Yang v Wong, in the matter of Axis North Pty Ltd

1. These proceedings (QUD498/2023) were to be heard together with certain other proceedings: see Yang v Wong, Axis North Pty Ltd (receiver and manager appointed) (in liquidation) [2024] FCA 1017: on 27 May 2025. Those other proceedings concern a multifaceted dispute between Mr So (and entities associated with him) and Mr Clancy (and entities associated with him). Those persons were engaged in land development projects, though they have since had a falling out and are now embroiled in substantial internecine litigation: see CIP Group Pty Ltd v So [2022] FCA 1490; (2022) 164 ACSR 566, 569 - 570 [6] - [8] and, most recently, CIP Group Pty Ltd v So (No 9) [2025] FCA 694. On 15 May 2025, the hearing of that dispute was adjourned to late November 2025. However, the parties to the current matter remained desirous to proceed on 27 May and it was agreed by all that QUD498/2023 ought not to be adjourned. As that course left the door ajar for a finding of credit to be made against Mr So, being a critical witness in this matter, I indicated that, if it were necessary, I would delay judgment until after the hearing of the entire dispute. As it is, the issue that might be affected by a finding in relation to Mr So's credit does not require determination, and it is appropriate for judgment to be given.
2. It must be stressed that the findings made in this matter are based solely on the evidence before the Court, and it may well be that, in the course of the hearing of the primary dispute, additional evidence is adduced that sheds further light upon some of the topics considered herein.

1. The circumstances in which the issues arise inter partes are relatively self-contained. To the extent that there is any degree of complexity, it largely derives from the nature of the defences raised. In general terms, it is said that the manner in which Axis North and other companies associated with it did business - which involved the advancement, by Axis North, of substantial sums to those associated companies as loans, with no agreed terms, interest or security - was "reasonable" in the context of the association of corporate entities. As such, it is necessary to consider the context (and manner) in which Axis North and its associated companies operated.

Axis North as a constituent of the Golden Gate Property Group

1. Axis North was incorporated on 3 December 2015. It is one of a plethora of entities - including, for example, Golden Gate Property Group Pty Ltd, GPG Pty Ltd (GGPG), Wharf Road, Wharf Road Surfers Paradise 1 Pty Ltd and GGPG Developments (No. 8) Pty Ltd - which comprise the so-called "Golden Gate Property Group" (the Group) and have, as their director(s), Messrs So and/or Clancy. Three preliminary observations ought to be made. First, there is no evidence that such entities constitute that which is commonly referred to as a "group of companies", that being "a parent or holding company and a number of companies that were its subsidiaries": Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2015] NSWSC 354 [91]. Here, the companies were variously owned by Mr So, Mr Clancy or both, or together with other entities. Second, it is not readily apparent that there existed any defined group structure. There was no evidence of any cross-collateralization as between the companies in question nor of the existence of any agreements for mutual indemnification in relation to their external liabilities.
2. Third, whilst Mr So, in the course of his evidence, characterised the nature of his relationship with Mr Clancy as that of a "partnership", it must be kept steadily in mind that neither Mr Clancy nor his entities were parties to this action and there is no need to define the precise metes and bounds of their enterprise here. Putting such labels to one side, the thrust of Mr So's evidence was that he and Mr Clancy were, in effect, the controlling minds of several companies through which they conducted their business as property developers. In respect of those companies, it was said by Mr So in an affidavit that was filed on 4 June 2024 (the So Affidavit) that (a) most were controlled by Mr Clancy and Mr So; and (b) some were controlled by either one of them.

1. According to the So Affidavit, since "the inception of the [Group] in 2015, the Group's funding has been primarily comprised of mezzanine and non-bank lenders and investors". Those "non-bank lenders" relevantly included, inter alia, "friends and family" of Mr So, such as Ms Wong as well as Ms Suk Kuen Leung (being an aunt to Mr So's wife). There was some inconsistency as to the interest payable upon investments made by such persons. For example, though Mr So deposes to having informed his parents that he "would provide them with a 20% return on their investment if they loaned money to me", it appears that it was ultimately understood that loans advanced by Ms Wong to the Group (prior to November 2019) would attract 20% interest p.a.
2. It was also said that Mr So used Ultimate Investment Portfolio Pty Ltd (Ultimate) - a company incorporated in or about March 2016, of which Mr So was a shareholder (alongside his wife) and sole director - as "the corporate vehicle" for loans to the Group and that, "[t]ypically, when [Ms Wong] loaned money to the Group, it was advanced to Ultimate and Ultimate on-lent the money to the Group". Whilst it is unclear as to when Ultimate assumed this function, it appears certain companies in the Group had become directly indebted to Ms Wong by 2018. It is also uncertain as to whether Mr So viewed Ultimate as but one cog in the broader Group or, rather, his private company. On the evidence available, the latter view appears more tenable, but such is the nature of the companies in question that it is not easy to distinguish them in this respect.
3. It is also apparent that Ultimate was not used exclusively as the financier to the Group. As Mr So indicated, when funds came into the Group from either Ms Wong or Ms Leung, their designation in the accounts of the business was a matter of chance. In the So Affidavit, he said:

... advances made by my mother and Ms Leung to the Group were recorded in the companies' books interchangeably (sometimes as Ultimate, sometimes as a loan from my mother or Ms Leung personally). It was my intention, when recording these transactions, that a loan from Ultimate was taken to be a loan from my mother.

1. This evidence conforms with the suggestions, advanced by Mr So and supported by an affidavit filed by Ms Wong on 3 June 2024, that (a) he was her "agent" in respect of the investment of her money in Australia; (b) he had full authority to use funds which she had paid into Ultimate as he saw fit; and (c) she did not require any details about how the money was ultimately used. There was some curiosity in the evidence in relation to this arrangement, being that it was said in the So Affidavit that Ms Wong's "only requirement" was that the principal and interest were repaid "as soon as possible". That, of course, is somewhat vague and indeterminate and, it may be added, slightly inconsistent with the usual nature of loans for land development purposes.

1. In or about 2016, Mr So and Mr Clancy pursued a development at Surfers Paradise. On 2 June 2016, Wharf Road entered an agreement to acquire one of the properties upon which the development was intended to occur (the Wharf Road Property) for $7,072,000. Settlement of the purchase of that property happened some one month later, on 8 July 2016, with the Group contributing approximately $3.5m.
2. It appears that some of the money used to finance the acquisition of the Wharf Road Property derived from funds advanced by Ms Wong. That being so, the evidence on the issue as to the source of the funds that were used to acquire the Wharf Road Property is insufficient to draw any useful conclusion. On the other hand, it is unnecessary to do so in the context of this case.

1. It is clear that Mr Clancy and Mr So also pursued the development of various properties along Park Ridge Road, Park Ridge. That so-called "Carver's Reach development" was intended to comprise a master-planned community that would include, inter alia, some 600 residential lots, a childcare centre and a six-hectare district park. Whilst the timing of the project is not entirely clear, Mr So notes that, in or about 2015, he decided that "Park Ridge would be a good location" to undertake such a development. The So Affidavit also notes that, in or about early 2016, Ms Wong began lending money to the Group "to fund the development of Carver's Reach".
2. It is unclear when Messrs So and Clancy opted to abandon the development at Wharf Road and turn their attention and funding to the Carver's Reach development, though it appears to have been in or about late 2018 or early 2019. After so deciding, the Wharf Road Property was sold.

1. By March 2018, it appears that Ms Wong had loaned the Group the sum of approximately $4m.

1. There is no need to consider in detail the circumstances leading up to Ms Yang lending money to Axis North, aside from noting that (a) in or about 2017, she expressed an interest in securing a residency visa in Australia; and (b) she deposes to having understood her chances of doing so to have been improved by undertaking a substantial investment in an Australian business.
2. It appears that a document headed "Investment Framework Agreement" came into existence in or around December 2017. That agreement was (a) said to have been signed by Ms Yang on or about 3 January 2018; (b) executed by Mr So and Ms Yang; and (c) between GGPG and Ms Yang. Its relevance in the proceedings is unclear despite it being an accepted circumstance as between the parties. Whilst expressed as a "legally binding agreement", its terms are somewhat vague. In short, it seems to provide for Ms Yang to make an investment of $3.5m with GGPG on the security of 40% of the shares in that company. Its clauses appear to be largely predicated upon Ms Yang obtaining a "132 visa". Reference is also made to a compulsory investment of $1.9m "required by the [S]tate government", although the origin of that obligation was not explained.
3. On 13 March 2018, a loan agreement for the advancement of $3.5m was entered into between Ms Yang as lender and Axis North as borrower (Loan Agreement). The terms of the agreement are set out in the pleadings and need not be repeated here. It is sufficient to observe that they are wholly imprudent as far as Ms Yang is concerned. Though clothed in legalese, they furnish her with little or no protection for her investment. For example, clause 3 provides as follows:

3. Loan Purpose

3.1 The Borrower warrants to the Lender that the Principal Sum is to be utilised for the business operation of the Borrower, development of the Property or any other purpose as determined by the Borrower.

(Emphasis added).

Whilst the clause masquerades as one providing some warranty advantageous to Ms Yang in her pursuit of a "132 visa" (being a Business Talent Visa), it is readily apparent by the language of the final alternative in cl 3.1 that Axis North was at liberty to use those funds as it so pleased.

1. Ms Yang was given "security" for her loan, being "the Borrower causing the issuance of shares in [GGPG] to the Lender". This was alleged to have been facilitated by a Share Sale Agreement entered into by Ms Yang and GGPG, in which the former acquired 80 Ordinary shares in GGPG for the sum of $80.00. Somewhat bizarrely, that agreement also required Ms Yang to return the security at any time that GGPG required. As security for her loan, it was plainly illusory.
2. Objectively, the Loan Agreement with GGPG was most improvident for Ms Yang. How that agreement came about is not in issue on these proceedings, despite the vague allegation in the Reply that Ms Yang was misled into entering the transactions. Whilst the evidence relating to whether she was so misled was objected to as being irrelevant to the proceedings, the presence of the allegation in the Reply renders evidence vis-à-vis the point technically relevant. Indeed, it is possible that it is relevant to the "reasonableness" of the making of the payments of money from Axis North to Wharf Road or to Ms Wong (via Ultimate) that the funds were acquired by misleading or deceptive conduct on the part of Mr So (or others). However, even if that was the case, nothing substantial was sought to be made of it and no further weight is placed on it.
3. Nonetheless, and in accordance with the terms of the Loan Agreement, it appears that Ms Yang advanced $3.5m to Axis North sometime between 15 and 21 March 2018.

1. Mr So gave evidence that, not long before Axis North received the funds from Ms Yang, he held discussions with Mr Clancy where it was agreed that those funds would be used to repay the outstanding indebtedness of the Group to Ms Wong. He said this was because it would (a) "enable my mother and Ultimate to loan more money to the Group in the future"; and (b) "encourage [Ms Wong] to loan more money to the Group when it was needed".
2. Between 15 and 22 March 2018, Axis North paid $3.5m to Wharf Road. That transaction is recorded as being a loan, however, there is no loan documentation in relation to it. No security was provided nor were any terms or interest agreed. In this respect, it is appropriate to keep in mind that the advance under the Loan Agreement was only interest free for (the first) two years.

1. It is not in contention that, on 19 March 2018, Wharf Road paid $1.4m directly to Ms Wong.
2. On 20 March 2018, a further $1.4m was paid away by Wharf Road. It is the applicant's case that those monies were paid to Ms Wong; it is the respondent's case that they were instead paid to Ultimate. However that may be, given the evidence led as to Mr So's agency for his mother and the fact that he regarded loans from Ultimate as being loans from Ms Wong, it is difficult to reach any conclusion other than that the money was effectively paid to Ms Wong. That is, and without reaching a conclusion vis-à-vis the competing contentions as to how Wharf Road dealt with the funds received from Axis North, it suffices to say that Wharf Road paid away a sum of $2.8m, which was ultimately received by Ms Wong, either directly or through Ultimate.
3. As mentioned, there is no dispute that Mr So's intention was to use the money received by Axis North for the purposes of repaying Ms Wong of the indebtedness of the Group to her, and the payments amounting to $2.8m achieved that purpose.

Formalization of the funding agreements of the Group

1. Prior to late 2019, no formal loan agreements were in place in respect of funding provided by Ms Wong or Ultimate to companies in the Group. The only evidence of the occurrence of the loans seems to have been entries made by Mr So in the books of account of various companies.
2. Some purported formalization of the indebtedness between Ultimate and the companies in the Group occurred in late 2019. Mr So said that, at that time, he had become concerned about the ability of the companies to repay the loans and the viability of the Carver's Reach development. This apparently prompted him to cause a loan agreement to be executed on 20 November 2019 as between Ultimate (as lender) and GGPG (as borrower), with a number of the companies in the Group (including Axis North) providing supporting guarantees and third-party mortgages.

1. In the course of the hearing, differences arose as to the precise scope of that which was in issue. To some extent, that was due to certain generalities in the pleadings, as well as some potential inconsistencies. To mitigate against any possible confusion, the submissions advanced by both parties need be set out against the backdrop of the relevant provisions of the Corporations Act.

1. Section 9 of the Corporations Act defines a "transaction" in the following terms:

transaction, in Part 5.7B, in relation to a body corporate or Part 5.7 body, means a transaction to which the body is a party, for example (but without limitation):

(a) a conveyance, transfer or other disposition by the body of property of the body; and

(b) a security interest granted by the body in its property (including a security interest in the body's PPSA retention of title property); and

(c) a guarantee given by the body; and

(d) a payment made by the body; and

(e) an obligation incurred by the body; and

(f) a release or waiver by the body; and

(g) a loan to the body;

and includes such a transaction that has been completed or given effect to, or that has terminated.

1. At the time of the impugned "transaction", s 588FDA of the Corporations Act (henceforth, s 588FDA) was drafted in the following terms:

588FDA Unreasonable director-related transaction

(1) A transaction of a company is an unreasonable director-related transaction of the company if, and only if:

(i) a payment made by the company; or

(ii) a conveyance, transfer or other disposition by the company of property of the company; or

(iii) the issue of securities by the company; or

(iv) the incurring by the company of an obligation to make such a payment, disposition or issue; and

(b) the payment, disposition or issue is, or is to be, made to:

(i) a director of the company; or

(ii) a close associate of a director of the company; or

(iii) a person on behalf of, or for the benefit of, a person mentioned in subparagraph (i) or (ii); and

(c) it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to:

(i) the benefits (if any) to the company of entering into the transaction; and

(ii) the detriment to the company of entering into the transaction; and

(iii) the respective benefits to other parties to the transaction of entering into it; and

(iv) any other relevant matter.

The obligation referred to in subparagraph (a)(iv) may be a contingent obligation.

(a) the transaction is a payment, disposition or issue; and

(b) the transaction is entered into for the purpose of meeting an obligation the company has incurred;

the test in paragraph (1)(c) applies to the transaction taking into account the circumstances as they exist at the time when the transaction is entered into (rather than as they existed at the time when the obligation was incurred).

(3) A transaction may be an unreasonable director-related transaction because of subsection (1):

(a) whether or not a creditor of the company is a party to the transaction; and

(b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency.

1. Section 588FDA(1)(b) has since been amended (see Treasury Laws Amendment (Modernising Business Communications and Other Measures) Act 2023 (Cth)). In its current form, it reads:

(b) the payment, disposition or issue is, or is to be, made to:

(i) a director of the company; or

(ii) a relative of a director of the company; or

(iii) a relative of a spouse of a director of the company; or

(iv) a person on behalf of, or for the benefit of, a person of a kind referred to in subparagraph (i), (ii) or (iii); and

(Emphasis added).

As made clear by the Explanatory Memorandum to that Act (at 48 [5.18] - [5.21]), this iteration locates the substance of the definition of a "close associate" - being once defined by s 9 of the Corporations Act as a "relative of the director" or "a relative of a spouse of the director" - in ss 588FDA(1)(b)(ii)-(iii) itself. For the avoidance of doubt, to the extent that the Statement of Claim pleads that Ms Wong "is a close associate of Mr So" (emphasis in original), that should be taken as referring to the alternatives that are now stipulated in ss 588FDA(1)(b)(ii)-(iii).

1. The scope and operation of s 588FDA was recently surveyed by Cheeseman and McEvoy JJ in CEG Direct Securities at [99] - [102] (see also Weaver v Harburn (2014) 103 ACSR 416, 428 - 429 [91] - [93] and Crowe-Maxwell v Frost [2016] NSWCA 46; (2016) 91 NSWLR 414, 427 - 428 [71] (Crowe-Maxwell)). There is no need to repeat the principles that were distilled at the present juncture.
2. A transaction will be "voidable" where it is "an unreasonable director-related transaction of the company", and was entered into, or an act was done for the purposes of giving effect to it, during the four years ending on the "relation-back day": s 588FE(6A) of the Corporations Act. Where the Court is satisfied that a transaction is a "voidable transaction", it may make an order that, inter alia, "direct[s] a person to pay to the company an amount equal to ... all of the money that the company has paid away under the transaction": s 588FF(1)(a): or "requir[es] a person to pay to the company an amount that, in the court's opinion, fairly represents some or all of the benefits that the person has received because of the transaction": s 588FF(1)(c).

1. In the Statement of Claim, it is alleged that "[b]etween 15 March 2018 and 22 March 2018, Mr So in his capacity as director of both Axis North and Wharf Road authorised and directed" the payment of (a) $3.5m from Axis North to Wharf Road; and (b) $2.8m from Wharf Road to Ms Wong. It is alleged that these payments comprised (a) a single, or composite, "transaction" to Ms Wong; and, in turn, (b) "a payment made by Axis North" (see s 588FDA(1)(a)(i)).
2. It was then alleged Ms Wong was a "close associate" of Mr So (see s 588FDA(1)(b)(ii)).
3. Further, it was pleaded that a "reasonable person" in the position of Axis North would not have made such a payment because (a) there was no benefit to it in making the payment to Ms Wong; (b) it suffered detriment as a result of making the payment because, for instance, no repayments have been made and the payment was interest and security free (and conversely, the funds were not used to generate income); and (c) Axis North exposed itself to a high degree of commercial risk by making the payment, especially in circumstances where it had other liabilities to meet, including an obligation to repay Ms Yang the amount of her loan (see ss 588FDA(1)(c)(i)-(ii)).
4. In terms of the benefits to other persons arising from the transaction, Ms Yang alleges that Ms Wong received a "significant benefit" because "she obtained $2,800,000 on interest free and security free terms and for no consideration" (see s 588FDA(1)(c)(iii)).

1. In relation to the allegation that Axis North and Wharf Road made certain payments in March 2018, Ms Wong (a) denies that Wharf Road paid her $1.4m on 20 March 2018, as such monies were instead paid to Ultimate; (b) alleges that other amounts from the funds received from Axis North were paid by Wharf Road to third parties; and, most relevantly, (c) says that the payments to Wharf Road comprised a loan from Axis North, and that the payments made by Wharf Road to Ms Wong were made in reduction of an antecedent loan indebtedness (Wharf Road Loan).
2. In essence, it is alleged that the payments made by Wharf Road to Ms Wong were not payments made by Axis North for the purpose of s 588FDA(1)(a)(i) of the Corporations Act and, as such, it could not reasonably be said that there had been a "payment" by Axis North to the respondent.
3. In the alternative, it is said that any payment made by Axis North to Ms Wong was reasonable. Underlying this submission were three propositions. First, it was said that a reasonable person in the circumstances of Axis North would have known that (a) it was permitted to use the sums advanced to it for any purpose, including for the purpose of the development of the Wharf Road Property; (b) shares were advanced to Ms Yang as "security" for the repayment of the loan; (c) the repayment of the so-called Wharf Road Loan to Ms Wong provided an inducement for her to continue to fund the operations of the Group; and (d) the transactions were beneficial to the Group as a whole and, as such, would increase the value of the "security" provided for the loan. In this respect, it should be noted that, in response to Ms Wong's reliance on the terms of the Loan Agreement between Axis North and Ms Yang, the latter asserts, in paragraph 9(b)(i) of the Reply, that she was misled into entering into that agreement by Mr So, amongst others. This issue has been discussed and dealt with above.
4. Second, it was said that some of the money that was transferred to Ms Wong was used "to fund loans which were made by the Respondent, through Ultimate, to GGPG, which were in turn used to fund the [Carver's Reach Development]". Third, it was said that Ms Yang, in parallel proceedings on foot in the Supreme Court of Queensland, had alleged that Messrs Clancy and So had represented that funds loaned by her to Axis North would be used in the Carver's Reach Development, and that she relied upon this representation in entering into the Loan Agreement. Similarly, in other proceedings in this Court, it is said to be alleged that Mr Clancy and Mr So, as directors of Axis North, agreed that the funds loaned by Ms Yang were to be applied to fund the Carver's Reach Development. The relevance of those allegations were not easy to grasp.
5. Further, Ms Wong makes the additional allegation that there was some "benefit" to Axis North arising from the making of the advance to her, because it (a) was beneficial to the Group and, therefore, Axis North "because any such transactions would increase the value of the security under the Loan Agreement and, therefore, the ability for the loan to be repaid"; and (b) enabled her to provide additional funding to the Group. She also asserts, inter alia, that (a) the payments reduced Wharf Road's indebtedness to her; (b) Axis North was not required to repay the loan to Ms Yang for some seven years, and (c) the advance to Wharf Road was a loan to be repaid.
6. The scope of the matters in dispute are widened considerably by Part B of the Defence. There, the circumstances of the developments undertaken by Messrs So and Clancy are raised as constituting the context in which the payments to Ms Wong were made. It is said that (a) from time to time, Ms Wong loaned money to companies within the Group; (b) there were no terms confining the advances made; and (c) those monies were moved around the companies in the Group by Mr Clancy and Mr So, with the transfers being subsequently entered in the accounts as loans by Ms Wong. It is also alleged that the money would "bear interest at 20% per annum" which, at the discretion of Ms Wong, would be capitalised at monthly intervals, and would be used for working capital, including on-lending to other companies. Specifically, it was alleged that some $3.9m had been advanced to Wharf Road by Ms Wong as of 18 March 2017.
7. In relation to the investment by Ms Yang, it is alleged that she signed an Investment Framework Agreement with GGPG. Though the terms of that agreement are extracted where relevant, the precise manner in which those allegations were relevant to the dispute was not made clear. The Loan Agreement is pleaded as being between Axis North and Ms Yang for an amount of $3.5m and its terms are also set out where relevant.
8. Notably, Ms Wong cites the net asset position of Wharf Road at the time of the making of the payments (which was "between in the order of -$444,862 to $192,138 with the potential for a substantial profit to be made"). It was, therefore, said (at [36(e)] of the Defence) that:

(e) by reason of the matters set out above, there were reasonable grounds to expect that Wharf Road ATF the WR Trust would have the financial capacity to repay the amounts loaned to it by Axis North ATF the AN Trust.

1. It is then said that, following the payment of Ms Wong (with the funds received from Ms Yang), Ms Wong advanced $5,589,922 to Ultimate, and that these funds were used by the companies conducting the Carver's Reach Development. This is plainly relied upon as indicating that the repayment of monies to Ms Wong in 2018 did, in fact, induce her to make certain further loans.

Were the impugned payments an "unreasonable director-related transaction"?

1. The conditions of s 588FDA(1) are, without question, cumulative: CEG Direct Securities [14], [99] - [102]. Therefore, in order to succeed upon its claim, the applicant must:

(1) identify the relevant "transaction" (or "transactions"); and

(2) establish that any such transaction:

(a) comprises one of the dealings defined in s 588FDA(1)(a); and

(b) is, or is to be, made to one of the entities defined in s 588FDA(1)(b); and

(3) establish that it may be expected that a "reasonable person", in the company's position, would not have entered the transaction having regard to the factors in s 588FDA(1)(c).

(for a similar summation, see, eg, Re Sans Pareil Estate Pty Ltd [2024] NSWSC 255 [61]).

1. It is necessary to be precise about what Ms Yang alleges is the relevant "transaction". In this case, the "transaction" pleaded was said to comprise the payment of $2.8m from Axis North to Ms Wong. That payment was said to have been made via the transfer of $3.5m to Wharf Road, such that the payment from Axis North to Wharf Road and then from Wharf Road to Ms Wong were the constituent elements of one transaction (as per [9] - [12] of the Statement of Claim).
2. In the applicant's written outline, Ms Yang sought to expand the alleged transaction to include certain wider dealings because, when "viewed in isolation[,] the entry into the Loan Agreement by Ms Yang is difficult to understand". To that end, it was said that:

[28] ... the transaction (for the purposes of section 588FDA(1)) is:

(a) discussions, meetings and representations made to Ms Yang about investing with Axis and "GGPG" to obtain a visa;

(b) provision of the Investment Framework Agreement, Loan Agreement and Share Sale Agreement;

(c) entry into the Investment Framework Agreement;

(d) entry into the Loan Agreement between Ms Yang and Axis on 13 March 2018;

(e) issue of shares in GGPG to Ms Yang (purportedly issued pursuant to the Share Sale Agreement that was signed by GGPG (Mr So) but not signed by Ms Yang;

(f) payments by Ms Yang to Axis between 15 March 2018 and 21 March 2018 totalling $3,500,000;

(g) payments from Axis to Wharf Road between 15 March 2018 and 22 March 2018 (caused to be made by Mr So);

(h) payments from Wharf Road to Ms Wong between 19 March 2019 and 30 March 2018; and

(i) The receipt of $2,800,000 by Ms Wong.

1. This liberalisation in the construction of Ms Yang's case was undertaken by reference to what was said to be a "wide view" in the case law vis-à-vis what might constitute a "transaction" for the purposes of s 9 of the Corporations Act. With reference to both Ashala Model Agency Pty Ltd (in Liq) v Featherstone [2016] QSC 121; [2017] 2 Qd R 1 (at 18 [120]) and Capital Finance Australia Ltd v Tolcher [2007] FCAFC 185; (2007) 164 FCR 83 (at 98 [74]), it was said by Mr Copley for the applicant that:

[13] ... The case law recognises that, where a course of conduct, plan or series of steps is involved, it may be appropriate to take a wide view of what constitutes the transaction, whilst keeping in mind that the steps taken in engaging in the course of conduct, plan or series of steps may comprise transactions in themselves.

1. It must be kept steadily in mind that that approach, and the authorities to which reference was made, relate to the operation of s 588FB of the Corporations Act. That provision provides the definition of an "uncommercial transaction", which is predicated upon substantially the same inquiry as that which is defined in s 588FDA(1)(c): see D Pty Ltd (in liq) v Calas (Trustee), in the matter of D Pty Ltd (in liq) [2016] FCA 1409 [58]. However, and in contrast to s 588FB, s 588FDA makes specific provision for, inter alia, the nature of the "transaction" that will fall within its scope. It somewhat emphatically provides that an action will be a "transaction" for the purposes of the section, "if, and only if", it "is" one of the specific dealings identified in s 588FDA(1)(a) of the Act. The explicit identification of payments, dispositions, or issuance of securities by the company, strongly indicates that an unreasonable director-related transaction is narrower than the infinitely variable transactions envisaged by the definition in s 9. Those dealings suggest that the object of s 588FDA concerns specifically identifiable alienations of property by the entity rather than broad arrangements that include the company: see the context in which s 588FDA was introduced into the Corporations Act: Commonwealth, Parliamentary Debates, House of Representatives, 16 October 2002, 7677 (Mr Peter Costello, Treasurer).
2. Of course, there is some prima facie inconsistency as between the definition of "transaction" in s 9 and the operation of s 588FDA(1)(a). The latter provision, being found within Part 5.7B of the Act, falls within the ambit of s 9. In such circumstances of internal conflict, recourse ought to be had to s 6(1), which, like s 9, lies within Part 1.2 of the Act and provides:
   1. Effect of this Part

(1) The provisions of this Part have effect for the purposes of this Act, except so far as the contrary intention appears in this Act.

1. In addition, s 7 of the Act relevantly provides:
   1. Identifying defined terms

(1) The Dictionary in section 9 includes a definition for each term that is defined in this Act, except:

(a) a term that is defined for the purposes of a single section or part of a single section; and ...

1. These provisions make it clear that, for the purposes of s 588FDA, the internal definition of "transaction" is to apply to the exclusion of the more general definition in s 9 (see also Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) at [27.335.6]). To the extent that this is inconsistent with the observations made by Anastassiou J in Aviation 3030 Pty Ltd (in liq) v Lao, in the matter of Aviation 3030 Pty Ltd (in liq) [2022] FCA 458 (at [299] - [301], [326] and [413]), I would respectfully disagree with that analysis.
2. That being so, the "transaction" in question must be that referred to in the Statement of Claim, being the payment by Axis North of $3.5m to Wharf Road and the onward payment of that or, at least the sum of $2.8m, to Ms Wong (the Transaction). Despite the attempt by the applicant to expand the scope of its case by identifying a somewhat wider arrangement, the allegations in the pleading more appropriately represent the dealing to which s 588FDA might apply.

Was the Transaction a "payment" that was made "by" Axis North "to" Ms Wong?

1. It will be recalled that the applicant alleges that the Transaction was a "payment", made "by" Axis North (see [13(a)] of the Statement of Claim and s 588FDA(1)(a)(i)), "to" the respondent, who is a close associate of Mr So (see [13(b)] of the Statement of Claim and s 588FDA(1)(b)). It is incontrovertible that Ms Wong is "a relative of a director" of Axis North (thereby sufficing the conditions of s 588FDA(1)(b)); however, closer scrutiny must be paid to two interrelated questions, namely: was there a "payment"? If so, was it made "by" Axis North "to" Ms Wong?
2. As the facts recited earlier in these reasons reveal, prior to the receiving of the funds from Ms Yang, Mr So and, allegedly, Mr Clancy, had agreed that the money received by Axis North would be used to reimburse or repay to Ms Wong some of the loans which she had made to the Group. The clear intention was that, following receipt of the funds from Ms Yang they, or most of them, would be received by Ms Wong. To that, the So Affidavit adds that "[b]ecause a large portion of [Ms Wong's] loan was recorded as being owed by Wharf Road to [Ms Wong] ..., I caused the Yang loan funds to be transferred from Axis North to Wharf Road and recorded as a loan from Axis North to Wharf Road in the companies' books". Once those funds had been received by Wharf Road, $1.4m was paid to Ms Wong and a further $1.4m was paid to Ultimate.
3. The central question which therefore arises is whether the passing of the money through the account of Wharf Road before being paid to Ms Wong altered the character of the Transaction. That is, did the receipt of money by Wharf Road, which was booked as a loan to it from Axis North, and the payment of funds to Ms Wong in discharge of an antecedent debt, constitute a payment by Axis North to Ms Wong for the purposes of s 588FDA of the Corporations Act?
4. It may readily be accepted that the submission that only the direct transfer of money from A to B will constitute a "payment" for the purposes of ss 588FDA(1)(a)-(b) of the Corporations Act affords the meaning of that term a far too narrow scope.
5. In Roufeil v Tarrant Enterprises Pty Ltd [2023] FCAFC 142; (2023) 299 FCR 204 (Roufeil), Jackman J (with whom both Abrahams J and I agreed) considered the expression "payment of money" for the purposes of ss 120 - 121 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act). There, the question was whether certain payments made by a person, prior to their entry into bankruptcy, from their account into the loan account of an associated company, which was in debit, were "payments of money" to that company. Relevantly, both accounts were held with the National Australia Bank Ltd (NAB). In the course of argument, it had been accepted that, as a matter of contract, the relevant dealings involved a circumstance where NAB had debited the bankrupt's account, thus reducing the debt which it owed to him, and then credited the company's account with that same amount, thereby reducing the debt owed to NAB by the company (at 212 [27]).
6. In relation to this issue, Jackman J noted the submission that the expression "payment of money" is "not a technical legal one" and encompasses the payment by credit card or cheque, each of which conceals within it a direction to a financial institution to make a payment (citing Federal Commissioner of Taxation v Rozman [2010] FCA 324; (2010) 186 FCR 1, 7 [19] - [21] (Rozman)). In Rozman, Perram J had held that a direction by a private company to a debtor to discharge the relevant debt by payment to a shareholder could be described as a situation in which the private company "pays" an amount to an entity. As his Honour reasoned (at 7 - 8 [22] - [23]):

[22] In truth, there is no reason to construe "pay" as requiring a direct flow of money from payer to payee. Only in a world in which the concept of money was confined to cash and coin could such a notion even begin to work, for once it be accepted that that concept includes debts and other choses of action, it becomes nonsensical to speak about money literally moving from the payer to the payee. Ms Rozman's construction of the word "pay" is, therefore, to be rejected. It ignores ordinary usage and it does so for no good reason.

[23] Ms Rozman's attempt to confine the word "pay" to situations where actual money changes hands is not novel, and, when raised, has generally been rejected.

1. Justice Jackman also referred to several authorities which lend support to the proposition that the payment of money to the bank of an account holder, for that account holder, comprises a payment to the account holder (at 212 - 213 [28] - [31]). His Honour then held (at 214 [35]):

[35] ... I respectfully agree with the reasoning of Perram J in Federal Commissioner of Taxation v Rozman, to which I have referred above, that the concept of "payment" or "payment of money" is an ordinary English expression, which takes its meaning from ordinary usage. In my view, it is entirely appropriate to refer to a banking transaction in which value is transferred from one bank account to another as being a payment of money between the two account holders, irrespective of whether the bank account receiving the money is a current account or a loan account or some other kind of account. The mere fact of receipt of that value constitutes the payment of money. That ordinary usage is supported by the authorities to which the Trustee referred.

1. Based on the foregoing, it might be argued that Axis North transferred value in the amount of $3.5m to the account of Wharf Road, which then transferred value in the amount of $2.8m to Ms Wong and, as a result, there was a "payment" by Axis North to Ms Wong. Whilst this is, in effect, the substance of Ms Yang's submissions, it should ultimately be rejected because it fails to appreciate the full ramifications of Rozman, Roufeil and the decisions cited therein.
2. The receipt of monetary value by one person which has been obtained indirectly from another, cannot be described as "a payment" merely by reference to the flow of value alone. In order for there to be a "payment", the flow of value must alter the legal rights and obligations between the alleged payer and payee. That may be, for example, by the discharge of an indebtedness, either wholly or partially, or by the creation of new rights, such as the creation of a new debt.
3. So, where A directs C, who is indebted to A, to pay an amount to B, to whom A is indebted, it can be said that there has been a "payment" by A to B of the amount, with a consequential diminution of A's indebtedness to B: see, eg, Quality Publications Australia Pty Ltd v Federal Commissioner of Taxation [2012] FCA 256; (2012) 202 FCR 574, 586 - 587 [43]. Similarly, in a circumstance where B was not indebted to A, but the transfer of value via C was intended to create an indebtedness from B to A, it could also be said that there was a "payment" by A to B. However, where a transfer of money or value from A to C, merely puts C into a position whereby it may discharge their own indebtedness to B, and does so by a further transfer of value without any reference to A, there has been no "payment" by A to B. Such dealings neither create nor alter legal rights or obligations as between A and B. A "payment" necessarily requires a transfer of value which has some consequential impact upon the legal rights between parties to it.
4. A gift of value is not a payment and, if Axis North merely transferred the $3.5m received from Ms Yang to Ms Wong, the dealing would not amount to a "payment" under s 588FDA(1)(a)(i). It might plausibly amount to a disposition of the company's property to a relative of a director of Axis North (ss 588FDA(1)(a)(ii) and 588FDA(1)(b)), but that was neither what was pleaded nor what occurred in the context of this case.
5. Here, there was no payment by Axis North to Ms Wong. Undoubtedly there was a payment to Wharf Road of $3.5m. As Mr So said in his affidavit, he transferred the funds received by Axis North to Wharf Road, which was recorded as a loan between those two entities. It was not suggested to him that the recording of such was not efficacious to create a loan and, in all likelihood, it did. That being so, Axis North made a "payment" of the loan funds to Wharf Road. Thereafter, Wharf Road made a payment to Ms Wong of $2.8m (being the payments directly to her and to Ultimate) which had the effect of reducing its indebtedness to Ms Wong by that amount. However, these dealings did not have any effect upon any legal relationship between Axis North and Ms Wong, either in relation to any antecedent legal rights or the creation of new legal rights. Put bluntly, between Axis North and Ms Wong, their legal rights inter se remained unaltered by reason of the dealings that transpired in late March 2018.
6. Ms Wong relied on the discussion in Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 (Sheahan), concerning the meaning of a "payment made by a debtor" for the purposes of s 122(1) of the Bankruptcy Act, as being a useful analogue to the concept of payment by the company in this case. There, Dawson, Gaudron and Gummow JJ observed (at 435) that:

In our view, in characterising the payments made to Carrier and Air Con, it is important to have regard to their source, namely the funds in the receiver's account established in conformity with the requirements of s 421(1) of the Corporations Law and to the control of those funds in the manner discussed earlier in these reasons, in particular by cl 22 of the debenture. It was in exercise of the authority conferred upon him by the debenture to deal with the moneys in this fashion that the receiver was enabled to make the payments. They were payments by cheques which could only be drawn upon the account by the receiver. It is, therefore, correct to characterise them as payments made by the receiver.

That does not cease to be so because of the additional circumstances that the payments had a significant effect upon other subsisting legal relationships.

1. Those observations are largely of little relevance, aside from drawing attention to the important question of the actual source of funds which are used to make the impugned payment. In that case, the contrast was between the company's funds and the receivers' funds, which were of a fundamentally different character. That has no application here.
2. Nevertheless, it is important to note that the plurality in Sheahan held that the concept of a "payment made by a debtor" is wider than a payment that is directly made the debtor to another. Indeed, their Honours accepted (at 437) that a payment could be "made by a debtor" where the debtor directs a third party, who holds funds at their direction or is otherwise obliged to the debtor, to account to the debtor, not by payment to the debtor but to a creditor of the debtor. This has been referred to above, though it does not assist Ms Wong.
3. It follows that Ms Yang has failed to establish the Transaction constituted a "payment" made "by" Axis North "to" Ms Wong. Though the value received by Ms Wong may very well have originated from the funds received by Axis North from Ms Yang, the only payment to her was "by" Wharf Road. Therefore, the necessary requirements of ss 588FDA(1)(a) and (b) of the Corporations Act are not satisfied and, accordingly, Ms Yang's claim must fail.

Was the Transaction "unreasonable" in the circumstances?

1. Given the conclusions that have been reached above, it is not strictly necessary to consider the "reasonableness" inquiry set out in s 588FDA(1)(c) of the Corporations Act. Nevertheless, it is appropriate to deal with such given the potential for this matter to be litigated further.
2. The approach to be taken in any assessment of the "reasonableness" of a transaction for the purposes of s 588FDA(1)(c) was recently discussed in CEG Direct Securities (at [160] - [161]). There, Cheeseman and McEvoy JJ observed that:

[160] The inquiry under s 588FDA(1)(c) is concerned with the reasonableness of the company's conduct, objectively assessed by reference to the company's circumstances and encompassing all relevant matters: Tosich Construction Pty Ltd (in liq) v Tosich [1997] FCA 979; (1997) 78 FCR 363 at 366 to 367 (Burchett, Foster and North JJ); Capital Finance Australia Ltd v Tolcher [2007] FCAFC 185; 164 FCR 83 at 109 [129] (Heerey, Lindgren and Gordon JJ); Crowe-Maxwell at [70] (Beazley P; Macfarlan and Gleeson JJA); Smith v Starke (No 2) at 162 [104] to [105] and [107] (Gleeson J); Weaver at 428 to 429 [91]. Each element of s 588FDA(1)(c)(i) to (iii) is a mandatory consideration in the requisite evaluative assessment: Weaver at 429 [92]. As is the "any other relevant matter" requirement in s 588FDA(1)(c)(iv) which necessitates that facts and circumstances of the particular case be considered in the evaluative assessment required to arrive at a conclusion as to whether the negative proposition is established.

[161] The assessment of "benefits" and "detriment" and any other relevant matter as part of the mandatory considerations required to reach a conclusion as to the negative stipulation in s 588FDA(1)(c) demands a sensible commercial assessment of the reality of the company's circumstances and ought not be confined to analysing only the enforceable legal relationships as documented. To do otherwise risks artificially distorting the operation of s 588FDA by extending the definition of unreasonable director-related transactions to capture transactions in a way that is not consistent with the control mechanism in s 588FDA(1)(c).

1. In Tosich Construction Pty Ltd (in liq) v Tosich [1997] FCA 979; (1997) 78 FCR 363, it was held (at 366 - 367) that the cognate question for the purposes of s 588FB of the Corporations Act, being whether "it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction", needed to be answered from the point of view of the relevant company. That approach should apply equally vis-à-vis any analysis under s 588FDA(1)(c).
2. In Crowe-Maxwell, Beasley P (with whom Macfarlan and Gleeson JJA agreed) observed (at 427 - 428 [70] - [71]) that:

[70] Gleeson J recently conducted an extensive review of the authorities on s 588FDA in Smith (in his capacity as liquidator of Action Paintball Games Pty Ltd) (in liq) v Starke (No 2) (2015) 109 ACSR 145; [2015] FCA 1119. The following principles discernible in her Honour's judgment are of relevance to the present case:

1. Impropriety or breach of director's duty is not necessary to establish an unreasonable director-related transaction (at [104]).

2. The inquiry under s 588FDA(1)(c) is concerned with the reasonableness of the company's conduct, objectively assessed (at [104]-[105]).

3. The inquiry under s 588FDA(1)(c) is conducted by reference to the company's circumstances, encompassing all relevant matters (at [107]).

4. Normal commercial practice is a relevant but not determinative matter in conducting the s 588FDA(1)(c) inquiry (at [108]).

5. A transaction of derivative benefit only can still be for the benefit of the company (at [110]).

[71] McLure P made the following useful observations in Weaver v Harburn (2014) 103 ACSR 416; [2014] WASCA 227 as to what is required to satisfy s 588FDA(1)(c):

"[91] The test of unreasonableness in s 588FDA of the Act is objective; it is what a reasonable person in the company's circumstances may be expected not to do. The 'company's circumstances' encompass all relevant matters, starting with its status as a company and what flows from that; its controllers, shareholders, business and other activities; and the facts and circumstances of, and surrounding, the transaction. ...

1. In the light of these observations, it is self-evident that the reference to the consideration of reasonableness being taken from the perspective of the company, refers to a company that is properly concerned in the advancement of its own corporate interests. That must include, at the very least, (a) compliance with the requirements of the Corporations Act; (b) promotion of its corporate objects; (c) enhancement of its business and profitability; and (d) avoidance of insolvency. That said, a company may act reasonably in the advancement of its interests even if such a course were to involve the incurring of some short-term detriment, so long as some long-term benefit or advantage is perceived to be legitimately available. That advantage may be derived directly or indirectly through other associated companies. However, it is not likely that a company can be said to be acting reasonably for the purpose of s 588FDA by engaging in transactions by which it sacrifices its corporate interests for the interests of others, such as its members in their capacity as shareholders of other or related companies.
2. It follows that the question is whether a reasonable person, in the position of Axis North, would have made the payment of $3.5m to Wharf Road in circumstances where it knew that Wharf Road intended to use the funds to reduce its indebtedness to Ms Wong by $2.8m. This is not the same as asking whether a reasonable person in the position of Axis North would have made the payment to Ms Wong; however, as that did not eventuate, it is irrelevant. In any event, if the loan to Wharf Road was not reasonable, a payment to Ms Wong would have been less so.

The terms of the Transaction are to the detriment of Axis North

1. Under the Loan Agreement, Axis North borrowed $3.5m from Ms Yang for a period of some seven years, with interest being payable in three tranches, namely (and albeit with some degree of generality): (a) no interest to be paid for the first two years; (b) interest to accrue at 2% p.a. on $1.6m for the third year; and (c) interest to accrue at 2% p.a. on $3.5m thereafter. As such, the total amount of interest to be paid at the loan's conclusion would have been some $312,000.
2. Although it is apparent that that agreement strongly favoured Axis North and was improvident from the perspective of Ms Yang, the fact Axis North assumed the not insignificant obligation to repay the loan with interest should not be quickly forgotten.
3. It will be recalled that the Transaction involved, in part, the transfer of $3.5m from Axis North to Wharf Road purportedly as a loan, albeit not subject to any terms. Interest was not payable. Nor was Wharf Road required to provide any form of security. In the absence of any agreement as to the duration of the that "loan", it was repayable upon demand. In the ordinary course, the lending of money in this way might generally be regarded as lacking a commercial basis. It is difficult, at least from an objective standpoint, to discern any logic in borrowing money (upon which interest is payable) and then lending the funds received without imposing any obligation upon the borrower to pay interest or to provide any form of legitimate security. Indeed, the fact that no security was taken would necessarily leave Axis North to vie with other unsecured creditors if the developments proposed by Messrs Clancy and So failed, and Wharf Road was wound up. That prospect is especially concerning where the proposed development was both speculative and likely to have taken years to complete. From the viewpoint of Axis North, that appears commercially improvident and an arrangement from which losses will inevitably arise.

The context in which the Transaction was made undermine a finding of reasonableness

1. Money is moved amongst the Group at the whim of Messrs So and Clancy

[32] Mr Clancy and I operated the Group on the basis that it was essentially one business. Mr Clancy and I were the controlling minds of the companies within the Group and either us or our family members were the beneficiaries of any profits made by the Group (by our status as shareholders). For this reason, we would move money between the companies as and when it was needed and those transactions would be recorded as inter-company loans which would be repaid when the borrower company had funds available. The purpose of running the Group's finances in this way was to enable its various projects to be progressed efficiently. I had discussions with Mr Clancy where the operation of the companies in this way was discussed and agreed. ...

(Emphasis added).

1. If such evidence is accepted, it may be observed that Axis North lent money to Wharf Road in circumstances where the latter would acquire possession of such funds, yet the manner in which such could be used (alongside its other funds and assets) would be subject to the whims of Mr So and Mr Clancy. Indeed, as is discussed above, Axis North, by Mr So, was aware that Wharf Road would use the funds received to repay the indebtedness then owing to Ms Wong. It would no longer have those funds or the value which it represented, even if it would result in it being the owner of the Wharf Road Property and free of indebtedness to Ms Wong. Whilst the precise financial position of Wharf Road after the Transaction is not greatly material, it may reasonably be inferred from the evidence of Mr So that whether the loaned $3.5m was ever repaid to Axis North was dependent on whether he and Mr Clancy determined that to be an appropriate course; after all, money was moved amongst the companies in the Group "as and when" Messrs So and Clancy considered it was "needed". In that calculus, there is nothing to suggest that they would have any incentive to act to protect Ms Yang from detriment at a cost to their own interests.
2. The manner in which Mr So and Mr Clancy dealt with the funds in the Group is important in a broader context. The fact that money was moved around as and when the controlling minds of the Group determined it to be appropriate to do so, means that there was no certainty that the money would remain in Wharf Road. For example, Mr So and Mr Clancy might have changed their minds about which development was worth pursuing, and move the funds to a company, the financial circumstances of which were more precarious than those of Wharf Road. Indeed, they did abandon the Wharf Road Development in favour of the Carver's Reach Development and, given the facts outlined above, at the time of the making of advances to Wharf Road by Axis North, that was a real possibility. From the perspective of Axis North, this form of dealing left it with little, if any, control over where the value representing the money loaned ended up.

2. Axis North was not, itself, in a position to repay the loan to Ms Yang

1. At the hearing of the dispute, much was made of Axis North's balance sheet as at 30 June 2018. It relevantly identified the company's (a) "Current Assets" as $300 "cash on hand" and a motor vehicle (worth $211,337.64); and (b) "Non-current Liabilities" as a number of loans owing to other companies in the Group, as well as Mr Clancy, Mr So and Ms Yang. A noticeable aspect of the identified related-party loans is that their documented histories from the prior 12 months reveal them to not bear interest. Axis North neither paid interest on its borrowings (other than that from Ms Yang) and did not receive interest on the loans which it made to other companies in the Group. In that sense, at the relevant time, Axis North did not appear to engage in any activity which earned it a profit or was intended to earn it a profit. A similar inference can be drawn from the absence of any relevant change in the current liabilities of the company over the previous 12 months (leaving aside a demand for the repayment of money in late 2017). This conclusion is buttressed by consideration of Axis North's profit and loss statements, which disclose that it had no revenue in the financial years ending 30 June 2017, 2018, and 2019.
2. The absence of any evidence that indicates that Axis North engaged in any income producing activity renders the lending of its funds to Wharf Road for no return even more imprudent.
3. Ms Wong submitted that Axis North was in the business of providing finance to the Group and that this justified its lending money to Wharf Road. Whilst it is true that it was, to some extent, a conduit for money which was used by the Group for the Carver's Reach Development, it is difficult to view such as commensurate to being engaged in the business of lending. As noted, it charged no interest on the amounts advanced to companies in the Group and does not appear to have paid interest on the majority of the loans that it obtained from other such entities. Even if this could be viewed as a business, it is not one that justifies the making of the relevant loan.
4. To make matters worse, the balance sheets of Axis North from 2017 and 2018 reveal that, from its inception, its net asset position continued to deteriorate. This meant that the company was not ever in a position to secure any income from any business to repay any interest to Ms Yang. In this way, Axis North, which had an obligation to repay Ms Yang $3.5m and some $300,000 interest in seven years' time, nevertheless lent $3.5m to Wharf Road without security or interest in circumstances where it had an increasing deficit of assets over liabilities and no business or income stream by which income would be earned. In short, its only expectation of being in a position to repay Ms Yang when the loan fell due or, indeed, any of its other loans, was the beneficent exercise of discretion by Mr So and Mr Clancy to return money to it when that time came, in circumstances where both persons, by reason of their shareholdings in other entities, were likely to derive a benefit from refusing to repay the loan. That expectation was worthless.

The Transaction is inconsistent with "ordinary commercial practice"

1. There was no evidence as to what might have comprised "ordinary commercial practice" in the relevant circumstances. Even so, it is difficult to accept that such "practice" would comprise a circumstance where a company borrows money upon terms that it must repay it with interest, only to then lend it out to others on terms that do not require the payment of interest. Similarly, it is difficult to believe such practice would endorse the lending of funds in those circumstances without the taking of any security. On the other hand, Axis North was but one of a number of companies involved in a land development project, and it might reasonably be thought that it is not unusual for such groups of companies to have one that is designated as the treasury for the group. Experience shows that it is often the case that the treasury company has little or no assets, but instead accumulates the debts of the group, and is sacrificed when the development encounters financial difficulties. Whilst experienced lenders will require the provision of real property security to support any loan given, less informed persons may not. Entities of this nature are sometimes referred to as "special purpose vehicles", and they are a common feature in the building industry. That said, courts should not endorse the use of sacrificial companies in this way as having any connection with what could be described as "ordinary commercial practice". Nor should they accept that such a practice exists in circumstances where the payment of one company's debts hinges upon the gratuitous payment of its liabilities by another company.
2. To the extent that Ms Wong submitted to the contrary, and did so on reliance of the observations of Cheeseman and McEvoy JJ in CEG Direct Securities (at [179], [195], [199], [211], [213]-[214], [217]), that should be rejected. While it can readily be accepted that companies in a true corporate group may reasonably act in the interests of others within the group in circumstances where the advancement of those other companies has the potential to advance the interests of all, the same cannot be said of the current circumstances. Here, all that existed were a number of companies. Some of them were owned by Mr So. Some of them were owned by Mr Clancy. Some of them were owned by both, or in some combination with other parties. There were no agreements between them which could result in the sharing of profits from any development, no cross-guarantees in respect of each other's liabilities, nor were they subsidiaries of a holding company that indemnified them in respect of any liability incurred in the course of business. In these circumstances, it cannot be said that the engagement of a company, such as Axis North, in transactions that were beneficial to others, albeit not to itself, is "reasonable" merely because its shareholder(s) may derive some benefit as a shareholder of another company in the Group.
3. Of course, it is possible that this conclusion may not be the same in other circumstances, such as if Axis North had a substantial income producing business and a significant excess of assets over liabilities, that was not the case here: cf the observations in Lewis (as liquidator of Doran Constructions Pty Ltd) v Doran [2005] NSWCA 243; (2005) 219 ALR 555, 588 [148] - [149]. Indeed, it might also be different if Axis North could reasonably expect support from other companies in the Group by reason of the consequences to them, or the interlocking shareholders ,were it to become insolvent, but again, there is nothing to indicate that such circumstances existed.
4. Here, the commercial reality, as of March 2018, was that, as the circumstances of Axis North's insolvency in 2022 demonstrate, there was nothing which suggested it would have the support of other companies in the Group (or the shareholders) if financial difficulties arose. No cross-guarantees, third-part securities or the location of the business in the Group would generate a benefit to Axis North by the transaction in question: cf Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50; Linton v Telnet Pty Ltd [1999] NSWCA 33; (1999) 30 ACSR 465, 472.
5. Although it may be that Ms Wong did, in fact, lend further amounts to the Group, such ex post facto evidence is irrelevant to the question which needs to be answered when the transaction occurred. As mentioned, it might be assumed that Ms Wong might be encouraged to make further advances to the Group, though, in the circumstances of the structure of the Group, that was of little benefit to Axis North.

That which Wharf Road stood to gain by the Transaction

1. In the So Affidavit, it is asserted that, as at the time of the receipt by Axis North of funds from Ms Yang and the payment to Wharf Road, the latter had a net asset position of $298,138. That was based upon Mr So's belief that the Wharf Road Property was worth $7,750,000 (being the valuation attributed to it at 15 March 2018). In stating his view, Mr So also referred to a balance sheet for Wharf Road as of 14 March 2018, which indicated that Wharf Road had a deficiency of assets over liabilities of some $379,861.31. It appears that the difference is largely accounted for by the value attributed to the Wharf Road Property in the balance sheet as being $7,072,000. The balance sheet also shows that the indebtedness to Ms Wong was then $3,600,105.63.
2. Whilst there was some disputation as to whether the net asset position was positive or negative, ultimately, that does not matter. Even if it is assumed that Wharf Road's net asset position was positive, the advancing of $3.5m to it by Axis North only had the effect of substituting it as an unsecured lender in the stead of Ms Wong. While that may have been of substantial benefit to Wharf Road by substituting Ms Wong's finance (and its 20% p.a. interest rate) for finance with no interest, it could hardly have been said to be "reasonable" from the position of Axis North.

That which Axis North stood to gain by the Transaction

1. The view that Axis North obtained a "benefit" from the making of the loan because it obtained an entitlement to recover a debt from Wharf Road is wholly unsustainable. Indeed, the contrary is true. From any ordinary commercial view, the making of the advance to Wharf Road was a detriment to it. Any entitlement to recover the debt was practically worthless, given it turned on Messrs So and Clancy preferring the interest of Ms Yang to their own.
2. To that, it may be added that a "detriment" suffered by Axis North flows from the opportunities which it forwent in making the advance to Wharf Road. Prior to the making of the loan, it held (at least) $3.5m which it could invest (as it saw fit) and have made a return. Though, on behalf of Ms Wong, it was submitted that no specific investment had been identified, it can readily be accepted that an investment in, for example, an interest-bearing account or bonds would have generated sufficient income to repay the $3.5m loan to Ms Yang at its expiration. Axis North could, of course, have made an inter-company loan which earned interest and, whilst that might have exposed it to an increased risk, it would at least have enlivened the possibility of a return from which it might have met its borrowing obligations to Ms Yang. However, it did none of those things, instead advancing the money to Wharf Road, interest free and without security.
3. On behalf of Ms Wong, it was also said that there was a real "benefit" in her being repaid the amount of $3.5m in or around March 2018, as it would encourage her to lend additional funds to the Group in the future. There is some difficulty with this proposition, and it tends to elevate the interests of the so-called "group of companies", or at least some of them, over Axis North as a separate entity. In the first place, it is to be recognised that the companies were not linked as having granted cross guarantees in respect of the liabilities of the Group. Thus, apart from allowing those other companies in the Group to be in a position whereby they might be able to repay their loans to Axis North, the making of further advances by Ms Wong to them was of minimal value to Axis North. It is to be remembered that, unlike many conventional groups of companies, the companies in the Group were not connected by shareholding. Whilst they were individual companies with similar shareholdings, the structure was not one whereby a benefit to one would, thereby, enhance the value of another or others. Rather, they comprised a number of companies which might be said to have been pursuing a broad common goal, although there was no mechanism by which any success in the venture was to be shared amongst them all.
4. It necessarily follows that any submission to the effect that there would be some overall benefit to the Group is misplaced. The fact Ms Wong might lend additional funds to other companies in the Group to engage in business activities would not result in any real benefit to Axis North. The increased value of other companies in the group would not enhance the value of Axis North in any way, save to the extent that the directors might devolve some gratuitous benefit on it.
5. In these circumstances, it is unnecessary to address the evidence concerning whether there was any real expectation that repayment to Ms Wong would encourage her to lend further amounts in the future. That said, the evidence did establish that, to a not insignificant degree, Mr So had substantial autonomy over the use of his mother's money. Both agreed that he was her agent to deal with her money and Mr So's evidence to the effect that a payment to his personal company, Ultimate, was as good as a payment to Ms Wong, tends to support that conclusion.
6. Even working upon the basis that the repayment of $3.5m to Ms Wong in March 2018 did encourage her to make advances to companies within the Group in the future, that was of little relevance to the position of Axis North.

Conclusion as to the "reasonableness" of the Transaction

1. From the above consideration of the benefits and detriments to Axis North from the entering into the Transaction, and the benefits to others as well as other relevant factors, it is impossible to accept that a reasonable person in the position of Axis North would have made the payment to Ms Wong (or, indeed, to Wharf Road). Any benefits from the Transaction were minimal, if not illusory. Conversely, the detriments to it by reason of it parting with a substantial sum of money with no security, no real consideration or identifiable benefit, were real and significant. The only the hope of it recovering the loan was if Mr So and Mr Clancy concluded that it was in their interests to cause that to happen. Whatever benefit might have been obtained for Axis North, by Ms Wong being prepared to continue lending to other companies engaging in other projects, is difficult to discern. Conversely, the other parties to the Transaction, being Wharf Road and Ms Wong, obtain substantial benefits. Wharf Road obtained an unsecured loan on which it was not required to pay interest and which it was able to use to repay Ms Wong who, similarly, obtained the repayment of funds which she had lent.

The liquidation of Axis North and the "relation-back day"

1. On 14 March 2022, Ms Yang filed an application in the Supreme Court of Queensland to wind up Axis North in insolvency. Some two weeks later, on 26 March 2022, Axis North was wound up in insolvency and Mr David Hambleton and Ms Kaily Chua appointed as liquidators. Thus, the "relation-back day" in relation to Axis North was 14 March 2022, being the date on which Ms Wong filed the application in the Supreme Court: see s 91 of the Corporations Act.
2. The impugned payments were made between 15 and 22 March 2018. Therefore, it can be said that the Transaction was entered into, or acts were done giving effect to it, within the four years prior to the "relation-back day": s 588FE(6A). Accordingly, had the Transaction comprised a "payment" "by" Axis North "to" Ms Wong for the purposes of ss 588FDA(1)(a)-(b), it would have been an "unreasonable director-related transaction" and "voidable". In that circumstance, an order would have been made under s 588FF directing Ms Wong to repay the $2.8m received from the Transaction to Ms Yang (having been assigned the rights of Axis North's liquidators, as well as the rights of Axis North, to sue Ms Wong vis-à-vis the Transaction on 25 June 2023). That being so, it is unnecessary to consider the form that any such order may have assumed.

1. Though one can understand Ms Yang's concern with the manner in which Axis North disposed of the money she lent it, her action failed. No submissions were advanced to the effect that the ordinary rule in relation to costs should not apply, and there is no apparent reason why it should not. It follows that Ms Yang should pay the respondent's costs of the proceedings.

I certify that the preceding one hundred and nine (109) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.