NSWC 1322, [1236]; Re Holland Australia Pty Ltd [2009] VSC 95, [175].
[113] See Slea Pty Ltd v Connective Services Pty Ltd (No. 9) [2022] VSC 136, [1747].
[115] The Substantiation Schedules record this as a loan by PTE Melbourne. However, because the defendants treat PTE Melbourne as an alter ego of Mr Rahman the Financial Investment Schedule and hence the balance sheet record it as a loan by Mr Rahman to ANIT.
[116] [2010] EWHC 390 (Ch) and Munstermann v Rayward [2017] NSWSC 133.
[117] Re Renex Founder Hold Co Pty Ltd [2024] VSC 244, [644]-[648].
[118] The new entity created by Mr Rahman.
[121] See year the prior year comparative figures which are shown in the Audited Financial Statements for FY 2021. The prior year figures which appear to be inconsistent with the Financial Investment Schedule were not audited.
[122] The detailed calculations are at paragraphs [517]-[541] below.
[123] Termine v Witches in Britches Pty Ltd [2015] VSC 66.
[124] See, inter alia_, Slea_; Strategic Management Australia AFL Pty Ltd & Anor v Precision Sports & Entertainment Group Pty Ltd & Ors (No 3) [2017] VSC 35.
[125] Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256.
[126] There is a discrepancy between the FY 2017 net investment by Mr Shadat between the Substantiation Spreadsheet which shows a net investment of $37,603 and the Financial Investment Schedule which shows a net investment of $51,203. There was no explanation as to the discrepancy and the figure in the Financial Investment Schedule is the figure which informs the balance in the loan account as stated in the financial statements.
[127] The brackets signify money taken out of ANIT which is the same as a loan made by ANIT to the counterparty.
[128] See Paragraph 42[A] of the counterclaim.
[129] The $109,789.95 is the total of the (generally) fortnightly payments of salary and superannuation for Mr Shadat and Ms Afrin and the PAYG tax. The $109,789.95 is the total of Ms Afrin's salary of $39,325.77, Ms Afrin's superannuation of $4,447.52, Mr Shadat's salary of $56,680.11, Mr Shadat's superannuation of $4,568.55 and PAYG tax instalments of $4768.
[130] Comprising Ms Afrin's salary of $25,770, Mr Shadat of $33,936, Ms Afrin's superannuation of $3,032.40, Mr Shadat's superannuation of $4,263.98, PAYG tax instalments on behalf of Ms Afrin of $6,150, PAYG tax instalments paid on behalf of Mr Shadat of $10,166.
[1]29 The figure has been rounded down; the 0.10 is de minimis and can be ignored.
[13]0 A draft of the letter of instructions will be annexed to the orders made this day.
(2010) 30 VR 493
(2009) 26 VR 526
(2009) 238 CLR 304
(2011) 288 ALR 310
(2018) 366 ALR 557
(2022) 403 ALR 111
(1985) 180 CLR 459
(1994) 35 NSWLR 1
(2017) 53 VR 520
(2004) 207 ALR 136
(2004) 63 NSWLR 167
(1990) 3 WAR 166
(1990) 20 NSWLR 588
(2014) 291 FLR 246
(2011) 285 ALR 488
(2019) 3709 ALR 698