Plaintiffs v Defendants [2024] VSC 651 | Case summary

Plaintiffs v Defendants [2024] VSC 651 | Case summary | Zoe

[15]

(a) In the period leading to late November 2017, MCH was threatening legal action against Kee and Ari, former employees (and then shareholders) of that company. Kee and Ari feared that MCH would seek and obtain an injunction shutting down the new business they had established and were then operating (Kegland Business).

(b) In early December 2017, Kee and Ari registered Kegland Hardware Pty Ltd (Kegland Hardware) to own and operate this business. The share register shows that Kee and Ari were connected with this company (tellingly, it also shows that Hong never was). Hence Kee and Ari decided to register a new company. They wanted to instal their friend and business associate, Sam Jum Lie, as a stand‑in director; and they wanted Sam to hold shares in the company on their behalf. In this way, they hoped to disguise their respective interests in the proposed company. But Sam lived in Jakarta Accordingly, he could not act as the sole director of the proposed company. This is something that Kee only learnt from his accountant on 4 December 2017. But Kee, Ari and Sam did reach an agreement under which Sam would hold 50% of the shares in the new company on trust for Kee and Ari.

(c) Against this background, with Kee's approval, Ari approached Hong on 6 December 2017.

(d) Prior to 6 December 2017, Hong was not involved in the Kegland business. Hong did not come up with the idea to form this business; he did not invest in this business; he did not own shares in Kegland Hardware Pty Ltd; and he did not help to run this business. Indeed, as he revealed in cross‑examination, Hong was unaware that Kee and Ari had registered Kegland Hardware. He was also unaware that, prior to the registration of Kegland Distribution Pty Ltd ... , this company was the owner and operator of the Kegland business.

(e) On 6 December 2017, Ari (with Kee's approval, albeit he did not know Hong) asked Hong to hold 50% of the shares in the proposed company for him and Kee until the disputes involving Maggie and MCH had ended. Ari did this because he and Kee wanted to disguise their respective interests in the proposed company (and, therefore, the Kegland business).

(f) Subsequently, Kee and Ari implemented an elaborate but naïve scheme to cover up their respective interests in the new company, Kegland Distribution. This scheme involved deception and dishonesty, some of which was egregious. Hong was an active participant in this scheme and, like Kee and Ari, he engaged in seriously dishonest conduct designed to mislead this Court, officers of this Court and MCH.

(g) In 2019 and 2020, on different occasions, Hong admitted the trust. These admissions occurred before the present dispute had arisen.

[30]

As those experienced in commercial litigation in general, and in securities class actions in particular, would readily appreciate, what matters most in the determination of the issues in cases such as this is the analysis of such contemporaneous notes and documents as may exist and the probabilities that can be derived from these documents and any other objective facts. Take the example of the dealings between GetSwift and the customers: there is likely to be a documentary record both within the business records of GetSwift and their contractual counterparty which records dealings between them which go beyond the agreement itself. Additionally, experience suggests that it is also likely that there will be informal email exchanges, both between GetSwift and the customers, and within the relevant organisations.
As Leggatt J said in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) at [15]‑[23], there are a number of difficulties with oral evidence based on recollection of events given the unreliability of human memory. Moreover, considerable inference with memory is also introduced in civil litigation by the procedure of preparing for trial. As his Lordship noted, a witness is asked to make a statement, often when considerable time has already elapsed since the relevant events. The statement is usually drafted by a solicitor who is inevitably conscious of the significance for the case of what the witness does nor does not say. The statement is often made after the memory of the witness has been "refreshed" by reading documents. The documents considered can often include argumentative material as well as documents that the witness did not see at the time and which came into existence after he events which the witness is being asked to recall. It may go through several iterations before it is finished. As Lord Buckmaster famously said, the truth "may sometimes leak out from an affidavit, like water from the bottom of a well". This may be overly cynical, but the surest guide for deciding the case will be as identified by Leggatt J at [22]:

[35]

(a) An obvious difficulty with allegations and oral evidence based on recollection of events which occurred several years ago is human memory.

(b) Human memory is fallible. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate.

(c) Underlying both these errors is a faulty model of memory as a mental record which is fixed at the time of experience of an event and then fades (more or less slowly) over time. External information can intrude into a witness's memory, as can his or her own thoughts and beliefs, and both can cause dramatic changes in recollection. Events can come to be recalled as memories which did not happen at all or which happened to someone else.

(d) Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.

(e) The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings.

(f) Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been "refreshed" by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re‑read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness's memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events.

(g) There is no clear distinction between recollection and reconstruction - all remembering of distant events involves reconstructive processes. Such processes are largely unconscious and that the strength, vividness and apparent authenticity of memories is not a reliable measure of their truth.

[37]

In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross‑examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.

Proposition 4: In light of Proposition 3, case law emphasises the importance of documentary evidence in assessing the credibility and reliability of witnesses. Courts should look to such contemporary evidence to see the extent to which it supports or undermines what a witness says. Such evidence often provides a valuable guide to the truth.

In Onassis v Vergottis [1968] 2 Lloyd's Rep 403 at 431, having reviewed the various reasons that a witness's oral testimony might not be credible, Lord Pearce stated as follows:

... all these problems compendiously are entailed when a judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.

Similarly, in Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 Lloyd's Rep 1, 57 Robert Goff LJ made this observation:

It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence ... reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.

In Brookfield v Yevad [2004] FCA 1164 at [416], in relation to the importance of documents in terms of testing credibility, Lander J said relevantly as follows:

Often, especially in commercial causes, the best evidence of the events the subject of the inquiry in the trial is contained in the contemporaneous documents. Usually, documents are created in circumstances where parties do not expect the documents to surface in a trial. They often, therefore, contain the true account of the contemporaneous event.

In Wetton (as Liquidator of Mumtaz Properties) v Ahmed & Ors [2011] EWCA Civ. 610, Lady Justice Arden made an important point concerning the absence of contemporary documents. The judge said relevantly as follows (emphasis added):

[11] By the end of the judgment, it is clear that what has impressed the judge most in his task of fact‑finding was the absence, rather than the presence, of contemporary documentation or other independent oral evidence to confirm the oral evidence of the respondents to the proceedings.

[12] There are many situations in which the court is asked to assess the credibility of witnesses from their oral evidence, that is to say, to weigh up their evidence to see whether it is reliable. Witness choice is an essential part of the function of a trial judge and he or she has to decide whose evidence, and how much evidence, to accept. This task is not to be carried out merely by reference to the impression that a witness made giving evidence in the witness box. It is not solely a matter of body language or the tone of voice or other factors that might generally be called the 'demeanour' of a witness. The judge should consider what other independent evidence would be available to support the witness. Such evidence would generally be documentary but it could be other oral evidence ...

...

[14] In my judgment, contemporaneous written documentation is of the very greatest importance in assessing credibility. Moreover, it can be significant not only where it is present and the oral evidence can then be checked against it. It can also be significant if written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and that the party adducing oral evidence is responsible for its non‑production, then the documentation may be conspicuous by its absence and the judge may be able to draw inferences from its absence.

Proposition 5: In the fact‑finding process, courts prefer evidence which is inherently probable in the circumstances. As to incontrovertible facts and probabilities, as a matter of common sense, the inherent improbability of an event having occurred will be a relevant factor in deciding whether it did in fact occur.[19] Proof of an improbable event may require more cogent evidence than might otherwise be required.[20]

Proposition 6: In the fact‑finding process, in addition to the significance of contemporaneous documents, courts prefer evidence which is consistent with (1) facts admitted by the parties or (2) matters of common knowledge or experience.

Proposition 7: Courts also prefer evidence that a witness gives against his or her interest.[21]

Proposition 8: Evidence of independent witnesses - that is, persons who have no reason to be partisan - may be decisive in resolving the conflicting evidence of interested parties. In many cases, it is necessary for the court to assess the credibility and reliability of such witnesses.

Proposition 9: There is an important difference between credibility and reliability. Credibility concerns honesty. However, reliability is different from credibility. A witness may be honest, but she may have a poor memory, or she may be mistaken. By way of example only, the Kegland parties refer to Ari's inability to recall the day of the week on which the 16 December 2017 meeting occurred ([T 719]). This inability does not support an adverse credibility finding against Ari. In any event, the day of the week is unimportant, and, even if it were important, it could be discerned with reasonable accuracy from a careful analysis of contemporaneous emails and other documents (see Proposition 4).

Proposition 10: In terms of assessing credibility and reliability, an important factor is the inherent consistency of the account. If the evidence of the witness contains internal contradictions, it cannot be accepted as a whole. The question may be which part to reject.[22]

Proposition 11: Further to Proposition 1, there are risks in making global findings about the credibility of any particular witness. First, if it is found that a witness has lied about one thing, that finding does not mean that other parts of his or her evidence are untruthful.[23] Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern.[24] Second, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful.

[104]

(a) As to (1), the relevant jurisdiction of this Court arises under section 85 of the Constitution Act 1975 (Vic) read in conjunction with section 36 of the Supreme Court Act 1986 (Vic). Declaratory relief is discretionary in nature. The discretion is to be exercised according to the facts and circumstances of the individual case, and the considerations that may be relevant to the exercise of the discretion are so numerous that it is not possible to enumerate them.[86]

(b) As to (2), the proposed relief is facultative only - it is designed to avoid further litigation, including a further action to rectify the register of members under section 175 of the Corporations Act. It is not "consequential relief" in the relevant sense. In any event, the Kegland parties no longer seek this relief.

(c) Lastly, as to (3) and (4), such relief is not "consequential relief" in the relevant sense. Further, as to (4), the Kegland parties seek no consequential or other relief.

(d) In these circumstances, by their counterclaim, the Kegland parties now seek purely declaratory relief, in which case the clean hands doctrine cannot apply (c.f. what is said in paragraph 348 of the plaintiffs' submissions dated 26 July 2024).

(e) Contrary to what is said in paragraph 347(i) of the plaintiffs' submissions dated 26 July 2024 ("... without it [a transfer order] the declaration does nothing and goes nowhere"), the declaration sought would quell completely and finally the controversy in respect of the threshold issue. The practical consequences are explained in the next subparagraph.

(f) If the Court makes the proposed declaration, all that will occur is that, as the declared beneficial owners of the shares, Kee and Ari will call a meeting of the company and pass a resolution to amend the share register to reflect the true position (and, presumably the directorship, assuming Hong has not already resigned), and thereafter write to ASIC to ask them to adjust their records to reflect the true position. This is simply an indoor management issue followed by ASIC being informed thereof.

[110]

In a proceeding in which purely declaratory relief is sought, as distinct from a proceeding in which a declaration is sought, for example, in aid of the grant of an injunction, which is of course itself a remedy in equity, a defence of unclean hands is no defence. This is so because the grant of a declaration is not the exercise of hands is no defence to any merely statutory remedy".

A mere declaration has legal effect, but otherwise does nothing: Ambridge at [66]. The principle that clean hands does not apply to purely declaratory relief does not apply where ancillary relief involving coercive orders of the Court are also sought: Ambridge at [65]. Vickery J then said [75], relying on Meyers v. Casey[92] at 93‑94:

On the other hand where a declaration is made which is ancillary to or part of equitable relief, the usual equitable defences may apply. Although the categories are not closed, two examples of such relief are: the grant of an injunction, where a declaration may be made in aid of the injunction; and secondly where a declaration is made as a means of imposing a constructive trust as an equitable remedy in the appropriate case.

Thus, the exception to clean hands also does not apply where the remedy of a constructive trust is sought. Vickery J said on [77]:

Accordingly, the imposition of a constructive trust by declaration being an equitable remedy should reflect the principles of equity, including where warranted, application of the classic equitable defences. The remedy of a declaration of a constructive trust may be lost by reason of the operation of such doctrines of equity, including unclean hands.

Here:

(i) relief beyond a mere declaration is sought, namely, an order to transfer the shares. That is necessary relief: without it the declaration does nothing and goes nowhere. The court would not make a declaration, without more, as it will not do so if that involves an academic question.

(ii) a resulting trust is claimed if the alleged trust not "completely constituted". The intervention of equity is needed to confirm, establish or extend that trust. This is discussed further below.

Since an order for the transfer of the shares is sought, so as to enforce the alleged trust, the doctrine of clean hands applies. Since the Defendants did not have clean hands the relief they seek should be denied.

[116]

The text of s 232 sets out broadly expressed conditions which must be satisfied before the power to make orders under s 233 can be enlivened. As a matter of language the "unfairly prejudicial" conduct of a company's affairs which may enliven the powers under s 233 would appear to subsume oppressive conduct. The claim by Backoffice relied upon the three heads of oppressive, unfairly prejudicial and unfairly discriminatory conduct. The primary judge's findings adverse to Mr Campbell on this claim were all expressed in terms of oppressive conduct.[95]
For the reasons which appear below, I am of the opinion that special leave to appeal should be refused on the cross‑appeal. It has no prospect of success. Before turning to the reasons for that conclusion, it is helpful to refer briefly to the legislative ancestry of ss 232 and 233.
The history giving rise to ss 232 and 233 commenced with the Cohen Committee which, in 1945, recommended amendments to the Companies Act 1929 (UK). The Committee proposed powers for the court so that, if satisfied that a minority of shareholders was being oppressed and that a winding up order would not do justice to them, it could make orders including an order for the purchase by the majority of the shares of the minority.[96] The Committee contemplated a very broad power.[97]
The Cohen Committee's recommendation was reflected in s 210 of the Companies Act 1948 (UK). Similar provisions were adopted in a number of Australian States.[98] Section 86 of the Uniform Companies Act 1961 was based on s 210, albeit the wording was not identical.
Uncertainty developed about whether "oppressive conduct" under s 210 required proof of a course of conduct and of illegality and invasion of rights.[99] In its report on the Companies Act in 1962, the Jenkins Committee expressed the opinion that the intention underlying s 210 was to enable orders to be made when the affairs of the company were being conducted in a manner unfairly prejudicial to the interests of some members.[100]
The Jenkins Committee recommended amendment and its recommendation was given effect by the enactment of s 75 of the Companies Act 1980 (UK). Australia followed suit. In 1983, s 320 of the Companies Codes, established under the Cooperative Scheme set up in 1981, was amended to expand the powers of the court in cases of oppression to conduct "unfairly prejudicial to, or unfairly discriminatory against" a shareholder or shareholders. Section 320 later became s 260, then s 246AA of the Corporations Law under the 1989 Cooperative Scheme.[101]
The Corporations Law provisions were split and renumbered as ss 232‑235 by the Corporate Law Economic Reform Program Act 1999 (Cth). In the Explanatory Memorandum to that Act it was said that the oppression remedy was to be rewritten without making any significant change. One of the three "minor" changes was to make it clear that the court would be able to make orders even if the act, omission or conduct complained of had yet to occur or had ceased.[102]

[121]

Many orders are instanced in s 233, and the court's power extends to making "any order under this section that it considers appropriate in relation to the company". The order presently in question is that in s 233(1)(d). Other than by the preconditions in s 232 no criteria are stated for the exercise of the discretion inherent in "may" in s 232. The discretion must be exercised with regard to the statutory purpose to be found in the provisions.
The predecessors to ss 232 and 233 were introduced in the United Kingdom as s 210 of the Companies Act 1948 (UK), as a means of giving an aggrieved shareholder a remedy when winding‑up on the just and equitable ground would be too harsh. They enabled orders by which the oppression came to an end with the shareholder remaining a shareholder (as in Re H R Harmer Ltd [1958] 3 All ER 689; (1959) 1 WLR 62) or came to an end through the shareholder being bought out as a shareholder (as in Scottish Cooperative Wholesale Society Ltd v Meyer [1959] AC 324; [1958] 3 All ER 66 (Scottish Cooperative)). That legislation was adopted in Australia, and has since been significantly amended to the form earlier set out. There are more widely available statutory remedies, but historically the point of granting a remedy is to bring an end to the oppression - as Powell J said in Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588 at 620; 2 ACSR 553 at 566, "if it be possible, to bring the 'oppression' to an end without recourse to a cure the effects of which would, in many cases, be worse than the disease".
Apart from history, under the current provisions the statutory purpose is gained from the opening words in s 232, that the court "may make an order under s 233 if ...". The "if" does not simply indicate the precondition to making an order, but is an indicator of why an order should be made. At its widest, the order is to provide a remedy for the oppression, and in relation to s 233(1)(d) it is to do so through the shareholder being bought out. Whatever the position when an order other than an order for the purchase of shares is claimed (as, for example, an order that damages be paid to the company: Re Chime Corporation Ltd [2004] HKCFA 73; (2004) 7 HKCFAR 546; Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26; [2007] 4 All ER 164), the exercise of the discretion should be with a view to ending the oppression. A buy‑out order is not to compensate for the shareholder's loss (although it may have that effect), but to separate the oppressor and the oppressed, and so albeit unusually, can be an order that the oppressor sell to the oppressed: Re a Company (No 00789 of 1987); ex parte Shooter (1990) BCLC 384; Re Brenfield Squash Racquets Club Ltd (1996) 2 BCLC 184.
Thus there will ordinarily be no occasion for making a buy‑out order under s 233(1)(d) if the oppression has otherwise been brought to an end, at least provided that the bringing to an end was not itself a consequence of the conduct complained of, such as by oppression "carried to the extent of destruction of the business of the company": Scottish Cooperative at AC 364; All ER 86 per Lord Keith.

[124]

(a) The essential criterion of oppressive conduct for the purpose of s 232(e) is that of commercial unfairness.[113]

(b) Unfairness is assessed by reference to whether 'objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair' and can be established by wrongful exclusion from participation in a company's management or by conduct in breach of a shareholders or services agreement even if the person undertaking that conduct thinks he or she is acting properly.[114]

(c) Whether the treatment of one member was fair also needs to be assessed against the background of the fair treatment of the whole body of members. Fairness cannot be considered in a vacuum, and in relation to a family company can only be considered in the light of the history of the company and the family and the purpose for which the company was formed.

(d) The question is whether there has been unfairness. The test is objective, and it is viewed from the perspective of the commercial bystander. As the test is objective, whether or not the conduct is oppressive will not depend upon the motives for what was done. It is the effect of the conduct that is material.[115]

(e) The task is to be undertaken in the context of the particular relationship in issue,[116] and in the context of the facts and circumstances existing at the time of the oppression.[117]

(f) The oppression need not be of a member in its capacity as a member, and may include conduct that impacts upon a member in his capacity as a director.[118]

(g) The doctrine is informed by equitable considerations.[119] However, there is no independent or overriding requirement that it should be just and equitable to grant relief or that the petitioner should come to the court with clean hands.[120]

(h) It is unnecessary for an applicant to prove that the respondent knew or believed that the impugned conduct was unfair.[121] A defendant may act oppressively even though its motives are honest.[122]

(i) The conduct of a company's affairs may be oppressive even though the conduct is otherwise lawful, and the person engaging in the conduct believes he or she is acting lawfully.[123] An exercise of a discretionary power under a company's constitution in a particular way may enliven s 232.[124]

(j) A single instance of oppression is sufficient to constitute a basis for relief.[125] Separate instances of conduct may, cumulatively, constitute oppression.[126]

(k) The oppression need not exist at the time of the application or trial.[127]

[156]

(a) that little weight should be placed on the witness statements of Kee, Ari and Sam in circumstances where those statement were drafted by lawyers. In this respect, they rely on the fact that, as discussed below, Mr Amos' witness statement failed to address events in late 2020 because the lawyers, ignorant of Kee, Ari and Sam's lies in relation to the Share Option Agreement, had not considered the period to be important as a basis to argue that the portrayal of events in the witness statements, in general, is not fair or accurate;[177]

(b) that a striking feature of the case is the admission of Kee and Ari that they had deliberately misled the Court in the proceeding with MCH by maintaining the position that they had no stake in Kegland (which they now claim to have) and that, in contrast Hong maintains he told the truth in that proceeding. Further, they say it is telling that in explaining their lies in the MCH proceeding they lied to this Court insofar as their evidence regarding the Share Option Agreement. Further, in maintaining the lies in the proceeding with MCH they filed false pleadings and failed to provide proper discovery, for example by failing to discover the Partnership Agreement or relevant WeChat messages;[178]

(c) that by maintaining the Share Option Agreement had been signed in 2018, the Defendants filed false pleadings and written evidence in this proceeding, that they only admitted to their lies in the face of overwhelming documentary evidence in circumstances where they resisted amendments to pleadings which was egregious conduct, and doubled down on the lie by falsely instructing their solicitors in relation to the metadata of the Share Option Agreement document. In this regard, they say it should be inferred that the Defendants would have persisted with their lie had the balance of the documentary evidence not been against them. Further, like in the proceeding with the MCH, the Plaintiffs say that the Defendants knowingly failed to provide proper discovery in this proceeding, including, by way of example, failing to discover emails from late 2020 between Kee and Elysium Accounting regarding a draft share sale agreement such that the emails were produced under subpoena from Elysium and the late discovery of skype messages between Kee, Ari and Sam in late 2020 regarding the Share Option Agreement;[179]

(d) that the Defendants' explanation for the absence of documents supporting their case is implausible;[180] and

(e) that the Defendants, in this proceeding and the proceeding with MCH, committed serious and extensive breaches of a number of their overarching obligations under the Civil Procedure Act 2010.[181]

[185]

(a) on 15 November 2017, Kee sent an email to Oliver Permezal (Oliver) (who worked at Keg King[218]) expressing an interest in hiring Oliver, explaining that there was stock being prepared in China ahead of the launch of the company, and stating that Oliver would initially work with the web‑designer to develop the website and that Oliver could log his hours from home;[219]

(b) later that afternoon, Oliver contacted Kee on Skype. In those messages, Oliver agreed to work with Kee and Ari, although he requested a full‑time contract once the warehouse had been set up, and mentioned that Ari had called him that morning to tell him that he had left MCH 'and that Kegland was going ahead'. Kee replied that they were happy to employ Oliver through a full‑time contract and noted that, although the lease was still being negotiated, he anticipated it would commence from 1 December 2017. The remainder of the messages concerned the Kegland website and Oliver's timesheet;[220]

(c) on 22 November 2017, Elysium sent a letter of engagement addressed to Kegland Hardware Pty Ltd, thanking Kee and Ari for asking Elysium to act as their accountant and to inter alia provide tax advice for 'Kegland Pty Ltd'. That letter requested that Kee and Ari sign and return the letter of engagement;[221]

(d) on 21 November 2017, Kee sent an email to the designer who had developed the Kegland logo[222] confirming they would continue to use that logo and providing further detail about the potential to sub‑let part of the warehouse they were anticipating leasing;[223] and

(e) on 23 November 2017, Kee sent Ari an email asking him to send through 'a complete list of all the products that we are ordering between now and Jan/Feb' so that Oliver could focus on ensuring those products were on the website. Ari replied that he was waiting on the list from China.[224] Separately on 23 November 2017, an email chain shows that Kee and Oliver discussed the progress of the website design and how best to maintain a record of their product codes, including how to access the backend software through the www.kegland.com.au domain.[225]

[198]

Hong: How about it? Has the shareholder issue been settled? Is there still a shortage of shareholders? I'm very serious about this.

Ari: Liu, I just saw your message. Here's the situation: because the issue regarding the [inaudible] of the company hasn't been resolved yet, we haven't addressed this matter. We can discuss is once we've sorted out this issue.

Hong: If you need legal advice, let me know. I have a really reliable guy here. He used to be a lawyer at Norton Rose, and now he's been poached by the boss of the biggest project in the city to be an assistant to the General Manager.

Hong: This person is very diligent in his work. I think he's very reliable. If you're okay with it, I can create a group. Then you can get to know each other and chat between you two, and see how he can help you with advice, and such.

Hong: Basically, all of my reliable lawyers were introduced by him

Ari: [inaudible] outside. It is so noisy.

Hong: Was it not recorded? Or what?

Ari: That's not it, Liu. Right now, my company has some legal disputes so I can't establish this company now, so I'm not able to finalise the shares matter ASAP. I need to wait until the legal issues are resolved and everything is clear before we can consider the next step. That's what I meant.

Hong: No, I did not say that. I was talking about your legal issue. If you need legal counsel, I can ask a friend to help you and give you advice, because I think this young man is very good. He used to be a lawyer, and now he has gone to work as an assistant for one of the largest Chinese developers in Melbourne. All my reliable lawyers were recommended by him.

Ari: What industry is he in? I've also consulted several lawyers here. Oh man, once lawsuit is involved, it really becomes quite troublesome.

Hong: To file a lawsuit, you need a lawyer with experience in that field. He specialises in real estate; so he's not part of this circle. However, he knows indirectly which type of lawsuit to file for certain fields, or which lawyer is better for a particular case, so he could help with recommendations.

Ari: Currently, the first lawyer I found was for the shareholder dispute, and later, I might need to find a commercial law lawyer, a barrister specializing in commercial law right now.

Ari: And my partner, he's having another friend look for a tax law lawyer for his these couple of days.[242]

[218]

You asked him to be the shareholder and he agreed to be the shareholder?‑‑‑ I asked him to hold the, be a shareholder yeah, holding share for us. He agreed, he happy to, to do for us.

What he agreed to do was to be a shareholder and if the company did well, you'd talk later about what might happen about further people becoming involved in the company? ‑‑‑ We, I didn't specifically as early date say that. I just want to he can hold the share for us and be director to set up the company. I didn't specifically mention what the future, how many shares I give you or you can involve. I never specifically say that to Hong.

You didn't know at this time whether the company would be successful or not, did you?‑‑‑ At that time, I don't know, Is, everything uncertain. Too many pressures from different angles and ah, we, we just want to set it up and also we thought we might be able to um, solve the dispute, some type of agreement which is solve it. Then in short term, we can finish the issue. I don't you know, need Hong later on. I thought he's couple months, can be finished, finish the issues.

You needed him and Sam to be - or his company and Sam to be the shareholders so that Maggie and MCH wouldn't find out that you were involved?‑‑‑That, that's correct because we was under injunction ah, pressure that we so scared, we says, we saw that as the only way we can do, yes.

So I suggest to you, what you said to him was you be the shareholder and maybe in the future we can talk about what things might happen differently; words to that effect?‑‑‑ No, I never, I never, I never offer anything to him about share as at early date.

You never said to him that he just needed to sit in as a director and hold the shares until the issues with Maggie and MCH were over, did you?‑‑‑ I did them ah, ah I never say I gonna give share to him because he said he interested but I didn't say we are gonna give any shares but I knew him to present to help us to set up a new company.

You needed his help so you'd shield all this from Maggie and MCH?‑‑‑ I needed his help because we needed Sam's help but Sam is not ah, resident. He, he not only ah, he can't able to do. That's why we needed one person being um, Australian citizen, then can set up company. That is only the reason I ask him to help.

You never sent a WeChat message to Hong to the effect that he just needed to sit in as a director, did you?‑‑‑ I can't remember, maybe I didn't say in the WeChat but over the phone clearly, I told him because I told him he help and also any costs, Kee and me gonna cover. He will not put any money out of from his pocket for his help.

You never asked him to sign or provide - withdraw that. You never said to him that you would provide an indemnity to protect him, did you?‑‑‑ I did. I did told ah, Hong we can sign agreement make sure you be fully protected. You will not cover anything, money holding share because we did this to Sam. We already signed this indemnity agreement with Sam. I, Kee suggest we have to do this with Hong as well. I say it to Hong but Hong - that's the time to be honest, I think Hong is really happy to help us and he said I don't need sign, sign anything. No problems. I didn't force him because, for , for the Chinese culture, if I said no, no, no you need to sign the holding share for us, sounds like we don't trust him. I, I, I can't keeping ask him to sign it. I suggest but he refused.

You didn't put it in writing because you thought it was - you didn't put it in writing that he was just going to be sitting in as a shareholder did you? ‑‑‑ I did talk to him over the phone. I said we can write down the agreement. We can write and sign and he refused. He said no that's why we didn't, we didn't write in paper.[263]

[221]

... On the morning of 6 December, after 8:42 am, Ari telephoned you. Correct? ‑‑‑I can't recall.

I'm going to suggest that he telephoned you and he asked you if he could help with the situation regarding KegLand Distributions - if you could help with the situation regarding KegLand Distributions?‑‑‑ I can't recall.

I want to make myself clear. I may not have made myself clear for which I apologise. Ari called you - that is Hong - and asked if you - Hong - could assist him with the situation regarding KegLand Distributions?‑‑‑ I can't recall. Does that answer your question?

Next question. Ari told you in that conversation - I'm just putting this to you so you can agree or disagree or you can say whether you recall or not. In that conversation, Ari said that you were just needed to sit in as a director and hold the shares until the issues with Maggie and MCH were over. What do you say to that?‑‑‑ Firstly, I do not recall the contents of our telephone conversations because we had many telephone conversations. Secondly, I clearly remembered that this was not discussed.

I want to suggest this to you next. Ari reassured you that you did not have to put in any money into the business or the company or both?‑‑‑ He didn't say that.

I want to suggest to you as follows. Ari suggested that an agreement could be signed outlining the arrangement. Agree or disagree?‑‑‑ Um, to sign what kind of agreement?

An agreement which outlined the arrangement for you to sit in as director and hold the shares until the issues with Maggie and MCH were over?‑‑‑No.

...

I want to put some questions to you again because it's not entirely clear to me that we were all focused upon the phone call I was suggesting to you occurred, which occurred on 6 December 2017, understand?‑‑‑ I understand.

I'm going to put five or six propositions to you and invite you to agree, disagree or say something else if you think it appropriate but I want to move through this fairly quickly if that's all right with you.

HIS HONOUR: Yes, no, or don't remember.

MR HEATH: Yes, no or don't remember. Thank you, Your Honour?‑‑‑ Sure.

Ari called you on 6 December 2017 between 8:42 and 1pm. What do you say?‑‑‑ Can't recall.

Thank you. In that telephone conversation I suggest to you, Ari told you that he needed your help?‑‑‑ Can't recall.

In that telephone conversation I suggest to you Ari told you that you just needed to sit in as a director of a new company they were proposing to incorporate? ‑‑‑ I can't recall.

In that telephone conversation I suggest to you Ari told you that you would hold the shares in that company until the issues with Maggie and MCH were over, agree, disagree or can't recall?‑‑‑ Firstly, I do not agree. Secondly, I do not remember those conversations during this period.

Yes, no or don't recall? ‑‑‑ I don't agree.

Thank you. In that telephone conversation I suggest to you Ari proposed that you sign an agreement outlining the arrangement which I suggested just now. Agree, disagree, or don't recall?‑‑‑ I do not agree.

Thank you. Ari in that telephone conversation, I suggest to you, Ari also suggested the proposed agreement could contain an indemnity to protect you, agree, disagree, or don't recall? ‑‑‑ I can't recall.

In that telephone conversation I suggest to you, you responded to that suggestion by saying words to this effect, if you don't want me I do not need to see. Agree, disagree, or can't recall? ‑‑‑ I can't recall. However, can I ask, sign what?[265]

[223]

(a) at 6:46pm on 5 December, Hong sent Ari a WeChat text message with a link to a warehouse on a commercial real estate website and Ari replied at 11:10pm that night asking about the warehouse;[266]

(b) between 7:01am and 8:42am on 6 December, Hong sent five WeChat audio messages to Ari where he inter alia explained that the warehouse was for rent, explained he was 'adding someone' for Ari who did injection moulding in Melbourne and had factories elsewhere in Australia, explained connections he had in China with a person who ran a refrigerator factory, suggested they look into running a 'brewery class', and told Ari he should 'go check out Glen Waverly as soon as possible. If that place is suitable then we can get started right away';[267]

(c) sometime between 8:42am and 8:56am on 6 December,[268] Hong sent Ari a WeChat audio message stating: 'This is also good. This incident offers an opportunity to carefully review your business model, identify what works well and what doesn't, explore new directions, and also undergo a transformation';[269]

(d) sometime between 8:42am and 8:56am on 6 December, Ari then sent Hong two audio messages saying 'Sam wants the 4 us to meet. I think it will be in the next couple of days. We can meet up and get acquainted, and then we can confirm it and start working on it' and 'Liu, from now on, you need to keep this relatively confidential. Because of that partner of mine, the woman, she's also Chinese, and she and the ... The circle of Chinese people is not big. So, we can't let her know. Because really, she and I will have to disappear from this industry for a while, so we really need to keep it a secret';[270]

(e) sometime between 8:42am and 8:56am on 6 December, Hong replied to Ari by audio message stating: 'Okay, no problem. I'll keep it strictly confidential. Just that you need to be mindful of some details. For example, the contact information, emails, and phone numbers for the new company, you need to provide them to me, or register a new one under my name, definitely not yours. Otherwise, if we get into a lawsuit, it'll be fatal';[271]

(f) at 8:56am on 6 December, Ari replied by audio message stating: 'Do it as soon as possible. If not tonight, we can meet up tomorrow and finalize it. We need to register the company first. Yes, that's right. So that's why I want to do it as soon as possible. If not tonight, we can meet up tomorrow and finalize it. We need to register the company first';[272]

(g) at 1:00pm on 6 December, Ari sent Hong a text message asking for 'Name, DOB, born place, address. Tax file number' and at 4:37pm that day Hong replied with those details;[273]

(h) at 5:20pm on 6 December, Kee emailed Mr Amos stating 'we need to setup a new company called KegLand Software PTY LTD' and that '[w]e have two new directors for this company' naming Hong as the first director with 50% shareholding, and Sam as the second director with 50% shareholding;[274]

(i) at 7:22pm on 6 December, Hong sent a further text message to the chat with Ari supplying LL UP's details;[275]

(j) at 9:51pm on 6 December, Ari emailed Mr Amos, copying in Kee, to give an update on the new company, stating that Hong preferred to use his family trust to hold the shares and providing LL UP's details;[276]

(k) at 5:03pm on 7 December, Ms Shauna Simcocks at Elysium emailed Kee attaching a document she described as 'the company order form re: KegLand Software Pty Ltd' and asking him to check all the information before they submitted the application;[277]

(l) between 5:30pm and 5:43pm on 7 December, Ari sent Leon three WeChat text messages asking 'Are you free Sunday evening? I'm inviting you and Liu to have dinner together', saying the dinner could be near Doncaster, and finally saying 'Secret Kitchen, 7:00 Sunday. I'll make the reservation';[278]

(m) between 8:16am and 8:47am on 8 December, Ari sent Hong two WeChat text messages and one audio message, those messages attached a PDF titled 'KegLand Software Pty Ltd', explained it was a document for registering the company, asked Hong to check the information was correct, and told him that he had made an appointment with Leon at Secret Kitchen on Sunday evening;[279]

(n) at 12:28pm on 8 December, Kee replied to Ms Simcocks at Elysium saying they wanted to make one change, which was to change the name of the company from Kegland Software to KegLand Distribution, ending that email saying 'If you can go ahead with everything else that would be great';[280] and

(o) on 8 December, Hong signed the Application to register Kegland Distribution Pty Ltd as a company,[281] Hong and Sam signed consents to act as Directors,[282] on behalf of LL UP, Hong signed the consent to become a member,[283] Sam and Hong signed the resolution of the directors,[284] and Sam and Hong signed Kegland's constitution.[285]

[297]

194 I also reject the Plaintiffs' submission that the fact the Partnership Agreement does not refer to any share dilution scheme, or to capital gains tax, supports a finding that these matters were not discussed at the 16 December meeting. In this regard, I accept Kee's evidence that the Partnership Agreement was, to paraphrase, drafted 'for simplicity' - I understand this to mean it was drafted to provide the overall gist of the of the agreement - and in enforcing the agreement it 'didn't matter how we got there'.[397] Albeit given in relation to a different document, I consider Sam's evidence in cross‑examination to the effect that, although he could not recall the details of the share sale or share issue, he 'trusted Kee and Ari to organise this. I just don't have the time to go and study this how share detail and share you know, like transfer or (indistinct) how they're going to organise this. I just trust them they're going to, you know, do the right by me, yeah' broadly supports this view of how Kee and Ari operated.[398] I consider that the picture that emerges from the evidence as a whole is that Kee, Ari and Sam were not sophisticated commercial operators. Indeed, this is apparent from the very premise of the MCH ruse. Thus, to the extent the Plaintiffs seek factual findings on technicalities or because of the absence of specific details in documents you would otherwise expect to see from established commercial entities or business people, those submissions are misplaced. Moreover, in accordance with my previous comments,[399] my opinion in this respect is not affected by the subsequent email 'just recapping' the meeting, which only refers to relatively minor operational items.[400] Such limited content in communications of this kind was not unusual and was perfectly consistent with the ongoing concern of Kee and Ari to avoid placing anything in communications which might alert Maggie and MCH to the true position with Kegland and their involvement in the business. Neither, in this context, is the fact of this meeting and its attendees, in any way inconsistent with the existence of the Hong Trust.[401]

[320]

Message 1 - 8:32am

Ari: Because once the auction is over, they're definitely going to have to move out, right? But the final settlement, as per the contract, is something that happens after the auction, right? For example, in the worst‑case scenario, of our cash, our sales money, gets frozen by the bank, if that happens, can we just cancel the purchase and negotiate with the second buyer? Our main goal is to get them to move out, right? That's our primary objective, so these are all factor we need to consider, right? We all need to consider these options, that's the safest way to go about it.

Message 2 - 9:03am

Hong: And another thing is, who's going to pay for this auction, I think what Kee said makes sense, he's got a point. Because if we really want to continue working together and move forward step by step, we should sit down and have a proper discussion about this matter, I have no problem with that. It's better to be clear, and I support that. Another thing is what? Last time when Sam was here, I wanted to ask as well, but I told Sam he didn't have to answer me right away. If all these matters are settled, is Sam going to continue to invest money and become a part of our team, or does he prefer to exist as a consultation providing technical assistance? I want to clarify this aspect of the operation first.

Message 3 - 9:03am

Hong: Another point I want to clarify on the operational level is this: because didn't I promise that after all these matters are settled, we'll redistribute the shares? At that time, we'll invest with cash, right? You can decide how many shares you want to give up. My principle is that I don't want to be a major shareholder because even though I love this industry, I don't have the energy to manage it every day. But I still want to participate. In participation, what I want is for the company's structure to be A and B shares in the future. And what this means is

Message 4 - 9:03am

Hong: Simply put, the A and B shares structure I have in mind is to make the core team, such as you, me and Kee, into A shareholders. This team would have 100% management control, but the dividend rights would be given to the B shareholders. For instance, if the company goes bankrupt or distributes dividends, B shares would have priority. However, B shares would not have management rights. This separation of A and B shares has benefits for future financing as well. I'm not sure about the actual financial situation and whether financing will be needed. If it is needed this would be a particularly good model. Anyway, these are just details and not something we can discuss in one or two days. I just wanted to bring this up today. Take a look at these points and see if there is anything specific to discuss later on. You can also discuss this with Kee beforehand. I think his ideas and approach are fine, and I support them.

Message 5 - 9:15am

Ari: Regarding the share structure issue, once we've resolved this matter, we can sit down and have a thorough discussion to see how we want to proceed with the overall direction. Currently, it doesn't seem like we urgently need funding, so the financial aspect isn't a major concern at the moment. However, once this is settled, we'll assess how we want to [inaudible] move forward. If we decide to expand on a larger scale or increase sales points to other countries, that might be a different story. We'll think about it when the times comes. So, once we've resolved the current issue, we'll analyse the situation and figure out how to proceed with this matter.

Message 6 - 9:15am

Ari: As to Sam, he definitely wants to continue working with us, and his strength lies in software maintenance. This is the main contribution he provides for our continued collaboration. This is how he's currently considering it from what we discussed earlier.

Message 7 - 10:17am

Hong: As for Sam's situation, my understanding is that he definitely wants to work with us, but I want to clarify whether he intends to invest real money or exist as a third party. That's what I want to figure out. As for the proportion, that's a separate matter and can be discussed later.

Message 8 - 10:17am

Hong: As for the issue of shares, the proportions and who owns how many shares, that's all negotiable. My thoughts align with yours. If in the future we need money, for instance, if there's potential for growth in the business and we need significant funds to quickly capture the market share, then the A and B share structure would be the best solution. This is a strategy, not specific detail. The specifics will have to be discussed after this period is over. This is all manageable; details like share proportions can be discussed later.

Message 9 - 8:09pm

Ari: Liu, I've just seen the message, I've been so busy. Tomorrow morning at 8:30, I have to go to the lawyers office to provide some new materials. Oh man, looks like I'll be staying late at the office again tonight.

Message 10 - 8:09pm

Ari: Sam's situation is like this: his software hasn't been launched yet, so it's not on the market. Once his software in on the market, he'll have income coming in. Currently, he's working on his software and providing platform support, including bookkeeper, financials, and invoice scanning. He categorises everything on his end. So, at the moment, he's mainly focusing on software updates and support.[444]

[330]

(a) the use of the word 'promise' by Hong recognises a self‑imposed obligation to return or redistribute the shares.

(b) there is a reference to Kee and Ari deciding how many shares they want to 'give up' and that this is a reference to Kee and Ari as beneficial owners of the shares and that this is consistent with Ari's evidence concerning the foundations of the bare trust as alleged. Further, they submit that Hong's company was the beneficial owner of the shares, Hong had no reason to make this statement, and would not have made this statement, as in that context Kee and Ari had nothing to 'give up'.

(c) the subsequent messages on 19 March 2019 support the admission of a trust, in that they demonstrate that Message 3 related to the redistribution of the shares in Kegland Distribution and not to any interest in the unit trust that owned the warehouse. In this regard, it is common ground that Sam had no interest in the warehouse. In particular, the Defendants rely on Message 5, which was sent by Ari at 9:15am, and Messages 7 and 8, which were sent by Hong at 10:17am.

(d) Hong made the relevant statements at a time where there was no suggestion of a dispute concerning the beneficial ownership of the shares and in circumstances where he did not anticipate them surfacing during a trial.

(e) Hong's evidence given in cross‑examination that Message 3 related to the sale of the warehouse was implausible. First, it is submitted that the balance of Message 3 undermines the warehouse explanation, as that message refers to Hong's love of the industry, being the industry in which Kegland operated, and his wish not to be a 'major shareholder', both were matters which related to the ownership of the Kegland shares and did not relate to the warehouse. Further, they contend that although Messages 1 and 2 relate to the warehouse, halfway through Message 2 Hong began to discuss Sam's role and whether he would become 'part of the team' and these statements go beyond the purchase of the warehouse and reflect Hong's understanding that Sam was not the beneficial owner of the shares registered in his name. In this regard, the Defendants emphasise that Sam had no interest in the warehouse. Finally, they say that Hong's explanation in cross‑examination ignored the fact the unit trust set up in relation to the purchase of the warehouse did not occur until August 2019, in circumstances where Hong's accountant and lawyer prepared the relevant documents months after Message 3 was sent. As such, Hong's explanation, as an experienced businessman, that he did not understand the structure was unconvincing and manifestly incorrect.[454]

[356]

Hong: The second this is, when applying for the loan back then, Henry, who was originally Lele's accountant, helped my dad create a back up plan. In one aspect of this plan, he turned my dad into a director of Kegland's beer business, and this needs to be revoked. I'm not entirely sure about the specifics or the steps involved. You could ask Henry directly as you have his contact details. Or I could create a group and add Henry to it. See which is more convenient to you.

Jerry: I don't know much about Henry and Kegland. Do you remember we talked about this a few months ago? You lawsuit has settled, right? It that's the case, should we consider the situation with Kegland? Like starting afresh, transferring everything over, and getting back to normal. Or course, from this side, we also need to consider the other things like government subsidies etc. At least, from my understanding, the three shareholders should come to the surface later, and your father definitely shouldn't be involved anymore. It's you who should come up and do it for sure.

Hong: Yes, let's resolve the issue to do with my father first. How to withdraw him from this? Because I'm not quite clear about how it was initially set up, I only know he was to make my father a director, or both my father and me directors. I'm a bit confused about that. See if you can ask Henry about it, or what. Then, regarding my mother's side, I'll create a group and add all of us to it, and we can arrange a time for a meeting or whatever suits everyone. I think it's more convenient to discuss things face‑to‑face. If it's convenient for you, you can go to my parents' place.

Jerry: And, basically, I'm not sure what he has done with your brewing company. How about this: I'll send you an email. Currently the information of your brewing company should be with Ari, right? Send me one thing, and I'll get a sense of the situation. Alternatively, an easier way is that I'll have my assistant add it later as, like last time, an ASIC agent; we essentially become an agent. That was we can access some information, I think being an agent is a faster way.

Jerry: I need the company's full name.

Hong: okay.[483]

[378]

Message 1: 11/8/2020

Hong: Hey you two legends, I just remembered something again, I'll sort out Kegland first, so that's what Kee told me, so what he said was that for this company, only people who work there can hold shares in the company, so if I still want to take shares in the company, then I need to work there, I suddenly thought of something, I will take all the jobs as the accountant, then I will be working here, right? Then Jerry you just behave as me, and just take all the accounting jobs as well, that will be it, right?

Message 2: 11/8/2020

Hong: But the premise is that I don't think there is much need to work together anymore, but it's a bargaining chip, a negotiating chip, and I don't want to go against him because we're not on bad terms yet. That is, they have put forward an offer, talking about their company's development vision, then I will follow the company's vision. I'm still in the company, so according to the company's vision, what work should I do? I'm going to do all the accountant related work. You guys, please see if you can give me any advice, let's kick the ball to their side of the court. So what is the benefit? The benefit is that I'm going to give him an offer based on what he had said, and whether we fall out with him or not, we can deliberate on the next step.

Message 3: 11/8/2020

Hong: they have shown their knives and they are gritting their teeth, so I don't think we need to be polite anymore.

Message 4: 11/8/2020

Hong: At the very least, if he is willing to let me keep my shares, then whatever he does, it's not a bad think for me to hold all the accounting things in my hand, to have all the accounting records.

Message 5: 11/8/2020

Jerry: Your move is quite interesting I think this as a negotiation technique, it's fine, they certainly will not agree, because the financial side of things is their lifeblood, he certainly wants to control it from beginning to end, so this can be used as a bargaining chip, to put it out there, no problems at all. To put it bluntly, what does it mean? Liu, we may have more or less predicted the end results already, what is left now is that we need a reasonable figure, it has been so many years, we've done so much work, we need to have a reasonable figure, this is fair.

Message 6: 11/8/2020

Leon: It can be raised. But ultimately, it will come back to a evaluation of the company. It is unlikely that the other party will agree to you continuing to hold a 50 per cent shareholding simply because of the accounting work.

Message 7: 11/8/2020

Hong: Yes, I just think that we should discuss how to get back to him in the first round, that is, in the next two days, I will not contact him for the two days and then wait for them to contact me, and how to get back to them after they contact me? Tentatively, this is what I am going to say. Because he will not agree, if he agrees, I would be very surprised, it's normal if he disagrees, but we have followed his statement, his planning, it is in accordance with the company, I also work in the company, right? Then I want to see how he will reply to me.

Message 8: 11/8/2020

Leon: Yeah, he wouldn't agree. [Chuckle]. Okay. I'm fine with this direction.

Message 9: 11/8/2020

Jerry: [Chuckle][Grin]

...

Message 10: 13/8/2020

Hong: It's been two days since we talked about it, and then today, there's a group chat that has Kee and Ari and Leon in it, and I'm going to add Jerry into that group, and just talk to them about my idea, just like the idea we talked about last time, what we were going to say to them in the first round.

Message 11: 13/8/2020

Hong: So we just pretend to be polite, I want to say this first of all, I particularly agree with Ari, not Kee's business proposal, that is, his philosophy is that only people who work in the company can have shares in the company, I would say that I particularly agree with this concept, and then I have thought about in the past two days, so what can I do in the company? So what I can do in the company is to bring this team in, to intervene in the company from the financial and legal side of things, so this is what I can do for the company, to make this company better.

...

Message 12: 13/8/2020

Jerry: Boss Liu, I have just listened to your voice message, you can say this first, you should say it is this way, directional wise, I think it has not changed from before, I reckon this is still no change, or according to the previous idea, but then if this is the case, when we talk to him, we should leave an opening. If the company, if he does not accept the terms, then we should leave this opening for him to put forward the idea, in this case we can then follow his ideas and move things forward.

...

Message 13: 13/8/2020

Leon: You're a director of the company now, right?

Message 14: 13/8/2020

Leon: I suggest you just say that I think I can retain my position as director of the company to co‑ordinate the company's finances and some of the legal matters, and that will do.

Message 15: 13/8/2020

Jerry: Then, Boss Liu, how about this, I am going to do a company search of KegLand company, and then after I've done the search, I will give the results to all of you to confirm the directors and shareholders, this is our starting point.

...

Message 16: 13/8/2020

Hong: First thing, I just called Ari just now, and I don't think there much more to talk about, so I decided to chat in WeChat right after the call, and that's the first thing.

...

Message 17: 18/8/2020

Hong: I'll say a text later and sent it to Kee and Ari in that group chat, and I'll also ask you both to help me review it first.

...

Message 18: 18/8/2020

Hong: [Bank account details] this is my bank account detail, please transfer $179, 725.69. And in future of the kegland, I'm really want to part of the business, but if you guys want me out of the business, I try to get out completely. By my understanding the factory part and Kegland is one. That's the reason I join the factory part.

Message 19: 18/8/2020

Hong: So this is roughly what I am going to say, or have I made myself clear? Do help me think, anyway, the idea is to tell him that I that I think the business is whole, and if wants me to withdraw then it should be a complete withdrawal, and he should make me an offer.

...

Message 19: 19/8/2020

Jerry: After reading their response, I feel like I need to be more clear with them and ask them to propose the conditions for us to quit.

...

Message 20: 19/8/2020

Leon: Jerry, do you know how much Liu has invested in kegland?

...

Message 21: 19/8/2020

Jerry: There's a Draft for 2019, there's a 100,000 loan on the books for Liu's side.

...

Message 22: 19/8/2020

Leon: Yesterday when we were talking about the rental, Ari told me that he had transferred RMB500,00 to Liu in China for this A$100,000, @liu hong riu is there such a thing?

[379]

Hong: yes

Message 24: 19/8/2020

Leon: @Jerry, if that's the case, maybe the main account is still on Smith Road.

Message 25: 19/8/2020

Leon: But we can say that kegland is where it is today, because of our contribution too, because we squeezed out the competition by buying Smith Road

Message 26: 20/8/2020

Leon: Hello everyone, I just thought of something else, KegLand company was established in December 2017, it has been almost three years till today, from the first day Hongriu LIU is the full‑time director, and is the only one in Australia to meet the requirements of the Corporations Act, there must be a local director. Should think of it this way, even if he did nothing for these three years and normally speaking, in the market, being a director means to bear all the obligations and responsibilities, so a director fee should be paid. We should think of it this way, this is a direction that can be explored, three years, we could say this, if you hired a person for three years, then three years of wages is a large sum, so this, I think, can be another direction to explore.

Message 27: 20/8/2020

Hong: [ThumbsUp]

...

Message 28: 20/8/2020

Hong: I don't think it's going to end up so badly, but let's prepare for the worst. I still think there is room for discussion. So if you are going to withdraw in the end anyway, I think my bottom line is to put the ... first I don't want to be involved in the factory with them, so just get the money back to me, and that we bit it, and according to their current way of lending, I think it will be quite easy, just get the money out of the loan and pay it back to me, that will be it. As for the interest and other costs, I was hoping to have it calculated and see if I can leave some share in it, this is my idea, if they insist on not giving the shares, then it is also okay for them to covert it into money and I will withdraw after payment.

...

Message 29: 20/8/2020

Leon: Where do you want your shares to be kept, Kegland?

Message 30: 20/8/2020

Leon: Or the Smith Road company?

Message 31: 20/8/2020

Leon: If it's the former, might as well take the money now. Because they have every means to make the company unprofitable or lose money.

Message 32: 20/8/2020

Jerry: Take the money, there's no point in taking shares any they can't be financially transparent with you for 5%. It's better to take the money and go.

...

Message 33: 20/8/2020

Jerry: This request is definitely possible, but we should see it this way. This will be a long story, they would say although you have 50% under your name, you actually only hold such and such, you are just a proxy and you hold such and such on behalf of other, because if you are not a proxy, we don't have this lawsuit. We should see it this way, regardless of how much shares you hold, you are definitely a shareholder, if a 1/3 of the shareholders ask for some financial transparency, that is to say, to understand the general situation, it's totally legit. But we should only do this if we cannot reach an agreement through discussion, then we will follow 1234567 to move forward.

Message 34: 20/8/2020

Hong: Yes, I'd better wait for them, see how they reply, anyway, whatever he says, I'm asking to be part of the business, or I'll withdraw completely, the first thing is, they must give back the money, as for the rest of the money and other input and how to calculate these, we can discuss it. My idea is that firstly give me back the cash I invested in Smith Road, and then we can calculate the rest of the money, whether it is my input, or others, if they do not count these for me, then I will not withdraw that shareholder and ‑ what is called - legal person, I will not withdraw as a director, that's it.

Message 35: 20/8/2020

Hong: In fact, there is another way, but this is we completely fall out with them. I can make preparations on both ends. Firstly, is to take Smith Road - because for Smith Road I am the sole director, although I am 1/3 share holder - I can absolutely take out the loan money, and then sell the shares over there, and be done with it, but I don't think there is a need to do that.

...

Message 36: 17/11/2020

Hong: The second thing is that this week I will go to Kee's house for a BBQ, and Ari and the people from their company will be there too, anyway, I will continue the discussion with them, do you guys have any ideas? Any ideas on how to communicate better? My idea is to insist on keeping some shares, but if I can't, then I'll withdraw completely, including the building and everything else. Also, as of now, I still owe the company a little money, I think there is no hurry, I will delay it for now, or do you guys think it's just a little money and I should just pay the company first? It's all kind of expenses.

...

Message 37: 17/11/2020

Jerry: Yes, the Smith Road account is with me, so it's very clear how much money should be refunded, so they can't run away from that, so we should move forward in that direction. I think if you want to quit, there are two ways to do it usually, one is to leave the shares for you, the other is not to leave the shares. If no shares are to be left to you, in that case, normally speaking, then you can see whether the company will pay you a fee for your hard work, after all, you have been a director of this company for a long time, right? Or this can be calculated another way, to have this ..... you can decline the payment, but the calculation and account should be clear.

Message 38: 17/11/2020

Leon: Of we talk about it, we can either co‑operate, or keep the shares, or we can all agree on a fixed return of capital for the previous investment.

...

Message 39: 17/11/2020

Leon: The fee for hard work is generally a fixed capital return.

Message 40: 17/11/2020

Hong: [Thumbs up]

Message 41: 17/11/2020

Leon: I don't think 8% ‑ 15% is unreasonable.

Message 42: 17/11/2020

Leon: every year

Message 43: 17/11/2020

Leon: or call it interest

Message 44: 17/11/2020

Jerry: or director fee

...

Message 45: 22/11/2020

Hong: The only progress made was that they wanted to ask me what I thought about the next step for the company and how I would position myself, and I told them that I hadn't actually worked at the company, and that if they wanted me to be involved, then I could go in one day and week and give then an answer then.

...

Message 46: 22/11/2020

Hong: Anyway, I was thinking that they weren't going to let me get involved at all, because we posted that golden ticket to the Kegland group group chat on Facebook, I wanted to try and see what happens, you know? So it was posted, and there were all kinds of comments, and then Kee called and asked me if I would recall it. And I said okay.

Message 47: 22/11/2020

Hong: The current situation has no changed much, they are still getting [inaudible] ready to kick me out, but they will not tell me directly, I think this is what upsets me the most. Let's just take it slowly, as they have not said it to me directly yet.

...

Message 48: 24/11/2020

Hong: Ari's coming over my house today too, so come on over and chat for a bit anyway, I think I've opened up quite a bit with that I've said.

Message 49: 24/11/2020

Hong: I said let's not talk about the future, what's the point of taking to me about things miles away, let's talk about the present. Are you going to let me get involved or not?

Message 50: 24/11/2020

Hong: Don't tell me all the rules if you want me involved. If you put all the rules down on paper, I can sort all of them out. If you don't want me to get involved, I'll just take all our inputs as a package deal and quit.

Message 51: 24/11/2020

Hong: I'll ask you two to help me then, I also told him, if you don't want me involved anymore, it's simple, I'll withdraw, I'll withdraw everything, you don't have to tell me whether to withdraw the factory first or later, I'll just withdraw it all and that's it. Then you just go straight to Jerry and Leon to talk about things, and I don't want to get involved, there's a price for everything.

Message 52: 24/11/2020

Hong: And then Kee... Not, it was Ari who old me that right now with these current full‑time employees that they have, they just don't want anyone else involved, they're in there every day working, blah blah, and I said what about my input from the very beginning, right? What about my risk? That doesn't count? I said to put it very bluntly, now that it's all over, you are basically telling me to just fuck off and be done with it.

Message 53: 24/11/2020

Hong: I said I genuinely like that thing, and I met a group of people who liked that thing, and my offer is still like this, I want to participate, I want to participate in the core business, whether I'm one or 100, we can discuss, right? But if you don't want to talk to me about that, let's talk about how to split it, and if you want to continue the discussion, we can pick it up anytime. Two days ago, I went to Kee's house for dinner, and I said, invite all these people to my house, and we'll have dinner again, right? Business is business, and even if we can't reach agreement, we can still have dinner and drinks, and that's fine.

Message 54: 24/11/2020

Hong: But let's be direct, no need to beat around the bush, if you don't want me involved at all then just say fuck off and we'll talk price and be done with it.

...

Message 55: 24/11/2020

Hong: I also told them my offer, I said it's ok now, if at the root of things, we are not making money, this is up to the operation team, but we must be divided into two groups, a group of people with the body of shares, the other group with the real value of this thing, you can have it valued, afterwards we can discuss whether I am 1% or 100%, this can all be discussed, so it is up to the operation to say we did not make money, if you did not make money you guys just get divided.

...

Message 56: 24/11/2020

Leon: I'll talk to Ari on the phone tomorrow.

...

Message 57: 24/11/2020

Hong: If you're going to talk to him, you can mention to him that when we were chatting, I said that I can re‑sell this 50% of shares to Keg king.

...

Message 58: 24/11/2020

Leon: Maybe they're thinking what you're thinking right now.

Message 59: 24/11/2020

Leon: At the time of the lawsuit,

Message 60: 24/11/2020

Leon: from an objective point of view,

Message 61: 24/11/2020

Leon: Keg King might have had a point.

Message 62: 28/11/2020

Hong: The second thing is that on the 18th, I have invited Ari's whole team, the four companies will get together for dinner, free standing dinner, and then after 9:30 we'll go to karaoke. I also wanted take this opportunity to talk to them, to make this clear to them, that it's easier to invite the devil in than send him away, if you want me out, it can be done, I still want to stay, but the premise of staying, first of all, I have realistically estimate the value of the company, and then find a reasonable price to add my money into it. Secondly, the accountant must be Jerry, they can find another accountant, it doesn't matter, the accounting work must be done by Jerry, and then the company must pay for it, that's what I think.

Message 63: 28/11/2020

Hong: Anyway, take you time to talk about it, I think this is something to talk clearly with them first, whether they still want me around or not, if they don't want me, then I'll trouble the two of you to settle the score with them and settle it until they want to take me on again.[515]

[422]

(a) that Kee and Ari's evidence, that Hong was informed ahead of time that Kee was to be appointed as director, should be rejected in light of the lack of any documentary evidence to support such a finding. In this regard, they say that the opening line of Kee's email of 15 December 2020, where he said '[j]ust letting you know as of 3rd December I am now a director of KegLand also', makes clear Hong had not previously been told of the appointment, and say that Kee's general evidence that '[w]e did avoid putting a lot of things in writing where possible for as long as possible recording this particular topic ... trying to limit the amount of paperwork, I guess there would be connecting - you know, is to the MCH ruse'[580] is implausible considering a ASIC search would have shown he was a director and therefore should be rejected.[581] In line with my findings above regarding the plausibility of the MCH ruse explaining why certain matters were not put in writing, as well as my findings as to what was discussed at the 11 August meeting, I reject this submission. I do not consider that the email of 3 December 2020, which on an ordinary reading of the words could also be interpreted as Kee confirming knowledge Hong already had, requires me to make a contrary finding;

(b) that, in any event, when Ari and Kee did decide to inform Hong of Kee's appointment they did so by sending an email to his Urban Waste email, which was an email account he did not monitor, in circumstances where they had previously sent emails to a different account of Hong's.[582] I make no findings with respect to this submission at this stage but note the Plaintiffs press like submissions with respect to communications relating to the share issue. These are dealt with together in the section below dealing with the oppression claim;

(c) that the Court should find that the no director's meeting took place on 3 December 2020, attended by Hong and Sam - the minutes of that purported meeting forming the documentation relating to Kee's appointment as director.[583] As I understand it, this is not contested or, at the very least, is uncontroversial as Kee and Sam accepted this was the case in cross‑examination;[584]

(d) that the appointment of Kee as director without Hong's knowledge (rather than by him at Kee and Ari's direction) is inconsistent with the existence of the Alleged Oral Agreement on the basis that a term of the agreement was that Hong would facilitate the appointment of Kee and/or Ari as director at their direction.[585] I decline to find that Kee's appointment as director was inconsistent with the Alleged Oral Agreement such that it necessitates a finding that agreement did not exist. As discussed in more detail below in relation to the threshold issue, in the circumstances that Ari and Kee found themselves, lacking commercial sophistication, tangled in the lies from the MCH ruse, and facing a recalcitrant Hong, their decisions in this regard, irrespective of whether or not the appointment was validly made, are reconcilable with, and fit within the puzzle pieces establishing, the existence of the Hong Trust; and

(e) that Hong's account of what was said and discussed at the Christmas party should be accepted (with particular emphasis on what the Plaintiffs allege are inconsistencies in, and implausible aspects of, Kee and Ari's evidence regarding, for example, the timing of events on the day of the Christmas party) over the evidence of Kee and Ari on those matters.[586] As a preliminary observation, I decline to place weight on those matters which the Plaintiffs contend support a finding that Kee and Ari's evidence regarding the Christmas party should be rejected. I consider that limitations Ari and Kee's recollection of specific details of the party[587] are readily explainable by the passage of time and do not bear of the credibility of their evidence in this respect more generally (see Proposition 3 and Proposition 9[588]). As such, on balance, and for the reasons discussed at various points in these reasons where I have accepted Ari and Kee's evidence over Hong's, I am satisfied that Ari and Kee's evidence with respect to Kee's speech at the Christmas party and the discussion they had with Hong afterwards should be accepted.

[425]

True position with share option agreement

As noted above, I no longer wish to give evidence that the share option agreement was signed in late 2017 or early 2018.

On the afternoons of 11 and 12 May 2024, I told my lawyers of the matters set out below.

In December 2017, after my discussions with David Amos regarding CGT, I attempted to draft a share option agreement. However, I did not get any further than the contents of that rough draft and no share option agreement was executed in around December 2017/January 2018, nor at any time until around December 2020/January 2021, as addressed below. I do not have that rough draft.

Towards the end of 2020, it looked like Hong would not honour the arrangement to pass the shares back to us. I had begun to panic about this.

By this stage, Ari and I had poured our heart and soul into the Kegland business. We had staff that were relying on us for jobs; me and my wife had taken a loan against our house to pay for the business start‑up; and the thought of losing all this to Hong was really terrifying me. The thought of us not being able to take ownership of a business that was our really made me feel sick.

I came up with the idea of finalising and backdating the share option agreement. I thought that, if we signed a backdated copy of the agreement, it would help us to get the shares back from Hong. At that time, I thought this was our best option for dealing with this problem.

Sometime in mid‑December 2020, I spoke with Ari and Sam (via Skype) about this idea. I told them that the share option agreement had not actually been finished, as I had totally forgotten about doing it. I explained my idea to them. Ari and Sam said that they were happy to follow this plan.

At this time, I felt a bit guilty. I was the person who was looking after this share option agreement in late 2017 and I did not get around to completing it.

I created the share option agreement using the version sent from Mansour Lawyers on 15 December 2020. I edited the Mansour version in Microsoft Word. I contacted Sam via skype and transferred the file to him to sign. Sam signed the file and then sent the digital copy back to me. Once Ari and I signed a printout, I then scanned the print out, so we had a scanned copy that had three signatures, but it was still missing a signature for the person who was meant to witness my signature (the unwitnessed version).

I asked my wife, Kelly, to sign the unwitnessed version as the person who had witnessed my signature. I only printed the signing page of the unwitnessed version. She signed that page which I then scanned and created a new PDF document, using the Adobe Acrobat software by replacing the signature page of the missing witness version with the scanned page with Kelly's signature and saving it as a new PDF.

I edited the meta data of 'Binder_1.pdf'with some free software that I had found online. I cannot remember the name of the software. I used this software to edit the file; and this software also enabled me to change the metadata attached to the file. I did not keep the software and deleted it from my computer soon after I used it.

This is the document with the file name 'Binder1_1.pdf'. The file name 'Binder1_1.pdf' was not created by me. 'Binder1' is the default name which the Adobe Acrobat software gives to a merged PDF document and the '_1' was added with I edited the meta data to create the file called 'Binder1_1.pdf'.

Shortly afterwards, on 23 December 2020, I was at work and needed to send the signed / witnessed version of the share option agreement to David Amos to give effect to the share issue. I could not located the 'Binder1_1.pdf' document on my computer as it was not saved in any of the folders I checked, and the file name did not enable me to conduct a successful search for the document on my computer.

As a result, I printed off the unwitnessed version and had Henry Burke witness my signature. I saved this under the file name 'Scan of Option Agreement.pdf', which made it easier to find. I also edited the metadata to hide the real date on which the document was created. I sent this edited version of the share option agreement to David Amos.

In December 2022, my solicitor, Mr Hope, informed me that the plaintiffs had requested production of the Microsoft Word version of the share option agreement that was signed and witnessed. I located the Microsoft Word document referred to in paragraph 228 above, modified its content to make it look like an earlier draft and edited its meta data using the same free software. I then deleted the software again and provided the modified document with the edited meta data to Mr Hope (the modified word version).

Mr Hope located 'Binder1_1.pdf' amongst the documents that we had provided to him for the purposes of instructions in this proceeding. He discovered this document. He also recently produced the modified word version after receiving the plaintiffs' proposed amendments to paragraph 23 of the statement of claim. It was only on the afternoon of 11 and 12 May 2024 that I explained the above matters to my lawyers.

I regret my conduct (as explained above). I apologise to this Court and the plaintiffs for my failure to "come clean" in relation to the time at which the share option agreement was created and signed.[589]

[428]

(a) on 9 October 2020, an email was sent from the Hong alias account to Mr Mansour at Mansour Lawyers (although initially sent by mistake to Mr Earl at Earl & Associates) and Mr Amos at Elysium, which stated '[w]e are looking at an internal sale of shares as we would like to do some restructuring. David can you please discuss this with Stephen and Rachel at Mansour Lawyers so that we can work out an agreement that is tax efficient'. Mr Amos replied later that day stating that his team would organise a meeting the following week but that 'whilst it is an internal sale that the shares will still be required to be transferred at market value to avoid any tax avoidance issue';[591]

(b) on 19 October 2020, Kee sent an email to Ms Rachael Urbaniak at Mansour Lawyers which asked whether they were getting close with the contract between Sam and Kegland as '[w]e wanted to get the contract signed so we can finish the share transfer with Sam Lie'. Ms Urbaniak replied the following day, stating inter alia that she had spoken to Mr Amos at Elysium in relation to the share transaction and that Kegland would need to urgently obtain a valuation of the company and complete its 2020 financials;[592]

(c) an Elysium invoice records 'D.A' having a 'meeting and advice in regards to ownership and share transfer and CGT implications and Valuation. And advice on Tax deduction of start up costs' on 4 November 2020;[593]

(d) on 4 November 2020, Kee sent an email to Mr Mansour which asked whether it would be possible, for the purposes of the sale of the shares, for the valuation of Kegland to be based on the end of financial year in July 2020, rather than November 2020 as they had a 'lot more stock and cash in bank account that will be more problematic'. In that email Kee also asked for a 'draft agreement ... to show Sam';[594]

(e) on 13 November 2020, Ms Urbaniak sent an email to Kee attaching two versions of a draft Sale of Shares Agreement, one version annotated and one clean. In that email she noted the purchase price of the shares would depend on the completion of the 2020 financials.[595] Relevantly, pursuant to clause 3.1 of the draft agreement, 'LL' was to transfer 45 shares to LTWQ and 5 shares to Team KK, while Sam was to transfer 40 shares to Team KK;[596]

(f) on 2 December 2020, Kee sent an email to Mr Amos, copying in Sam, which asked Mr Amos to call him regarding his appointment as director of Kegland. That email also stated that he was 'hoping to get a draft share purchase option agreement' from Elysium;[597]

(g) on 2 December 2020, Ms Urbaniak at Mansour Lawyers sent Kee and email attaching a document called 'Option to purchase shares agreement';[598]

(h) on 3 December 2020, Mr Amos sent Kee an email with the subject line 'Option Document' which stated inter alia '[j]ust for clarity I have not followed up on the document as you will be sourcing this yourself. Let me know if this changes';[599]

(i) on 7 December 2020, Kee sent an email to Mr Mansour at Mansour Lawyers which asked him to 'please draft a new option agreement for a new company that we have in mind' and, in explaining how the agreement should operate, stated '[i]f the individual is to exercise this option then the company would issue new shares to the individual which would subsequently dilute the existing shareholders';[600]

(j) on 11 December 2020, Ms Urbaniak sent Kee and an email attaching a draft Share Option Agreement his for consideration. That document was a PDF document;[601]

(k) on 14 December 2020, Kee requested a copy of the draft Share Option Agreement as a word document,[602] which Ms Urbaniak provided on 15 December 2020;[603]

(l) on 17 December 2020, Kee sent Sam a copy of the Share Option Agreement to Sam via Skype and asked him to sign the document and send it back. Later that day Sam replied saying he had read the option agreement but did not 'fully understand how it works' and asked whether there was another part to the agreement;[604]

(m) on 18 December 2020, Kee replied to Sam in a series of Skype messages, as follows:

[434]

You were going to the extent of getting lawyers to prepare this document because you wanted to effect a sale of shares from LLUP to you, weren't you?‑‑‑ Um, we had to make sure that there was some way to reflect the transfer of shares um and it was important from ah, Elysium Accounting's perspective to have a proper paper trail to value the shares at the time of the sale.

...

MR CAWTHORN: Sorry, purchase price, sum of TBC 50 and then there's the 40 and then there's as determined by valuation?‑‑‑ Yes, that's correct Your Honour.

It's 50 Hong shares though aren't there, not 10 shares - 50 fully paid LLU shares? ‑‑‑ Yes, that's correct Your Honour.

Not 10 shares?‑‑‑ Um, I think if I remember correctly, I would just have to remember the dates um, but we had not transferred the other - hadn't done the transfer of the 400 shares at that stage or issued the option agreement at that stage so I think at that stage, it was yeah, it was 50 and 50, correct.

If you never called for a transfer without any payment from Hong of his shares, did you?‑‑‑ Well, that was the problem Your Honour. Like Elysium Accounting said that if can't be for zero dollars. We would like to do that because we felt we owned the shares already and were the ones that financed the company but ah, from an accounting perspective, we have to do a valuation process so ‑‑‑

The answer to the question is no, isn't it. You never asked for a transfer of the shares, did you? The answer's no, isn't it?‑‑‑ To?

From Hong's shares to you?‑‑‑ We had discussed that with Hong on numerous occasions, yes.

And this - I suggest you didn't, what do you say about that?‑‑‑ No, it's not correct. Right from the start, the inception of the company, we had Hong hold shares on our behalf.

If that was the case, you could've called him to transfer the shares to you instead of going through the exercise of selling the shares to you are provided for in his agreement?‑‑‑ Well ‑‑‑

What do you say about that?‑‑‑ That was not what Elysium Accounting had told us. They said that the, if, if we transferred the shares at zero value on the books, then if that was to be looked in at a later date, they would look at the valuation at that time or they would calculate a valuation and then there would be a CGT implication based on the transfer.

When did they give you that advice?‑‑‑ On numerous occasions but ‑‑‑

When, when?‑‑‑ Well I first spoke to Davis Amos with respect to transferring shares before the inception of the company in December 2017 and then again later on, we had other conversations with David Amos around about this time as well.

Is that in writing? ‑‑‑ Um, we had a meeting face to face in his office.[616]

[462]

(a) Having regard to the relevant circumstances surrounding 6 December 2017, the alleged trust is inherently plausible.

(b) An overwhelming body of contemporaneous documentary evidence supports the existence of the alleged trust.

(c) To the extent that contemporaneous documentary evidence shows that Hong's company is and was the beneficial owner of the shares in question (for example, ASIC records, share certificates, and credit applications), such documents came into existence after the formation of the trust. It is clear, therefore, that such documents were created as part of the scheme to hide the respective interests of Kee and Ari in Kegland Distribution. This was a scheme in which Hong actively participated.

(d) Hong has admitted the trust. In two cases, he made this admission to Ari. In other cases, looking at the messages of Jerry and Leon, it is clear that Hong admitted the trust to each of them.

(e) For a variety of reasons, the contrary case is inherently implausible and, as such, it requires more cogent evidence than might otherwise be required ... [see above, [23], referring to [31] of the Defendants' submissions]. There is no such cogent evidence.

Paying close attention to the detailed narrative (see section F ['analysis of the evidence' in these reasons above), and paying close attention to the contemporaneous documents on which that narrative is based (see the extensive references in section F above), the following picture emerges:

(a) Contrary to his written evidence (Hong 1 at [17], [PSCB 5]), Hong did not establish the Kegland business.

(b) Prior to 6 December 2017, Hong had no involvement in the operation of the Kegland business. Similarly, he did not provide funds to Kegland Hardware, the owner and operator of that business.

(c) Hong was not involved in the establishment of Kegland Distribution. He had no say in the allocation of shares in that company.

(d) Hong's company and Sam became shareholders in Kegland Distribution. This happened because Kee and Ari controlled the allocation of shares. Indeed, the only reason that Kee and Ari decided to "decant" their nascent business from Kegland Hardware to Kegland Distribution was because of the way in which they wanted the shares held (viz, by others).

(e) Hong did not meet with or talk to Sam until 13 December 2017 (after incorporation of Kegland Distribution). As at 6 December 2017, Hong knew nothing about Sam, his experience in the brewing business, his abilities in IT, his suitability in acting as a company director, his wherewithal, the utility of the YouERP system, nor indeed anything else about him.

(f) The shares were not allocated to Hong's family company by reason of an investment of some sort. Neither Hong nor his family company made any investment in the Kegland Business or otherwise.

(g) Neither Kee nor Ari gifted shares to Hong's family company.

(h) Contrary to his written and oral evidence, Hong did not loan $100,000.00 to Kegland Distribution. Hong understood that the provision of such working capital would support his case in respect of the threshold issue. Hence, he maintained that he provided such funding, and he did so in the face of contemporaneous documents wholly inimical to this evidence.

(i) Nor did Hong lend $100,000.00 to Ari (which Hong suggested, for the first time, in cross‑examination).

(j) Hong did not play any significant role in the day‑today operation of the Kegland Business. But he did play an active role in the scheme to disguise the respective interests of Kee and Ari in the company (and, therefore, the Kegland business).

(k) In 2018, 2019 and 2020, Hong admitted the trust.

[466]

[10.370] From time to time, equitable jurisdiction is exercised in connection with transactions that involve future property. Future property is property which (a) is not yet in existence; or (b) is not yet owned by a party: Akron Tyre Co Pty Ltd v Kittson.[660]

A person cannot own, either at law or in equity, what does not exist.[661] Accordingly, the common law does not recognise an attempt by someone to deal with future property. Equity also takes this approach to future property: "[a] man cannot in equity, any more than at law, assign what has no existence."[662] However, while a transaction involving future property is "completely nugatory" at law,[663] equity affords it some recognition. Provided that (a) the property is sufficiently described so that it can be identified or ascertained at a future time; and (b) consideration is given, an agreement to assign future property operates as an agreement to assign the property when it is acquired by the assignor - that is, "the moment the property comes into existence the agreement operates upon it." Equity treats dealings with future property in this way because it considers the conscience of the assignor to be bound from the moment the assignment becomes possible, thus applying the maxim that equity regards what ought to be done as having been done. In Norman v Federal Commissioner of Taxation, Windeyer J said:

In equity a would‑be present assignment of something to be acquired in the future is, when made for value, construed as an agreement to assign the thing when it is acquired. A court of equity will ensure that the would‑be assignor performs this agreement, his conscience being bound by the consideration. The purported assignee thus gets an equitable interest in the property immediately the legal ownership of it is acquired by the assignor, assuming it to have been sufficiently described to have been then identifiable.

The result is that an equitable assignment takes place at the time it is capable of being assigned without the need for the assignor to do anything more. The principle applies not only to assignments of property, but also to the giving of charges and declarations of trust over future property.

What must be remembered is that equity does not permit the assignment of future property - it simply recognises an agreement to assign future property as soon as the assignor obtained title to that property. As Maitland explained:

[L]awyers easily slipped into the way of saying that in equity one could make an assignment of goods hereafter to be acquired though one could not do so at law. This was a compendious way of putting the matter and was not likely to deceive any equity lawyer.

Plaintiffs v Defendants

At a glance

Court

Decision date

Before

Source

Judgment (967 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (44)