Federal Court of Australia Sharif v Vitruvian Investments Pty Ltd (No 3) [2023] FCA 920 File number: WAD 127 of 2022 WAD 153 of 2022 Judgment of: COLVIN J Date of judgment: 8 August 2023 Catchwords: CORPORATIONS - where shares cancelled without complying with the statutory procedure for a selective reduction of capital - where relief sought by company under s 1322 of the Corporations Act 2001 (Cth) for Court to grant relief - where shareholder claims conduct in cancelling shares and other conduct to be oppressive under s 232 of the Corporations Act 2001 (Cth) CORPORATIONS - where plaintiff (in WAD153/2022) seeks relief under s 1322 of the Corporations Act 2001 (Cth) - where plaintiff claims statutory relief in the nature of rescission appropriate - where plaintiff alleged misleading and deceptive conduct - where plaintiff alleged agreement made on basis of a qualification the defendant did not have - where such factual finding not made - where complete disregard for statutory requirements - where continuing and blatant disregard for statutory requirements demonstrates dishonesty - where plaintiff acted as if statutory rescission was a self-help remedy - where plaintiff took no steps after being informed of failure to comply with statutory procedure - where not case that there is no substantial injustice - where significant delay in bringing claim - where requirements of s 1322 not met - claim dismissed with costs CORPORATIONS - where plaintiff (in WAD127/2022) alleges cancellation of shares and other conduct was oppressive - where cancellation of shares found to be oppressive - where evidence of plan to oppress plaintiff - where only reason for cancellation is alleged misleading and deceptive conduct said to have induced agreement to issue shares - where alleged misleading and deceptive conduct not established - oppression established by company, director and shareholder cancelling shares and then issuing further shares to dilute shareholding if shareholding subsequently reinstated - appropriate relief is to require benefitting shareholding to transfer shares to the plaintiff - claim upheld Legislation: Competition and Consumer Act 2010 (Cth) Schedule 2 (Australian Consumer Law) s 243 Corporations Act 2001 (Cth) ss 232, 233, 256B, 256C, 256D, 1322 Cases cited: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2019) 238 CLR 304 Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55 G8 Communications Ltd, in the matter of G8 Communications Ltd [2016] FCA 297 Hall v Poolman [2007] NSWSC 1330; (2007) 215 FLR 243 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 ICandy Interactive Limited, in the matter of ICandy Interactive Limited [2018] FCA 533 Joint v Stephens [2008] VSCA 210 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 Queensland Bauxite Ltd, in the matter of Queensland Bauxite Ltd [2018] FCA 2113 RBC Investor Services Australia Nominees Pty Limited v Brickworks Limited [2017] FCA 756 Wilmar Sugar Australia Limited v Mackay Sugar Limited [2017] FCAFC 40 Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 332 Date of hearing: 29-31 May 2023 and 1 June 2023 For WAD 127 of 2022: Counsel for the Plaintiff: Mr M Goldblatt Solicitor for the Plaintiff: Hall & Wilcox Counsel for the Defendants: Ms R Young SC Solicitor for the Defendants: Bennett For WAD 153 of 2022: Counsel for the Plaintiff: Ms R Young SC Solicitor for the Plaintiff: Bennett Counsel for the Defendant: Mr M Goldblatt Solicitor for the Defendant: Hall & Wilcox ORDERS WAD 127 of 2022 BETWEEN: AHMAD WALID OBAID SHARIF Plaintiff AND: VITRUVIAN INVESTMENTS PTY LTD (ACN 630 548 846) First Defendant JONATHAN CHARLES GREGORY Second Defendant J & S GREGORY PTY LTD (ACN 163 712 598) Third Defendant VFORMTRAIN PTY LTD (ACN 641 497 323) Fourth Defendant WAD 153 of 2022 BETWEEN: VITRUVIAN INVESTMENTS PTY LTD (ACN 630 548 846) Plaintiff AND: AHMAD WALID OBAID SHARIF Defendant order made by: COLVIN J DATE OF ORDER: 8 AUGUST 2023 THE COURT ORDERS THAT: 1. On or before 4.00 pm on 14 August 2023, the parties do file a minute of orders to give effect to these reasons, alternatively competing minutes. 2. The proceedings be listed for a case management hearing at noon AWST on 15 August 2023. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT COLVIN J: 1 Mr Walid Sharif was a shareholder in Vitruvian Investments Pty Ltd (Vitruvian). He held 15% of the issued shares in the company. Mr Jonathan Gregory was the sole director of Vitruvian and held 75% of the issued shares. Mr Andrew Larsen held the remaining 10%. He described himself as an angel investor in the company. 2 On 30 June 2020, Mr Gregory as sole director resolved to cancel Mr Sharif's shares. He claimed to be able to do so because, on Mr Gregory's version of events, Mr Sharif had deliberately misrepresented and exaggerated his qualifications to Mr Gregory when an agreement was made for Mr Sharif to commence working at Vitruvian on terms that included the issue of a 15% shareholding to Mr Sharif. In correspondence at the time of the director's resolution, lawyers acting for Vitruvian claimed that the company had rescinded the agreement with Mr Sharif to issue the shares. 3 Vitruvian immediately gave effect to the resolution to cancel the shares held by Mr Sharif. Two weeks later it issued 100,000 shares to J & S Gregory Pty Ltd (a company controlled by Mr Gregory) and 11,090 shares to Mr Larsen. On 10 September 2020, the shares then on issue by Vitruvian were split with approximately 178 shares being issued for every share. In addition, three million shares were issued to VFormTrain Pty Ltd as trustee for employees of Vitruvian for the purpose of establishing an employee share scheme. Over the following month, Vitruvian also issued shares to J & S Gregory Pty Ltd, Mr Larsen and two other investors at $0.21 per share and then another investor at $0.36 per share. Thereafter, Vitruvian made a further share issue in March 2021 at $0.37 per share and on 6 April 2022 at a price of $1.41 per share to some parties and $1.77 per share to other parties. There was a further issue of shares on 5 May 2022 at $1.77 per share. 4 Consequently, if Mr Sharif's shareholding was now reinstated his interest in Vitruvian would be minimal because it would be diluted by the extent of share issues that have occurred since the cancellation of his shareholding. 5 Mr Sharif claims, and Vitruvian now accepts, that the cancellation of Mr Sharif's shares was in breach of s 256B and s 256D of the Corporations Act 2001 (Cth). Section 256D(2) provides that a contravention of those provisions does not affect the validity of the reduction in capital or any contract or transaction connected with the reduction. 6 Mr Sharif claims that the conduct of the affairs of Vitruvian has been oppressive to Mr Sharif as a member of the company contrary to s 232 of the Corporations Act. He seeks declaratory relief to that effect. He also claims that J & S Gregory Pty Ltd and VFormTrain Pty Ltd benefitted from that conduct. They, together with Vitruvian and Mr Gregory, are the defendants to the oppression claim (Vitruvian defendants). 7 Mr Sharif also seeks an order that Vitruvian now issue him shares equivalent to 15% of its share capital, alternatively an order that J & S Gregory Pty Ltd transfer shares to him equivalent to 15% of Vitruvian's share capital. It is the latter alternative that was pressed in closing submissions for Mr Sharif as being the most appropriate. Mr Sharif accepts that, as to shares that are in addition to reinstatement of his cancelled shareholding, any order should be on terms that require him to pay consideration for the shares at the price paid by others at the time of each share issue. Alternatively, he seeks an order for payment of compensation in an amount equal to 15% of the value of Vitruvian's share capital (less the amount he would have been required to contribute in order to subscribe for shares at the time of the various share issues that have occurred since his shares were cancelled). 8 In the alternative to the oppression claim, Mr Sharif alleges that the way in which Vitruvian has raised capital has been in breach of an implied term of an agreement that was made when Mr Sharif agreed to commence working at Vitruvian. He says that the implied term was to the effect that he would be afforded the opportunity of participating in any capital raisings and other share issues undertaken by Vitruvian on the same terms as such capital raisings and other share issues to the extent necessary to obviate any dilution of his shareholding. He also says that the capital raising has been in breach of an implied term to act in good faith. He seeks damages on the basis that Vitruvian breached the agreement by cancelling his shares (thereby, in effect, retrospectively not issuing them as agreed) and by thereafter issuing shares without giving him the opportunity to participate. He says that if his shares had not been cancelled then he would have taken up the opportunity to subscribe for shares to the extent that his financial circumstances permitted him to do so. 9 By separate proceedings, Vitruvian seeks relief under s 1322 of the Corporations Act excusing its failure to comply with s 256B and s 256D. It says that as Mr Sharif engaged in misleading or deceptive conduct at the time of his agreement with Vitruvian, it is entitled to statutory relief in the nature of rescission with effect from the date of the agreement. In those circumstances, it says that the requirements of s 1322 have been satisfied. Even if it is not entitled to relief in the nature of rescission, Vitruvian still maintains that the misrepresentation by Mr Sharif justifies relief under s 1322. 10 The misleading or false representation alleged to have been made by Mr Sharif is that he had a bachelor's degree in electrical engineering when his only qualification was the equivalent of an Australian technical college certificate. The representation was said to have been made by Mr Sharif to Mr Gregory at a meeting held at Clancy's Fish Bar in City Beach in April 2019 (Clancy's Meeting) and to have been repeated in an investor pack sent by email to Mr Gregory by Mr Sharif in August 2019 after he commenced working for Vitruvian (August Email). 11 Mr Gregory says that he relied upon the truth of the alleged representation to conclude that Mr Sharif had the intelligence, hard work ethic and aptitude that Mr Gregory was looking for because, at least in Mr Gregory's mind, those attributes were required for a person to obtain a university degree in electrical engineering. He says that on the basis of the truth of the representation and what he deduced from its truth as to the capabilities of Mr Gregory that he agreed, on behalf of Vitruvian, to engage Mr Sharif on terms that included Mr Sharif being given 15% of the shares in the company at the time. 12 A separately pleaded claim to the effect that work done by Mr Sharif failed to conform to an implied term as to the quality of that work was not pursued. Instead, Vitruvian said that it relied upon evidence that had been advanced in support of that claim to support its misleading and deceptive conduct claim. In effect, it alleged in a general way, that the evidence showed that Mr Sharif did not have abilities that Mr Gregory deduced that he would have based on Mr Sharif's statement that he had a bachelor's degree in electrical engineering. The logical flaw in that aspect of Vitruvian's case is addressed below. 13 It is an admitted fact in the proceedings that Mr Sharif does not hold a bachelor's degree in electrical engineering. It is also not controversial that he did undertake studies at Heinz Nixdorf Vocational College in Essen, Germany and that in 2005 he graduated having completed a three-year course of study which he undertook over a five-year period. Part of that course of study related to electrical engineering. The course of study was at a level broadly equivalent to that offered by a technical college in Australia. Completion of the course qualified Mr Sharif for employment in Germany as a state certified information technology assistant. 14 The claim as to falsity of the alleged representation by Mr Sharif concerning the degree relies upon the admission by Mr Sharif that he did not have a degree. Significantly, it is not alleged that, by representing that he had a bachelor's degree in electrical engineering, Mr Sharif impliedly represented that he had any particular attributes, skills or abilities. If the case had been presented in those terms then there would have been issues as to whether any such representation was implicit in the alleged representation about the degree and whether Mr Sharif possessed those attributes, skills and abilities. Therefore, falsity of the representation as alleged could not be demonstrated by evidence concerning the attributes, skills or abilities possessed by Mr Sharif. Further, that evidence could have no relevance to the question of reliance. The case advanced as to reliance depended upon the claim that Mr Gregory deduced from the alleged representation about the degree that Mr Sharif would have certain attributes, skills and abilities and for that reason, had Mr Gregory known that Mr Sharif did not have a degree, he would not have entered into the agreement for Mr Sharif to work at Vitruvian. 15 The focus of the submissions on both sides was upon whether, on the evidence, it could be concluded that Mr Gregory was influenced by the alleged statement concerning the degree in deciding to enter into the agreement. 16 Therefore, the reliance aspect of the case as advanced by the defendants (including the case in support of Vitruvian's claim to relief under s 1322) turns on whether Mr Gregory drew an inference about the attributes, skills and abilities of Mr Sharif of the kind he claims and whether it caused him to enter into the agreement. The resolution of those questions does not involve an inquiry as to Mr Sharif's actual attributes, skills and abilities or the quality of the work he undertook at Vitruvian. 17 Further, for his part, Mr Sharif advances no case that statutory rescission would not be appropriate as a remedy because a point was reached where Vitruvian (by Mr Gregory) continued with the agreement once it was in a position to adjudge whether Mr Sharif had the attributes, skills and abilities that Mr Gregory had inferred he possessed by reason of his alleged claim that he had a bachelor's degree in electrical engineering. It was perhaps hinted at by submissions to the effect that considerable time elapsed during which it was possible to observe the work done by Mr Sharif during which no complaint was raised. However, those submissions were made to support a case to the effect that there was no reliance upon any representation found to have been made by Mr Sharif to the effect that he had a bachelor's degree in electrical engineering. There was no case advanced for Mr Sharif to the effect that, whatever the position may have been when the agreement was made for him to commence working at Vitruvian, by the time his shares were cancelled Mr Gregory on behalf of Vitruvian had made an informed election to affirm the agreement and continue with Mr Sharif. 18 Therefore, the case for Vitruvian on its application under s 1322 and for the Vitruvian defendants in answer to the claim by Mr Sharif is to the following effect: on the basis of the truth of the alleged representation that Mr Sharif had a degree, Mr Gregory formed a particular view as to Mr Sharif's capabilities and, based on that view, he decided (on behalf of Vitruvian) to enter into an agreement with Mr Sharif. It was on that particular basis that it was alleged that an order in the nature of rescission of the agreement would be appropriate. That is to say, the view that Mr Gregory was said to have formed was alleged to have been of such significance to Mr Gregory that he would not have made the agreement with Mr Sharif had he known that he did not have a degree. However, relief in those terms is not sought pursuant to the statutory provisions that deal with the remedial consequences of misleading or deceptive conduct. Rather, the claim made is that as it would be appropriate for statutory relief rescinding the agreement and cancelling the issue of the shares to Mr Sharif to be granted, the availability of that relief in all the circumstances supports Vitruvian's application for relief under s 1322. Vitruvian does not otherwise seek relief against Mr Sharif based upon his alleged misleading or deceptive conduct. 19 There is a plea in the defence by the Vitruvian defendants to the oppression claim brought by Mr Sharif that Vitruvian had an entitlement to rescind Mr Sharif's engagement by reason of his misleading or deceptive conduct. However, a claim of that kind is not pressed and rightly so. The statutory remedies conferred if a party breached the statutory proscription of misleading or deceptive conduct do not include a self-help remedy of rescission (akin to that conferred by the general law in limited circumstances). Rather, they empower the Court to make an order declaring a contract to be void or void at all times on or after a date specified in the Court's order: see s 243 of the Australian Consumer Law. The cancellation of Mr Sharif's shares could not be justified on the basis of an alleged exercise of a right or entitlement as a matter of general law to rescind his engagement. The only relevance of the allegation of misleading or deceptive conduct is to support the relief sought by Vitruvian under s 1322 which relief would have the effect of validating the cancellation of the shares and thereby provide an answer to the oppression claim (at least insofar as it complained about the act of cancelling Mr Sharif's shares). 20 As to the subsequent conduct in issuing further shares after the cancellation of the shares of Mr Sharif, the case advanced by the Vitruvian defendants is to the effect that there was no oppression in raising capital by issuing shares to investors in circumstances where Vitruvian needed the capital. That is to say, the conduct of Vitruvian in issuing further shares to raise capital was commercially reasonable and not oppressive. Further, they say that even if there was oppressive conduct that does not mean that relief in the terms sought should be granted to Mr Sharif. As to the appropriate relief, the Vitruvian defendants say that if Mr Sharif's shares had not been cancelled at the time of the subsequent share issues then he would not have been able to subscribe for shares because he did not have the financial capacity to participate in the capital raisings that occurred. There was also an issue as to whether, in that event, it had been established on the evidence that funds held jointly by Mr Sharif and his wife would have been applied to buy shares in Vitruvian in circumstances where Mr Sharif's wife did not give evidence as to whether she was willing to have their shared resources applied to subscribe for shares in Vitruvian. These matters were also relied upon in answer to the alternative claim by Mr Sharif based upon the alleged term of his agreement to the effect that he would be afforded an equal opportunity to participate in any further issue of securities by Vitruvian. 21 Importantly, Mr Sharif makes no claim that, at the relevant time, there was no legitimate need for capital on the part of Vitruvian. Nor does he say that the purpose of issuing shares to VFormTrain Pty Ltd (namely, to establish an employee share benefit scheme) was not justified. Rather, the claim he makes is that there was a plan that the shares of Mr Sharif would be cancelled, that Vitruvian would then undertake various steps which would mean that even if Mr Sharif's shares were reinstated, by that time his shareholding would have been substantially diluted. However, when asked to clarify the position in opening, counsel for Mr Sharif did maintain that the conversion to equity of alleged loans to Vitruvian by each of J & S Gregory Pty Ltd and Mr Larsen that occurred on 14 July 2020 was part of the oppressive conduct. Further, each of Mr Gregory and Mr Larsen was cross-examined about the reasons for and circumstances in which those share issues had occurred. Therefore, to that limited extent only, the case as pleaded (which alleged that each of the steps taken in relation to the securities of Vitruvian after the cancellation of Mr Sharif's shares was oppressive) was pressed by Mr Sharif. 22 Therefore, there are four aspects to the oppression that is alleged to have occurred, namely: (1) the exclusion of Mr Sharif from the management of Vitruvian; (2) the cancellation of Mr Sharif's shares without his consent and without complying with the statutory procedure for a selective reduction of capital; (3) the formulation and implementation of the plan to dilute his shareholding by not allowing him to participate in future capital raisings; and (4) the issuing of shares that occurred on 14 July 2020 (which was sought to be justified on the basis that it involved a conversion of loans to equity). 23 The other actions of the share split, establishing the employee share scheme and the rounds of capital raising by the issue of shares are not challenged on the basis that they had no proper commercial purpose. Rather, they are said to be part of the implementation of the plan to dilute any shareholding to which Mr Sharif may be entitled by first cancelling his shares such that (unlike Mr Gregory and Mr Larsen and their associated entities) Mr Sharif would not be able to participate in the issue of further shares for the purpose of Vitruvian raising necessary capital. Then, even if his shareholding was subsequently reinstated, his interest would have been substantially diluted. The evidence concerning the quality of the work done by Mr Sharif for Vitruvian 24 The way the issues were joined gives rise to an aspect to the proceedings which it is appropriate to emphasise at this point due to its significance. For reasons that have been given, the abandonment of the claim that Mr Sharif breached the agreement that he made concerning his work for Vitruvian means that no issue arises as to whether his performance of the work fell short of what might reasonably have been expected. Consequently, the focus must be upon whether the agreement with Mr Sharif would not have been made had Mr Gregory known the true position concerning Mr Sharif's qualifications and, if so, whether statutory relief in the nature of rescission would be appropriate. 25 At times, in the course of his testimony, Mr Gregory referred to respects in which he thought that Mr Sharif's abilities or the work that he undertook was not up to his expectations. However, that testimony (if accepted) remains only evidence of his personal view in a case where no claim was pressed to the effect that there was a representation made by Mr Sharif as to his skills or abilities nor that the work undertaken by Mr Sharif was defective in some way that meant he did not perform his agreement. The evidence is relevant only to reliance. 26 The evidence as to the quality or significance of the work that Mr Sharif did was described in opening submissions for Vitruvian as being relied upon only to support the claim to relief under s 1322. The same position was put in written and oral closing submissions for Vitruvian. As has been noted, the case about alleged misleading or deceptive conduct was confined to the alleged representation concerning the bachelor's degree in electrical engineering. If Vitruvian had no lawful basis to cancel Mr Sharif's shares, it is difficult to see what to make of general evidence to the effect that, in the view of Mr Gregory, Mr Sharif did not do a good job. Nor is it apparent how some complaint about the work that he did that is not articulated as a basis for cancelling the shares could support relief under s 1322. There is no claim before the Court concerning the termination of Mr Sharif as chief executive officer. As will emerge, it was uncontroversial as between the parties that the agreement made was for the shares to be issued to Mr Sharif without conditions. Therefore, no issue arises as to whether there was any form of contractual basis for cancelling the shares. A claim that there had been a total failure of consideration was not pressed. 27 The submission to the effect that Mr Sharif's inability to produce work to the standard reasonably expected of someone with a bachelor's degree 'proved, in effect, the falsity of the representation' is misconceived. The falsity of the representation, if proven to have been made, was admitted. If, as was not the case, Mr Sharif had advanced a case to the effect that if the representation was found to have been made and relied upon in the manner claimed that rescission was not appropriate because he had the technical skills, intelligence and hard work that might be expected of someone who had undertaken an engineering degree and had delivered the benefit of that work then the evidence might have had some significance - but even then it would not have been significant for any finding as to the falsity of the alleged representation. 28 In actuality, the case advanced by Mr Sharif as to causation included a submission to the effect that Mr Gregory knew that Mr Sharif was inexperienced and that it was his sales and marketing experience as well as his drive and energy (or what was described at some points in the evidence as 'hustle') that was being put forward as the reason why he was a suitable candidate. 29 For all those reasons, it is not necessary to deal with the evidence about the nature and extent or quality of the work that was done for Vitruvian by Mr Sharif in order to resolve the claims that were ultimately pressed in the two proceedings. 30 Likewise, for Mr Sharif, his case was initially advanced on the basis that he had contributed to the intellectual property that was used to develop the fitness product. He claimed to have been involved in the inventive process and to be entitled to a personal ownership interest in the patents that had been secured. However, those claims were not pressed by Mr Sharif. In consequence, large parts of the evidence adduced for Mr Sharif in the proceedings had little or no relevance to the issues on which the parties were joined. These reasons will not address this further large swathe of irrelevant material. 31 The only qualification to the above position is that certain aspects of the allegations that have been made and the evidence advanced to support those allegations which are no longer pressed may bear upon the credibility of the competing accounts as to the facts that remain relevant. A conversation in late 2019 about whether Mr Sharif needed to finish his degree 32 Before outlining the issues for determination, it is necessary to expose one further point concerning the evidence. It was a point that loomed large in the competing contentions as to whether Mr Sharif had engaged in misleading or deceptive conduct. 33 As has been explained, the case for Vitruvian in support of the relief under s 1322 of the Corporations Act is put on the basis that, at the Clancy's Meeting, Mr Sharif misrepresented that he had a bachelor's degree in engineering. Further it is said that he continued to make that representation after he commenced work at Vitruvian when he sent the August Email to Mr Gregory and Mr Larsen on 21 August 2019 which attached an investor pack in which Mr Sharif claimed that he was 'a Heinz Nixdorf electrical engineer graduate from Germany with a major in software engineering'. Mr Gregory's position was that he did not know the true position in relation to Mr Sharif's education until the time when Vitruvian cancelled his shares in June 2020. 34 However, in an affidavit deposed by Mr Gregory on 22 April 2022 and filed in support of the application for relief under s 1322 when the application was initiated by Vitruvian, Mr Gregory said: I also recall a conversation I had with Walid in late 2019. I said words to the effect that potential investors would most likely carry out due diligence on Vitruvian which meant that we would get put under the microscope by investors. In response, Walid said words to the effect that he had better finish his degree then. 35 The affidavit was prepared when the proceedings were being conducted in the Supreme Court of Western Australia. The proceedings were then transferred to this Court and directions were made for the filing of witness statements. In the witness statements filed by Mr Gregory in the proceedings in this Court, there was no mention of any conversation in late 2019 in which Mr Sharif was alleged to have said something along the lines of 'I better finish my degree then'. Further, the pleadings concerning the alleged misleading representation made no reference to the conversation. 36 The case was opened for Mr Sharif on the basis that the conversation in late 2019 referred to in the affidavit was significant because, so it was contended, it either showed that Mr Sharif had not told Mr Gregory that he had a bachelor's degree or that, if he had, Mr Gregory had placed no reliance upon the statement in deciding to enter into an agreement with Mr Sharif that included the issue of 15% of the shares in Vitruvian to him. Indeed, this was advanced as a conversation of considerable significance in circumstances where some months later in April 2020 (almost a year after the Clancy's Meeting) Mr Gregory proceeded to perform the agreement by causing Vitruvian to issue 15% of the shares in Vitruvian to Mr Sharif and proposing a draft shareholders agreement which provided for Mr Sharif to be the chief executive officer of the company and also indicating that the next step was to appoint Mr Sharif to the board of Vitruvian. These steps were said to have been taken despite Mr Gregory, on his own account of what occurred in late 2019, being aware from what had been said by Mr Sharif in late 2019 that he had not completed a bachelor's degree in engineering. 37 In presenting the case in that manner, Mr Sharif must be taken to maintain that the conversation in late 2019 did occur and that by the conversation Mr Sharif was not making a joking remark but was truly indicating that he did not have a bachelor's degree in engineering. 38 Further, that position was reinforced when Mr Gregory was cross-examined on the basis that the conversation had taken place and that it indicated something of significance to Mr Gregory which he might have been expected to question Mr Sharif about at the time if indeed he regarded the topic as being of importance. 39 As part of that cross-examination, Mr Gregory was also taken to a letter that had been sent by his lawyers to Mr Sharif dated 30 June 2020. Mr Gregory confirmed that he approved of the terms of the letter. Under the heading 'Misrepresentation about your qualifications', the letter stated: It has now come to Vitruvian's attention that you do not in fact have a Bachelor's degree in electrical engineering for the following reasons: … the Heinz Nixdorf Berufskollegin (HNBK) school in Germany is not a University and does not award Bachelor degree qualifications. HNBK awards industry recognised certificates similar to a TAFE accreditation; … HNBK has confirmed to us that it does not award Bachelor degrees in electrical engineering - information technology; and … during a conversation with Mr Gregory in late 2019 when discussing the fact that potential investors would most likely carry out due diligence on the company, you said to Mr Gregory words to the effect that you had better finish your degree then. In the circumstances, you deliberately misrepresented and exaggerated your qualifications to Mr Gregory at the meeting at Clancy's Fish Bar, prior to entering into the Agreement, and also on a Vitruvian investor deck that you emailed to Mr Gregory on 21 August 2019 and a Vitruvian investor deck that you emailed to Mr Gregory on 7 January 2020. Further, you continue to make the misrepresentation on your personal LinkedIn account. 40 If the position of Mr Sharif was that the comment was meant as a joke then it would not have been proper to put to Mr Gregory that it should have been understood by Mr Gregory as some form of communication to the effect that Mr Sharif did not have a degree. It must have been Mr Sharif's case that his remark was made and that it was made to indicate that he did not have a degree. The same may be said of the manner in which the comment was relied upon in the lawyer's letter. 41 When cross-examined, Mr Gregory's evidence was to the effect that when he heard Mr Sharif make the statement that he better finish his degree, it made him suspicious that Mr Sharif did not have a degree but Mr Gregory gave him the benefit of the doubt on the basis that Mr Sharif meant that he had completed the study but had not been awarded the degree. However, this was not an account that he had given previously and in the lawyer's letter alleging misrepresentation by Mr Sharif as to his qualifications, the statement was relied upon to support a claim that Mr Sharif had deliberately misrepresented his qualifications. That is to say, it was relied upon as a statement that indicated that Mr Gregory did not have a degree. 42 Further, if indeed the question of Mr Sharif's qualification was a matter of significance in Mr Gregory's mind (as he claimed to be the case) then it seems most unlikely that he would take particular notice of the comment by Mr Sharif about having to finish his degree yet say nothing more. It is also difficult to see how a statement made by a person that they had better finish their degree might be interpreted to mean that the person had finished the degree but needed to complete some formality for the degree to be issued (being the conclusion Mr Gregory maintained he had reached when the statement was made). His oral evidence as to what he concluded from the comment at the time was most unconvincing. It involved various versions of the unlikely proposition that by finishing off his degree, Mr Sharif meant that he had completed all of the requirements to obtain the degree but there was some further formal step to be taken for the degree to be conferred. 43 Looking at the significance of the conversation for the case advanced by Mr Sharif, evidence was not led from Mr Sharif about the conversation and it was not raised with him in cross-examination. Further, Mr Sharif had completed his course of study in Germany so a reference to finishing his degree is unlikely to refer to that course of study. It was common ground that Mr Sharif held a certified translation of his qualification which testified to the completion of all the course requirements and that he was entitled to the title of state certified information technology assistant. There was no suggestion from him that there was some reason for uncertainty as to whether he had completed the course and been awarded the relevant qualification. 44 Therefore, from the perspective of the case advanced by Mr Sharif, the reference to having to complete a degree would only make sense if he was referring to a degree that he did not hold but which he had claimed to hold. This is especially so given that the comment arose in a context where Mr Gregory was identifying a possible problem if investors put him under the microscope. The logical inference is that Mr Sharif was referring to a degree that he had claimed to hold in previous conversations with Mr Gregory. If that was so, it tended to support the claim by Mr Gregory that Mr Sharif had made a statement to that effect when describing his experience to Mr Gregory at the Clancy's Meeting. 45 Finally, returning to the case advanced for Mr Gregory, if indeed the position in relation to the degree in electrical engineering was as important as he maintained (and was mentioned in the lawyer's letter which he approved) then it is difficult to understand why Mr Gregory would have let the comment pass without further inquiry, especially given the alleged context of being put under the microscope by investors. His failure to do so suggests it was not of any real significance especially when it was not in dispute that a few months later Mr Gregory proceeded to issue the shares to Mr Sharif, to propose the terms of a shareholders' agreement and to indicate that the next step was for Mr Sharif to be appointed to the board of Vitruvian. 46 All in all, it appears to be an important aspect of the evidence that is problematic for aspects of the case advanced by each of the competing parties. The issues for determination 47 Having regard to the competing contentions as outlined above, the following issues arise for determination: (1) During the Clancy's Meeting, did Mr Sharif tell Mr Gregory that he held a bachelor's degree in electrical engineering? (2) If yes to (1), did Mr Gregory (and by him, Vitruvian) rely upon the statement of Mr Sharif in agreeing, on behalf of Vitruvian, to engage Mr Sharif and to issue a 15% shareholding to Mr Sharif? (3) Did Mr Sharif continue to represent that he held a bachelor's degree in electrical engineering by sending the August Email? (4) If yes to (3), did Mr Gregory (and by him, Vitruvian) rely upon the representation by continuing to engage Mr Sharif and by issuing a 15% shareholding to Mr Sharif? (5) Having regard to the answers to (1) to (4), is Vitruvian entitled to statutory relief rescinding ab initio the agreement with Mr Sharif on the basis that he engaged in misleading or deceptive conduct? (6) Having regard to the answer to (5), is Vitruvian entitled to relief under s 1322 and, if so, in what terms should that relief be expressed? (7) Were the affairs of Vitruvian conducted oppressively or unfairly prejudicially to Mr Sharif as a member of Vitruvian by (a) excluding him from the management of Vitruvian; (b) cancelling his shares without his consent and without complying with the statutory procedure for a selective reduction of capital; (c) making and implementing a plan to dilute the shareholding of Mr Sharif in the company by undertaking share issues so that if Mr Sharif's shareholding was reinstated it would then account for far less of the issued capital of Vitruvian; and (d) the issuing of shares that occurred on 14 July 2020 on the basis that it involved a conversion of loans to equity? (8) If yes to (7), to what extent could and would Mr Sharif have participated in the capital raising that occurred after his shares in Vitruvian were cancelled? (9) If yes to (7) and taking account of the answer to (8), should Mr Sharif be granted relief by requiring Vitruvian to issue shares to Mr Sharif or requiring J & S Gregory Pty Ltd to transfer shares to Mr Sharif and if so in what terms should that relief be expressed? (10) If yes to (7) and no to (9) should there be an order for compensation to be assessed? 48 If Mr Sharif fails in his claim to relief on the grounds of oppression, it will then be necessary to consider the further claim made by Mr Sharif to the effect that the cancellation of the shares and the issue of further shares without giving Mr Sharif an opportunity to participate was a breach of the agreement that was alleged to have been reached concerning the work that Mr Sharif was to undertake for Vitruvian. I will refer to this as issue 11. The need to focus upon the independent evidence 49 At the hearing of the competing claims, each of Mr Sharif, Mr Gregory and Mr Larsen gave oral evidence and was cross-examined. An employee of Vitruvian, Mr Brown, provided a statement which was accepted into evidence without the need for him to be cross-examined. It was of little relevance. 50 In key respects, the testimony of Mr Sharif and Mr Gregory was diametrically opposed. As will emerge, they were both unsatisfactory witnesses whose account as to critical matters could not be relied upon unless independently verified. 51 In those circumstances, I will begin by making factual findings where those findings may be based upon the documentary record and the uncontested events, together with inferences reasonably available to be drawn from the chronology that emerges from those findings. I will then address the issues dealing with contentious factual and legal aspects relevant to each issue. Before doing so, I will briefly state my overall conclusions as to the outcome of the two proceedings. Summary of outcome 52 The claim by Vitruvian to relief under s 1322 of the Corporations Act should be dismissed. 53 The oppression claim by Mr Sharif should be upheld. The appropriate relief to grant under s 233 of the Corporations Act is to require J & S Gregory Pty Ltd to transfer three million of the shares held by it to Mr Sharif and to do so before any further share capital is issued by Vitruvian. The order for the transfer should not be conditioned upon any payment being made by Mr Sharif to J & S Gregory Pty Ltd. Factual findings based on non-contentious evidence 54 In about 2008, Mr Gregory began conceiving of ways to combine algorithms with variable resistance training to create a personal fitness device to assist in eccentric exercise involving slow, lengthening muscle contractions. In mid-2016, Mr Gregory began considering ways in which his ideas might be developed into a fitness product that might form the basis for a business. 55 Mr Gregory contacted Mr Larsen by cold call email in December 2016. In the email he referred to a '[w]orking proof of concept electromechanical gym platform' that he would like to show Mr Larsen. They met in person in early 2017. 56 Mr Larsen controls Larsen Ventures Pty Ltd which he describes as a private investment firm. Larsen Ventures invests in start-up technology businesses. It also has other investments. In his role as an 'angel investor', Mr Larsen provides entrepreneurs with guidance and assistance. In some instances, he provides initial capital through his family trust. He may assist in making introductions to other parties interested in making investments in start-up enterprises. 57 In 2017 and 2018, Mr Gregory and Mr Larsen kept in regular contact about the progress of the development of the fitness machine. Various iterations of the machine were developed by Mr Gregory. Mr Larsen introduced Mr Gregory to contacts that he thought might be useful for the development of a business. They had a number of discussions about the concept for a fitness machine. At some point during that time, they had a discussion in which they each agreed to invest $100,000 in a business to develop and market a version of the machine. 58 On 12 December 2018, Mr Gregory arranged for the incorporation of Vitruvian. 59 In early March 2019, Mr Gregory set up equipment that had been used to make prototypes for the machine in a warehouse in Jolimont (Warehouse). 60 Meanwhile, in late 2015 or early 2016, Mr Larsen met Mr Sharif at a co-working space that was run by Mr Larsen. Mr Sharif was interested in being involved in a start-up venture. He spoke to Mr Larsen at meetings held at the co-working space. 61 Mr Sharif came to Australia in 2008 after studying and living in Germany. For a couple of years he worked at Crazy Johns selling mobile phones and mobile phone contracts and was promoted to assistant sales manager at the Whitford store and then store manager at the Joondalup Store. After that he worked for a short time on a turf farm. In 2011, he became a junior business manager at car dealerships offering finance and insurance to customers. He worked in selling finance and insurance at a number of car dealerships. He tried to start his own business. Then he moved to Queensland where he continued working in car dealerships selling finance and insurance. In documents in the proceeding, Mr Sharif referred to himself as having been self-employed between 2004 and 2008 working on web-design, search engine optimizing, hosting and email management. 62 In 2018, Mr Larsen introduced Mr Sharif to a Mr Young who was the founder of a software start-up known as uDrew. Mr Sharif started working at the start-up and was given various management titles. However, by 2019, Mr Sharif had ceased working at the company when he was disappointed by a decision made by its founder, Mr Young, to offer equity to two software developers who had agreed to assist in developing the company's software product without offering Mr Sharif that opportunity. 63 By 2019, Mr Larsen had formed the view that Mr Gregory was more focussed on building the product than on networking to build and grow the business. Mr Larsen had also formed the view that Mr Sharif 'was good at networking, taking to people, and at closing sales' and that his skills could be of value to Vitruvian. 64 Sometime in early 2019, Mr Larsen told Mr Gregory that he thought that Mr Sharif would be a good fit for an early stage enterprise because he was a hard worker, amazing salesman and could think about the commercial side of the business. 65 On 5 April 2019, Mr Larsen introduced Mr Sharif to Mr Gregory at the Warehouse. Mr Gregory learned that Mr Sharif had been working at another start-up called uDrew for around a year. 66 The next day, the Clancy's Meeting took place between Mr Sharif and Mr Gregory. The contentious aspects of what was discussed at that meeting are dealt with below in the course of dealing with the issues. 67 On 8 April 2019, Mr Gregory sent the following text message to Mr Larsen (noting that all subsequent quotations from documents are presented without correction to the original): Great thanks. I really like Walid. I'm happy to have him as ceo if you are? 68 Mr Larsen responded: I really like Walid - a good heart and tons of drive given the right opportunity! He's not super experienced, but I think with his energy and humble nature it's a potentially a good fit for now … 69 After the Clancy's Meeting, Mr Sharif went to Canada for a number of weeks. 70 On 3 May 2019, Mr Sharif sent a document described as a 'deck' to Mr Gregory and Mr Larsen. There were many references in the evidence to the terms 'deck' or 'investor deck' or 'pitch deck'. The terms were used interchangeably to refer to a form of concise presentation that captured the essence of what prospective investors in Vitruvian were being asked to invest in. The covering email from Mr Sharif said: Please take a look at the attached deck. Take it with a grain of salt as I had to use my imagination many times. Financial projections are missing as I do not have the relevant data but happy to put this together. Please pass on any feedback you may have. 71 Mr Gregory responded: Love your self-starting and tearing into it The deck will be a good tool to clarify what the actual plan is. I think a few sessions in the shed with the three of us and we will have a much more substantial plan to execute and write up in the deck. 72 There were some other communications by Mr Sharif with Mr Gregory which were of a kind that would enable a person in the position of Mr Gregory to make some assessment of the experience and capabilities of Mr Sharif. 73 There is no document recording a request by Mr Gregory for details of Mr Sharif's experience or qualifications. Nor is there any contemporaneous document indicating that Mr Gregory attributed any particular significance to matters of that kind when it came to considering whether to enter into an agreement with Mr Sharif. 74 On 13 May 2019, Mr Sharif indicated that Vitruvian was his 'first pick' and he sought a meeting with Mr Larsen and Mr Gregory to 'catch up and discuss'. 75 There was a meeting in May 2019 at the Warehouse attended by Mr Sharif, Mr Gregory and Mr Larsen. At that meeting it was agreed that Mr Sharif would join Vitruvian as a co-founder and that he would receive 15% of the shares in the company and Mr Larsen would get 10% of the shares. Mr Sharif would be paid $60,000 per year. There were no conditions that were to be met by Mr Sharif or Mr Larsen before the shares would be issued and there were no vesting terms or conditions that were to apply upon issue. 76 On 21 May 2019, Mr Sharif and Mr Gregory met with Mr Stephen Carroll of RSM Australia to discuss a possible research and development grant application. After the meeting, Mr Carroll sent an email to Mr Sharif and Mr Gregory asking for 'the company name/details'. Mr Sharif responded (with copies to Mr Gregory and Mr Larsen). He gave the details for Vitruvian and then set out the following: Founder CTO Jonathan Gregory Investor, CFO & Co-Founder Andrew Larsen Co-Founder CEO Walid Sharif 77 On 3 July 2019, Mr Gregory, Mr Larsen and Mr Sharif attended a meeting with Mr Shaun Hardcastle of Bellanhouse Lawyers to discuss the preparation of a shareholders' agreement for Vitruvian. Mr Larsen arranged the meeting which was also attended by Mr Larsen's accountant. 78 The following day, Mr Hardcastle sent through to all attendees 'a checklist which sets out the key matters for consideration with respect to the company's shareholders agreement'. It asked the recipients to 'populate and return'. 79 In July 2019, in response to a request by Mr Sharif, Mr Gregory agreed to increase his remuneration to $100,000 per year. 80 On 12 August 2019, Mr Sharif sent an email to Mr Hardcastle (copied to Mr Larsen, Mr Gregory and the accountant) with an attached checklist which was 'completed as much as I can'. Amongst other things, the proposed shareholders' agreement addressed the issue of future funding. The instructions completed by Mr Sharif provided for the inclusion of provisions which allowed for new share issues in which each of the parties to the shareholders' agreement would be given an opportunity to participate. However, the draft agreement was not progressed to completion. 81 Throughout this time, Mr Larsen was in regular communication with Mr Sharif concerning Vitruvian. He introduced a number of his contacts to Mr Sharif who then set up meetings. In the second half of 2019 Mr Sharif put together documents which referred to the 'Vitruvian Team' which included some of these contacts. They included Prof Ken Kazunori Nosaka a sports scientist from Edith Cowan University and Mr Daniel Brown a software engineer. At this stage, the documents included Mr Sharif's sister who was listed as head of marketing. Later versions did not include her. 82 In September 2019, Mr Sharif sent an email to Herbert Smith Freehills about possible legal work for Vitruvian. It began with information about the shareholders' agreement but covered other legal aspects such as intellectual property, employment contracts and privacy policy. Mr Sharif began the email with 'relevant info', namely: The company VITRUVIAN INVESTMENTS PTY LTD 100% owner by Jon. Standard Pty Ltd ordinary share price of $1. The 3 Founders Jon, Andrew and I have verbally agreed to is the following: Andrew Larsen will receive 10%. He made an investments of 100K (convertible note) and he is a co-founder of Vitruvian Jonathan Gregory will remain with 75% and is the founder Walid Sharif will receive 15% sweat equity co-founder. The types of shares will be class A-founder shares (us 3) class B for investors class C for advisers/future staff Attached is the shareholders agreement draft from Bellanhouse lawyers. 83 Also in September, Mr Sharif started offering positions on an advisory board for Vitruvian. Email communications were copied to Mr Gregory and Mr Larsen. They described Mr Sharif as 'CEO & Co-Founder'. He developed a basic demonstration video to be shown to the first member of the advisory board, Prof Nosaka. 84 On 31 October 2019, Mr Harrison a lawyer at Bellanhouse Lawyers sent a number of documents to Mr Sharif. They included an updated shareholders' agreement and a template constitution for Vitruvian. 85 On 14 November 2019, Mr Sharif sent an email to Mr Larsen and Mr Gregory in which he said: We have completed the shareholders agreement with a few minor gaps to add from our end. Attached is the latest version of the Vitruvian shareholders agreement along with the constitution. 1.) If you have time please review the documents prior to the meeting and raise any suggestions/feedback. If you are not able to read it prior to the meeting, I will give you a brief on the day 2.) Please nominate the entity/name in schedule 1 of the shareholder agreement for your % of the shares (personal name/company/trust/other). Please send me an email with your entity name for the shares prior to the meeting. 3.) Bellanhouse will prepare a resolution for Jon to sign as he is the only shareholder. 4.) There are items in this agreement that we may change such as listed directors (Jon and Myself) in any case one of us gets crushed by an exercise machine. Investors would not have to worry immediately about appointing a new director. Happy to change if you guys think otherwise. 86 As to the issue of securities by Vitruvian, the draft of the shareholders agreement provided that the board may resolve to issue new equity securities for funding purposes. It provided for the opportunity to take up further equity to be first extended to existing shareholders and then to other interested parties. 87 By December 2019, Mr Sharif, Mr Larsen and Mr Gregory had plans to secure investors and advance the venture in the next six months. As to the role of Mr Sharif in getting Vitruvian to the next stage, on 8 December 2019, Mr Sharif sent an email to Mr Larsen and Mr Gregory with a list of matters to be completed by various dates in December 2019. The items in the list were about progressing towards obtaining investment in the company. They included 'Complete first version of investor deck (10 slides) before 11/12/19. (Walid)'. 88 It is about this time that the conversation occurred in which Mr Sharif said to Mr Gregory that he better finish his degree. 89 In late December 2019, Mr Sharif worked with an intern on preparing a pitch deck. It included a page which depicted Mr Sharif, Mr Gregory and Mr Larsen as the 'Founding Team'. There was a photograph on each of them. Underneath the photograph of Mr Sharif was the following: Walid Sharif CEO/Co-Founder Electrical Engineer: Heinz Nixdorf Germany. Overall Winner IOTY WA 2018 90 The reference to 'IOTY' was to the Western Australian Innovator of the Year. The logo for the award appeared beneath the above description. 91 On 7 January 2020, Mr Sharif sent an attached pdf version of the investor pitch deck to Mr Larsen with the message 'Hi mate! Please see attached and let me know what you think'. It included a version of the slide that was similar to that in the December version. 92 On 22 January 2020, Mr Sharif sent a new version of the slide for 'THE V-TEAM' to Mr Larsen. It had the same information but added details of the five member advisory board that had been assembled by that time. On the same day, Mr Larsen sent the following email to Mr Sharif and Mr Gregory with the subject reference 'Snappy Deck Sent!': I've just shot the attached deck (as a PDF) to 2 of the (genuinely) best Angel investors in Aus; [Names and email addresses in original] Let's see what they come back with … I reckon get cracking with this deck … make a snappy COLD EMAIL and get going! Start hustling to line up those meetings: -let's get their feedback -answer their concerns if we like them (bail if not) -listen to their advice, take it if we agree (bail if not) -iterate to suit -Get Funded, Rocket to the Next Level! 93 Plainly, Mr Larsen, an experienced start-up investor, saw no deficiencies with the deck that had been prepared by Mr Sharif and was proposing that it be used to present to interested parties for the purposes of securing investment in Vitruvian. 94 On 5 February 2020, Mr Gregory and Mr Sharif had a meeting to discuss strategy. Following the meeting, a draft of a one page 'seed round' document to be used to seek to raise $500,000 in seed capital via a SAFE Note was sent by Mr Sharif to Mr Gregory. It described the ownership of Vitruvian by referring to Mr Gregory as Founder holding 75%, Mr Sharif as Co-Founder holding 15% and Mr Larsen as Co-Founder/Chair holding 10%. The acronym SAFE refers to a 'simple agreement for future equity'. The proposal was for an agreement that would 'convert to equity at a 20% discount to valuation at the next equity capital raising round'. 95 In the evening of 5 February 2020, Mr Gregory sent the following email with the subject 'Seed Round One Pager': That fine by me, get into them W, take feedback and adjust as necessary, but get out there, get aggressive, be confident. You are good at this. Don't be afraid to say I don't know but I'll find out and get back to you For example, what if you don't raise series a, what happens to my money then? (I'm not sure either) Go go go, this will be far better and quicker money than lampshade revenue Jon 96 There is no hint of any concern about the adequacy of the information being prepared by Mr Sharif or about the abilities of Mr Sharif to engage in the task of contacting investors and soliciting the seed capital. The last sentence appears to be a reference to a preference on the part of Mr Gregory for the seed capital approach at that stage rather than trying to undertake the work to put together much greater detail to call attention to the investment. 97 Mr Gregory followed up that night with a further email with the attachment the 'Vitruvian One page SEED'. It said: 'Just a few changes, altogether awesome'. At about this time there was also an updated version of 'THE V-TEAM' document. It described Mr Sharif in the following terms: Walid Sharif - Founder CEO A Heinz Nixdorf electrical engineer graduate from Germany with a major in software engineering. Walid has 20+ years experience in B2B & B2C sales, marketing, finance, insurance and project management. The description was followed by the innovator of the year logo. 98 The documents show that Mr Sharif immediately went about contacting potential investors using the one page summary and sought seed capital. He arranged meetings and responded to questions about the fitness product. He worked on arranging new video content demonstrating the use of the product for inclusion in application software for Vitruvian. He also worked on arranging website material to update and improve the website for the company. 99 In February 2020, Mr Ben Mactiernan was engaged to undertake work for Vitruvian. One of the tasks he was given was to work on the pitch deck. Towards the end of March, he sent an updated version of the deck to Mr Sharif. 100 Mr Mactiernan was formally introduced as a member of the Vitruvian team by email to Mr Larsen on 30 March 2020. Mr Mactiernan responded by email to Mr Larsen and Mr Sharif (copied to Mr Gregory) on 30 March 2020. It attached a document that was described as a company overview. The email said: Agree on the excitement around building a massive business! Would be great to catch-up over Zoom/phone when you have a minute this week. Not sure if Walid has already shared this, but see attached for the latest draft of Vitruvian pitch deck. We will use different versions of this core pack for potential investors and strategic players in the coming weeks, so would be good to get your thoughts. Note it doesn't specially include a funding/use of funds page as the answer will be a bit different by audience. We already have a few key strategics keen to chat in SWEAT, Facebook, 28BSW and a few others in the pipeline. Worth getting your thoughts on the likely interest in the venture community given the fit with covid-19 trends, but recognising that the company is pre revenue and product market fit, making it a bit tougher. But it seems the VC community is pushing further into seed stage with all the turmoil going on … which should help … Am pretty flexible on time, so can work around you. 101 The email dated 30 March 2020 was met with the following response from Mr Larsen (copied in to Mr Gregory and Mr Sharif): I just read every word of the deck - holy shit, love it. Genuinely - love the depth of thought, controls over growth and the way you step through the journey. Thursday would suit me if you're free - I can chat 12ppm - 5pm, pick a gap that sutis:) Obviously lots moving around in finance in general, but I do have spcific thoguths around venture which could help! 102 On 4 April 2020, Mr Gregory sent the following email to Mr Sharif and Mr Mactiernan with the subject 'March': Hey Walid Hope you aren't dying too much Look what you achieved in March. Class content, demo content, promo content, launched the website, built a studio, sorted VR, built a team, still married. Bloody unbelievable! Jon 103 It will be necessary to consider Mr Gregory's explanation for the content of this and similar supportive emails when considering relevant aspects of his oral testimony. 104 The following day, Mr Larsen sent an email to Mr Gregory saying that he was doing his tax for the previous year and wondered whether there was any documentation concerning the investment into Vitruvian. Mr Gregory responded saying that he had 'royally stuffed this one up'. He said that they should just do the paperwork to reflect what had happened and 'back date the share issue, update the shareholder agreement and carry on'. He indicated that he would provide the documents 'this week if humanly possible'. 105 At about this time, Vitruvian was completing the initial capital raising of $500,000 and entering into written 'safe note' agreements. Mr Mactiernan was involved in introducing some of the investors. 106 Just after midnight on 11 April 2020, Mr Gregory sent an email to Mr Sharif and Mr Larsen concerning 'Vitruvian shareholdings'. It attached a draft shareholders agreement. The email said: OK boys Sorry this has taken so long Here's what we are going to do Currently Vitruvian Investments is comprised of 100 shares at $1 per share The deal we cut in May last year is tricky to put together so that there are no immediate tax problems. These are the steps we need to take to make the capital structure reflect the deal. 1. 100/1 share split dated January 2019 to bring it up to 10,000 shares at 1c per share 2. I sell WS 1667 shares for $16.67 dated January 2019 3. Vitruvian issues 1112 new shares and sells them to AL for $89.928 per share, dated June 2019 This will result in shareholdings of JG: 8333 ordinary shares 74.99% WS: 1667 ordinary shares 15.00% AL: 1112 ordinary shares 10.01% Shareholders agreement attached Most of the power in the shareholders agreement lands with me as sole director. This is not a power grab from my perspective, its just simpler, reflects my outsized shareholding and keeps you guys off the hook for the unlimited liability directors shoulder. I hope we are not far away from a proper capital raising at which point the shareholders agreement will have to be rewritten anyway and the board structure professionalised. I have executed my portion of the shareholders agreement. As soon as you guys have signed I will do the ASIC filings to reflect the shareholdings Lets not let this drag on like it has in the past. Jon 107 The enclosed shareholders' agreement provided for the initial CEO of Vitruvian to be Mr Sharif. It stated that the company will be managed on a day-to-day basis by the CEO who will report to the board. It allowed for removal of the CEO by special resolution of the board ratified by a majority resolution of shareholders. 108 There is no indication in these communications of any concern as to the work being done by Mr Sharif or of his suitability as CEO. By this point he had been involved in the role for almost a year and had been working with Mr Gregory who has just praised him fulsomely for his work in the previous month. The absence of any such concern is particularly significance because of later claims made by Mr Gregory that Mr Sharif had been unable to produce a pitch deck, a claim developing by making a comparison between the document produced by Mr Mactiernan and earlier documents produced by Mr Sharif. 109 In a short responsive email sent about 20 minutes later, Mr Sharif asked for some clarification as to how things would work with the CEO being responsible for 'the burger with the lot', not the director. Mr Gregory responded immediately with the following email: Bear in mind that this shareholder agreement probably won't be around for long. As soon as we raise or partner it will need to be amended to accomodate new investors likely requirements. I suspect the day is coming soon when you and I both migrate to the board level as executive directors and keep working in the company according to our strengths, with professional CEO, CTO, CFO, etc. 1. Actually have no idea what happens if I die, I'll ask, but we will potentially be running around the block again trying to answer all this stuff, costing more money, taking more time 2. Here's how a typical board works You have a chairman who is an industry veteran and board members with specific skills like legal, accounting, etc The CEO and the Chairman work closely together to develop strategy, ratified by the board and executed on a daily basis by the CEO. The CEO is responsible for executing the plans and reporting back to the board but bears no legal liability. The board has all the legal liability in case of law suits, company reporting, etc The board and the ceo may or may not also be shareholders In our case, the language and mechanics of larger company structures is not very helpful but we have to work with what we have got. For you, you need to take your ceo hat off and read the agreement as a shareholder. By rights you should have a separate employment contract with the company as the CEO spelling out the terms of employment, as should I, but again more paperwork and less actual work Hope that helps 110 Again, there was no suggestion of any concern about the work being done by Mr Sharif. The response looked to a future in which Mr Sharif was on the board as an executive director. 111 Then at about 9.00 am on 11 April 2020 Mr Sharif sent an email to Mr Gregory and Mr Larsen in which he expressed concerns about the shareholders' agreement. It expressed the view that it read as if he (Mr Sharif) was an employee with all the responsibilities instead of being a business partner. Mr Sharif expressed the view that what was really needed in order to obtain more investors and to cover costs was sales. He said that there was a need to reallocate funds to a sales and marketing team so as to secure enough pre-orders. He made the following offer: Here is my offer: 1.) My equity does not dilute. I get paid $3500 USD commission per unit sold; $250 USD upfront rest on completion of sale. 2.) My equity dilutes like yours, I get paid no commission. I work 2 days per week and help you where you need me. Though not addressed in the evidence, the reference to $3,500 appears to be a typographical error and the intention was to propose $350 USD commission per unit. 112 In the afternoon, Mr Gregory sent an email asking for a phone call or a face to face meeting. Mr Larsen proposed a meeting in which to express concern about the offer as well as confidence that any issues can be fixed with ease. Mr Gregory suggested a meeting to 'knock it off asap'. 113 By 15 April 2020, a WhatsApp group chat between Mr Gregory, Mr Larsen and Mr Sharif had resumed. The following day, Mr Gregory sent a message: 'Hi Men, just sent application for shares to you both. Please PDF sign and return asap'. He followed up with messages 'Shareholder agreement out late today or tomorrow morning' and 'Then final part is resolution to add Walid to board'. 114 A few days later on 18 April 2020, Mr Larsen sent a message to Mr Gregory and Mr Sharif saying that Larsen Ventures was going to invest $340,000 'into your current round'. The message included the following: … just heard Walid's latest speech about the company and felt very compelled! However, the commitment was conditioned. Amongst other things it appeared to be conditioned on the ongoing involvement of Mr Mactiernan. 115 Late that night Mr Gregory and Mr Sharif exchanged a series of messages in which Mr Sharif said: 'You and Andrew [Mr Larsen] made me a millionaire' to which Mr Gregory responded 'Not yet, and you've had a big hand in it too'. 116 On 20 April 2020, Mr Sharif sent a curt email to Mr Gavin Stacey, a business advisory manager from RSM Australia who had been arranging the implementation of the shareholders' agreement. It said simply: 'how come the equity ended up in my personal name. who fucked up?'. Mr Stacey said that the equity had been discussed at length with Mr Gregory who said it had been approved by Mr Sharif. It prompted Mr Sharif to forward the email exchange to Mr Gregory with the following message: 'since I am the erratic one here Jon, can you tell me what my tax implications are'. 117 Also on that date, there was a heated email exchange between Mr Sharif and a person who had been arranging video production material. It culminated in the email chain being forwarded by Mr Sharif to Mr Gregory with the following covering email: Since I'm irratic you are welcome to deal with him and Chris and wiebke and Izaak for a bit. Can send you also the details of the 7 freelancers I deal with. 118 On 24 April 2020, Mr Gregory sent an email to Mr Stacey in the following terms: Did this share registry stuff all go through? I know there was some aggro with Walid earlier in the week. We have been having shareholders and directors meetings all week to get the communication working. Its nearly there! 119 On the same day he sent an email to Mr Sharif with an updated company search for Vitruvian showing the change in shareholdings and the message: 'Heres the proof. Just need the shareholders agreement signed now, I will recirculate tomorrow'. 120 On 28 April 2020, Mr Sharif reported to Mr Gregory and Mr Larsen that he had asked Mr Mactiernan for a bit of his time and that they had a very good conversation 'and cleared the air'. Also on that date, Mr Larsen sent an email to Mr Gregory and Mr Sharif introducing a commercial contact. The virtual introduction was in the following terms: … pls meet Walid & Jon @ Vitruvian - the 2 Founders I've been speaking endlessly about :) … What I'd suggest is a meet/greet in the warehouse to show [the person being introduced] where we're at as a team and to experience the product - I'd love to come if I can make the gap that suits you all! Everyone is up to speed with my convos - so I'm looking forward to intro'ing you all and seeing if we can take the next step to building something_massive together:) 121 On 29 April 2020, Mr Mactiernan responded to queries from a potential investor about answers to be given to another potential investor. The responses were copied to Mr Gregory. The response to a question about how many people were working full-time for the company included the following: • Jon - CTO and technical founder • Walid - Current CEO and co-founder - but will be stepping across to run the physical studio strategy as has a background in retail brick & mortar sales) • Izaak - Software • Wiebke - Currently 3/4 days a week but will be full time soon • Me - Growth - Currently 2-3 days, but is becoming more 122 On 30 April 2020, in response to an email from Mr Mactiernan which included the above, Mr Gregory sent the following information as to the capital position for Vitruvian at that time: 75%. 100k Jon 15%. Sweat Walid 10% 100k Andrew SAFE NOTE 0% coupon note converting to equity at a 20% discount to the next priced round $215k Jon $50k AP $100k TF 123 On 4 May 2020, Mr Sharif sent invoices for March, April, May and June to Vitruvian. 124 On 5 May 2020, Mr Sharif raised concerns about the way in which he considered Mr Mactiernan had been treating him. Mr Gregory proposed a meeting later that day. 125 At the meeting, which took place when Mr Sharif and Mr Gregory went for a walk from the Warehouse in Jolimont, Mr Gregory told Mr Sharif that he could not work with him anymore. Precisely what took place at the meeting was the subject of oral evidence from the two participants. It is addressed below. 126 Later that day there was a meeting between Mr Sharif, Mr Gregory and Mr Larsen to discuss what had occurred. They agreed to meet again on 7 May 2020. 127 Between the meetings on 6 and 7 May, Mr Gregory and Mr Larsen exchanged a considerable number of WhatsApp messages. They included the following: Larsen: hope you're doing ok today mate - keep your head up, we'll smash this and build a massive story:) Gregory: Thanks AL. Still ruminating and reflecting but having a productive day also. Hope you are ok and Walid too. Larsen: he's ok mate - likewise decompressing and reflecting - important he has someone to vent to I think (me) and help him work through his thoughts. Vitruvian will be stronger after this, another notch in the belt and another hurdle overcome. … 128 Mr Sharif made notes in preparation for the meeting to be held on 7 May 2020. Those notes record Mr Sharif's views about what had happened. They refer to tensions that had developed between Mr Mactiernan and Mr Sharif and difficulties that Mr Sharif had experienced in dealing with Mr Gregory. In short, they reveal a breakdown in personal relationships. The notes refer to statements said to have been made by Mr Gregory to Mr Sharif on 5 May to the effect that he had disappointed in his roles as CEO and co-founder and had failed Mr Gregory's expectations. They also attribute to Mr Gregory the statement that he woke up that morning (5 May) and just cannot work with Mr Sharif anymore. 129 The notes also record Mr Sharif's view that for the past year Mr Gregory had told numerous people that he had been performing an incredible job at Vitruvian. 130 The evidence of Mr Larsen about these events was that in April or May 2020 he became aware that the relationship between Mr Gregory and Mr Sharif had deteriorated and that Mr Gregory had told him words to the effect that he was very worried about his relationship with Mr Sharif. He also said that Mr Sharif told him that he was having challenges with Mr Mactiernan and that he was trying to challenge him for his role of CEO of Vitruvian. 131 On 20 May 2020, Mr Gregory sent an email to Mr Stacey in which he said: You'll puke at this one. I have asked Walid to leave. Got to the point that I didn't feel I could keep working with him. Not to disparage Walid in any way, just a working relationship thing So we are trying to negotiate a buy back of some of his shares at the moment as an exit deal. Ill keep you posted 132 On 28 May 2020, Mr Larsen sent a long email to Mr Sharif (copied to Mr Gregory). The subject title for the email was 'Offer for Founder equity on departure from Vitruvian'. The email was in three parts. The first part was a message to Mr Sharif. The second part was headed 'Vitruvian Equity Scenario'. It set out a summary of the dealings that had been agreed and carried into effect by the parties. The third part was headed 'Settlement Proposal & Calculations'. It proposed a resolution. The details of the proposed settlement were received without objection. 133 On the morning of the day before the email was sent, Mr Larsen sent a draft to Mr Gregory for comment. After midday, Mr Gregory sent back the following response: That's an excellent email Andrew. I think it gonna take all your soft skills to execute now. Good luck and thanks again for going the extra 100 miles on your angel investment! Andrew rocks 134 Given the significance of the subject matter, it may be inferred that Mr Gregory considered the terms of the proposal with some care. It may be inferred that he satisfied himself as to the accuracy of its terms both as to what the arrangements had been between them and the matters that might be brought to bear as being relevant to the settlement terms. Of considerable significance is the fact that the proposal was based upon providing Mr Sharif with adequate compensation for the work and effort that he had put into Vitruvian. As will emerge, its conceptual foundation is that Mr Sharif had been 'gifted' equity up front on the basis that he would earn the value of that equity by his own efforts into the future. This description accords with the position in other documents referring to Mr Sharif's shareholding as 'sweat equity', namely equity that is given as part of the compensation for work to be done for Vitruvian. There is no suggestion in the language of the email or in the nature of the proposal or the calculations upon which it is based that there has been any inadequacy in the effort or contribution by Mr Sharif. This would have been very plain to Mr Gregory when he considered its terms. 135 The message in the email of 28 May 2020 was as follows: Hi Walid, I have been working with Jon in the last 2 weeks to try and find a fair and reasonable settlement (for lack of a better phrase) that will both compensate you for your time & efforts at Vitruvian, and equally give the business the best chance to succeed into the future with some proposed adjustments to the capitalisation table. I firstly tried to compare the Vitruvian scenario with other startups and comparable companies I have seen previously, and secondly tried to summarise an offer from Vitruvian to purchase some of your shares back into the business. Below I have laid out the basic scenario, and tried to show working/thinking through the calculations. I feel it's likely best to talk this through in person once you've had a chance to digest - please let know when you're free next! Cheers, Andrew 136 The part headed Vitruvian Equity Scenario referred to Mr Sharif as having joined Vitruvian in about May 2019 and having exited in about May 2020. It described what 'Founders' get in a typical scenario. It then described what had happened in the case of Vitruvian in the following terms: Walid was given two things: Equity - Walid was gifted 15% Equity (with no conditions) in May 2019 Salary - Walid was given an initial salary of $60,000/yr, which was upgraded to $100,000/yr after 2 months. Walid's total salary for the year is ~$92,000 137 The final part headed Settlement Proposal & Calculations began with the following: Vitruvian feels that it is not fair to simply ask Walid to relinquish equity that was gifted, but believes it will be challenging to incentive new employees, and explain this scenario to new investors each time the company raises funds 138 The email then explained the calculations that had been used to formulate the proposal. Even allowing for the fact that the email sought to persuade Mr Sharif as to the merits of the proposal, it is significant that it does not seek to bring to bear any adjustment for any alleged failings by Mr Sharif in the 'sweat' that he had provided up until that point in time. It described the salary that was provided during his period of time at Vitruvian as 'generous'. It proposed a payment to purchase three to four years of equity on the basis that the equity when 'gifted' was worth $150,000, leaving Mr Sharif with an interest of 3.75%. It recognised that the 15% shareholding had not been transferred on a conditional basis. There was no suggestion that there were conditions of that issue that were yet to be performed by Mr Sharif. 139 The email proposed a payment of $56,250 for the partial buyback of Mr Sharif's equity, with the cost to be shared between Mr Gregory and Mr Larsen in proportion to their relative shareholding interests. 140 All of this was proposed on the basis outlined in the email, namely that 'Vitruvian feels that it is not fair to simply ask Walid to relinquish equity'. Yet, on the version of the events the subject of oral evidence by Mr Gregory, by this point in time he had formed the view that the performance by Mr Sharif was poor and not what he had expected. 141 Also, at about this time, Mr Gregory had sent a WhatsApp message to Mr Larsen which said: Hi Andrew, I guess W has a point about needing some certainty for his family. No need to run your coms by me if it speeds things up and let's you talk freely with him Jon 142 After the proposal was communicated, there were conversations between Mr Larsen and Mr Sharif which culminated in substantially the same proposal being presented to Mr Sharif on 3 June 2020. Before it was sent Mr Larsen sent a WhatsApp message to Mr Gregory in the following terms: I had a prelim chat w Walid on way home … just reiterated if lawyers jump in … its expensive and the offers get worse … also said proving IP (and making its sellable) would be difficult … I'm chatting w them both tomorrow - havent organsoed a time yet, but during the day Mr Gregory then asked for approval from Mr Larsen to send the 3 June 2020 proposal and received the response 'Good to go' from Mr Larsen. 143 On 5 June 2020, Mr Sharif sent an offer to Mr Gregory (with Mr Larsen copied in). It was in the following terms: We would like to make the following proposal on a without prejudice basis: 1.) Proceed with the original agreement when I started and I retain my 15 % equity. Sabrina and I have sacrificed many opportunities during my time at Vitruvian and also we believe in the product and the vision. Selling any of our equity at this early stage is not in our interests. 2.) If a key executive leaves a business he/she should be presented with reasonable notice and, in the absence of serving out the notice period, a payment that will allow him/her to plan the next step. In our opinion, we see it as fair that I receive a termination/departure settlement of 3 monthly payments (totaling $28,500 / this can be paid over 3, 4 or 5 months if that is easier for the company). 3.) As we have built this business together we believe it would be fair for Walid to be named as a co-founder or co- inventor on the website in the pages about us / company history / company story releases and where appropriate in press releases or other promotional material. It is in my best interest for Vitruvian to perform well and to have a positive and healthy shareholder relationship. 144 The offer was not accepted. 145 On 8 June 2020, Mr Gregory had the following exchange of messages with Mr Larsen on WhatsApp: Gregory: Hi Andrew, I've got time today at 11, 1, 2 and after 4 if you do. Jon Gregory: BTW, any chance you have a CV for Walid? I know it's a bit remiss of me trying to source it now Larsen: dont have sorry mateyou could pdf his linkedin? Larsen: will call at 4 if that's ok mate - sorry I didnt ping you this weeknd! 146 On 11 June 2020, Mr Gregory accessed the LinkedIn page for Mr Sharif. He noticed that it included the following entry under the heading 'Education' Heinz Nixdorf Berufskolleg Germany Bachelor of Electrical Engineering . Information Technology 1997 - 2000 Activities and Societies: Software Engineering, Network and Hosting Solutions. Design, development, manufacturing and management of complex hardware and software systems, and reliable cost-effective devices. This involves the use of new information and computer intensive technologies. Key subjects include software engineering, telecommunications, photonics, systems and control, energy systems, microelectronics and signal processing. He took a screen shot of the page. 147 On 12 June 2020, Mr Gregory met with Mr Martin Bennett of Bennett + Co lawyers. Notes of the meeting were in evidence because it was accepted that privilege had been waived by the grounds upon which the s 1322 application was advanced (by putting in issue the honesty of Mr Gregory). It included notes which were abbreviated. The notes begin with a note about 'fraudulent misrepresentation' and 'declare void ab initio'. They then refer to 'Terminate agreement, cancel share issue'. There are then notes which refer to misleading or deceptive conduct provisions as a back up to fraud. 148 The notes also record Mr Gregory as saying 'Introduced to me by friend angel investor. Provisional patent lodged in name of co … Threat to co. Pain on register. 15% shldr gives him power to demand accts etc. Onus on his conduct'. 149 After those matters, the notes then record a requirement for details to build up history of all dealings that caused the shares to be given to Mr Sharif. The notes conclude with 'flood letter with details'. 150 These notes are inconsistent with the position that it was a claim by Mr Sharif about having a degree that was the reason why the agreement was made with him. Rather, they suggest that there was a history to 'build up' as to what caused the agreement to occur. The notes focus upon a concern as to the power which might be exercised by Mr Sharif as a 15% shareholder. 151 The notes also refer to a resolution to rescind shares and ASIC forms and 'write to him directly another week'. It is apparent that the notes then address what Mr Sharif could possibly do in response to action of that kind. The notes state that he could bring an oppression claim and challenge the rescinding of shares and sue for damages. 152 Read in context of the overall events, the notes record instructions being given by Mr Gregory and advice being given by Mr Bennett. 153 Then the notes attribute statements to the following effect to Mr Bennett: (a) Mr Sharif had misrepresented his qualifications and made other misrepresentations; (b) 'after kick [Mr Sharif] out can issue shares'; (c) then correct ASIC register as to shareholdings in Vitruvian; and (d) Mr Gregory could lend money to Vitruvian now and convert to equity after Mr Sharif 'is out' or could put money in under new security (with a note referring to $340,000 loan). There is a reference to the need for chronology and dates. 154 On 19 June 2020, Bennett + Co sent a letter to the head of Heinz Nixdorf Berufskolleg. It included the following: Mr Sharif was hired on the representation that he held a Bachelor of Electrical Engineering from the Heinz Nixdorf Berufskolleg in Germany. Mr Sharif represented that he obtained this degree between 1997 and 2000. We attach a copy of Mr Sharif's LinkedIn profile setting out his qualifications, including reference to a 'Bachelor of Electrical Engineering - Information Technology from Heinz Nixdorf Berufskolleg.' 155 There is no suggestion that Mr Gregory accessed Mr Sharif's LinkedIn profile at any time before 11 June 2020 (the day before his meeting with Bennett + Co). 156 On 23 June 2020, Bennett + Co provided Mr Gregory with a draft of a letter from Bennett + Co to Mr Sharif. Bennett + Co also received a response from Heinz Nixdorf Berufskolleg to the effect that its highest degree was equivalent to a bachelor's degree, being level 6, but a degree in assistant of information technology was corresponding with level 5. 157 On 25 June 2020, Mr Gregory met with Mr Bennett and other lawyers from Bennett + Co. Notes of the meeting were in evidence. From those notes it is apparent that Mr Gregory was given advice as to what it would cost Mr Sharif to challenge a 'rectification' to the share register that occurred by resolution of Mr Gregory as director. Mr Gregory was told it would cost Mr Sharif $4,000 to commence plus $60,000. The notes also refer to an application for security for costs. It is also apparent that Mr Gregory raised the possibility of rescinding and diluting the shareholding. The notes record Mr Bennett as saying 'prorata distribution after issuing shares'. 158 The next day, Mr Gregory told Mr Bennett + Co that he was ready to proceed. 159 On 29 June 2020, Bennett + Co provided a letter of advice to Mr Gregory. In that letter there were recommended steps to be followed being (a) send a letter giving notice that Vitruvian rescinds the agreement with Mr Sharif and will cancel his shares; (b) pass a resolution to cancel the shares; (c) lodge forms with ASIC; and (d) 'Issue additional shares in Vitruvian by converting around 50% of your unsecured debt in Vitruvian'. The final point is significant. It is not part of what could be required to address any claim against Mr Sharif concerning the shares. Nor is it being proposed or justified as an appropriate step to be taken in the financial interests of Vitruvian. Rather, it is recommended as the fourth step to be taken to deal with Mr Sharif and his position as a shareholder of the company. 160 It is plain from the terms of the letter that it proposed action by Vitruvian on the basis of a claim that it was then entitled to elect to rescind its agreement with Mr Sharif. Of course, that is not the position that it now presents to the Court. Rather, the claim now made is that there is an entitlement to statutory relief of a kind that would bring the agreement to an end ab initio. 161 The letter of advice enclosed a revised draft of the letter to be sent to Mr Sharif. The purpose of the letter to Mr Sharif was described in the letter of advice as putting Mr Sharif on notice of his conduct and that his shares would be cancelled. That is to say, the letter was to be the basis for the action that Bennett + Co was advising Vitruvian to take. The terms of the letter are considered below in dealing with the issues. At this point it may be noted that the letter contains complaints about matters that are no longer advanced as a basis for Vitruvian's actions in cancelling the shareholding of Mr Sharif. 162 The letter of advice concluded with advice about potential claims that Mr Sharif may have against Vitruvian if it took the action that was being recommended. It dealt explicitly with the practical difficulties that Mr Sharif would face in taking action. In particular, it addressed the likely cost to Mr Sharif of bringing court proceedings. It expressed the view that it would be difficult for a claim for breach of contract by Mr Sharif to be worthwhile because the Court would have difficulty quantifying damages as Vitruvian was a start-up. It concluded with the following: The ability for Mr Sharif to progress these claims depends on his financial situation. You have told us that you think Mr Sharif's only significant asset is his family home. Based on this information, Mr Sharif's potential actions may not progress very far. 163 The advice did not address the merits of the claims that Mr Sharif may be able to bring if his shares were cancelled. 164 On 30 June 2020, a letter substantially in the terms proposed by Bennett + Co was sent to Mr Sharif. It contained the following statements as to the instructions given by Vitruvian: At around 6.30am in about early April 2019 you and Mr Gregory met at Clancy's Fish Bar, City Beach. At this meeting you told Mr Gregory about your background and experience, including that: … you grew up in Germany; … you had made money through an online pornography business in Germany; … you have a bachelor's degree in electrical engineering; … you were a semi-professional footballer in Germany; … you moved to Australia in 2008; … you loved fitness and almost started an F45 gym; … you had worked at Crazy Johns as a mobile phones salesman on the Gold Coast; and … you had worked at car dealerships as a salesman offering finance for car purchases or in a similar capacity. … Based on these statements Mr Gregory formed the view that your qualifications would be useful to Vitruvian's business. Mr Gregory was particularly interested in the fact that you had both a technical (as you indicated to Mr Gregory that you have an electrical engineering degree) and sales background. Mr Gregory considered that these skills would be critical in developing and marketing Vitruvian Form for the company. … Your Linkedln profile states that you obtained a Bachelor of Electrical Engineering Information Technology from Heinz Nixdorf Berufskolleg Germany in the period 1997 - 2000. … On or about 13 May 2019 you met with Mr Gregory and Mr Larsen at Mr Gregory's warehouse located at 5 Bishop Street, Jolimont. At this meeting, and based on the statements you made to Mr Gregory at Clancy's Fish Bar, Vitruvian agreed to engage you as a contractor to provide consulting services for $60,000 per year as well as a 15% equity share in Vitruvian (Agreement). … At the meetings at Clancy's Fish Bar and at the warehouse Mr Gregory explained to you that the role would require you to help Mr Gregory develop the product and the business and that there was lots of work to be done, including preparing an investor deck to raise capital and other business development work. 165 The letter made no reference to the appointment of Mr Sharif as CEO and co-founder. Nor did it refer to the proposed appointment of Mr Sharif as a director of Vitruvian that had been indicated by Mr Gregory to Mr Sharif in March 2020 when the shares were issued to Mr Sharif and the terms of a shareholders' agreement (confirming Mr Sharif's appointment as CEO) were presented to Mr Sharif by Mr Gregory for signature. Instead, it characterised the agreement as an agreement to provide consulting services to Vitruvian. This characterisation was plainly inconsistent with the explicit history of dealings between the parties. The terms of the letter and the fact that it was approved by Mr Gregory as an appropriate description of past events reflect adversely on his credit. It is a transparent attempt to recast the nature of the agreement that had been made and the circumstances in which the 15% shareholding had been issued to Mr Sharif. These matters are addressed further below. 166 The letter went on to state that during 'the period May 2019 to May 2020, it became apparent to Mr Gregory that Mr Sharif was not able to perform the services for which he had been 'contracted'. It then said: Mr Gregory's concerns about your performance include the following: … you were unable to prepare an investor deck for Vitruvian to a reasonable standard expected of someone with a technical degree. The investor deck took you nearly three months to complete and lacked substance in that there was no financial modelling and primarily comprised 'pretty pictures'; … you did not know how to use a spreadsheet to prepare a financial model to include in an investor deck; … you were unable to assist in the designing, fabricating or any aspect of completing the physical product development for Vitruvian Form; … when asked by Mr Gregory you could not answer elementary questions relating to the wiring and voltage levels required in the process of physical product development; … you could not assist with the software user interface or the development of an app for Vitruvian Form; … you used freelance workers to complete all of your technical work, including to create digital images of the product. 167 It may be seen that the complaints raised in the letter included a number of complaints about Mr Sharif's abilities to assist in physical product development. The letter then said that: 'Mr Gregory subsequently engaged a management consultant in March 2020 who was able to produce a compelling and comprehensive investor deck within two days'. This appears to be a reference to the deck prepared by Mr Mactiernan. 168 The letter alleged misrepresentation by Mr Sharif because he did not in fact have a bachelor's degree in electrical engineering. As has been mentioned, one of the matters relied upon to support that claim was the conversation 'in late 2019' where Mr Gregory said words to the effect that he had better finish his degree. It then alleged that Mr Sharif had deliberately misrepresented and exaggerated his qualifications and alleged that his conduct 'was also misleading or deceptive'. It then stated: Take notice that Vitruvian rescinds the Agreement on the basis that the Agreement was induced by the misrepresentations about your qualifications that you made to Mr Gregory and Vitruvian prior to entering into the Agreement. 169 Mr Sharif's shares in Vitruvian were cancelled on 30 June 2020. Following the cancellation of his 210 shares, the remaining shareholders were J & S Gregory Pty Ltd as to 1,050 shares and Mr Larsen as to 140 shares. Issue (1): During the Clancy's Meeting, did Mr Sharif tell Mr Gregory that he held a bachelor's degree in electrical engineering? 170 For the following reasons, I am satisfied that it is more likely than not that Mr Sharif told Mr Gregory that he held a bachelor's degree in engineering during the Clancy's meeting. 171 In his evidence, Mr Sharif's version of the Clancy's Meeting was to the effect that when Mr Gregory asked him about his background he told Mr Gregory words to the effect that he had studied electrical engineering and software engineering in Germany. He said that he told Mr Gregory that he had worked at uDrew where he did business development, that he had worked in the automotive industry and that he had played semi-professional football in Germany. He said that he told Mr Gregory that he had never been a CEO. 172 To the extent that this account accepts that there was discussion of his studies in Germany, it is inconsistent with the position as stated in correspondence from lawyers acting on his behalf when the issue was raised by Vitruvian's lawyers in June 2020. Mr Sharif's lawyers stated in a letter dated 15 July 2020 that 'our client's qualification and/or degree was not at any time asked about, queried or even discussed' before he was offered the position of CEO of Vitruvian and a 15% shareholding in the company. This is a matter that reflects adversely on the credibility of the testimony of Mr Sharif. 173 The lawyer's letter went on to say that Mr Sharif's use of the term 'Bachelor' on LinkedIn is on the basis that 'it is commonly understood to signify a non-graduate level of study undertaken at a college or university'. 174 When cross-examined, Mr Sharif accepted that in documents that predated the Clancy's Meeting he stated that he had a bachelor's degree in electrical engineering, that he was a qualified electrical engineer and that he had a major in software engineering. His explanation for referring to the certificate course of study that he undertook in Germany as a bachelor's degree was that he was unsure what to call the course in English. He said that he conducted a Google search which was something like what do you call a three-year engineering course and the result was bachelor of engineering. However, there had been no reference to the Google search explanation in the lawyer's letter of 15 July 2020. Instead, a different explanation was given about the common understanding of the term. This is unlikely to have been a matter of oversight or misunderstanding given the significance of the allegation as the foundation for the cancellation of the shares. 175 In his written statement of evidence, Mr Sharif referred to documents that he had provided to Mr Young of uDrew in which he referred to having obtained a bachelor of electrical engineering from Heinz Seimens Nixdorf in Essen, Germany. He said that he had offered to send Mr Young a professional translation of his qualification but he was told not to worry about that. He was unable to explain why he did not use the terminology on the professional translation which he had at the time which was 'Vocational College Graduation Level Certificate' and 'Certificate of Electrical Engineering, Information and Telecommunications Engineering, majoring in Information Technology, from the Vocational Senior College'. 176 As has been mentioned, Mr Sharif's LinkedIn profile also referred to his education as including a bachelor of electrical engineering from Heinz-Nixdorf Berufskolleg Germany. In his statement of evidence, Mr Sharif referred to a conversation that he said had taken place in or around late 2019. He said that Mr Gregory started asking him about his qualifications 'out of the blue' and that when he told Mr Gregory that he had studied for three years, Mr Gregory responded to the effect 'so, it was a bachelor, wasn't it'. Mr Sharif's version was that he said he was uncertain whether it was a bachelor to which Gregory responded that it was if Mr Sharif studied for three years and then said that maybe Mr Sharif should change his LinkedIn, 'since it would be important that investors could see it'. 177 An explanation to that effect had not been included in the exchange of lawyer's letters when the matter was at the heart of the basis upon which Mr Sharif's shareholding was cancelled. It appeared to be an attempt to attribute the use of the term bachelor to Mr Gregory, but Mr Sharif's use of that language to describe his degree preceded any such conversation. Mr Sharif accepted that he had used the description bachelor's degree in electrical engineering in various documents before that time. If indeed he remained uncertain as to whether he had received a bachelor's degree until he spoke to Mr Gregory in late 2019 then it does not sit with his explanation that he used that description based on his alleged Google search. 178 When cross-examined, Mr Sharif maintained that he had not included on his LinkedIn page prior to the conversation with Mr Gregory that he had a bachelor's degree in engineering. Yet, there were documents before the Court in which that was the terminology that he had used when presenting himself to uDrew and in documents prepared for Vitruvian before late 2019. It seems most unlikely that if he was describing himself in that way in communications with Mr Young of uDrew that he would not have used the same description for his LinkedIn page and instead, as he suggested, only adopted that reference after the conversation that he said had occurred with Mr Gregory in late 2019. 179 These inconsistent and unconvincing accounts reflected adversely on the credibility of the account given by Mr Sharif. 180 Returning then to the circumstances of the Clancy's Meeting, the purpose of the meeting was for Mr Sharif to be able to introduce himself to Mr Gregory. Mr Sharif was keen to be able to secure an opportunity in a start-up venture having ended his time at uDrew. Although he resisted the suggestion that the purpose of the Clancy's Meeting was for Mr Sharif to sell himself to Mr Gregory, I find that was part of its purpose. Further, it is evident from other documents that Mr Sharif was keen to join a start-up and to pursue the opportunities posed by a new venture in which he had a personal stake. For example, this is evident from the fact that Mr Sharif had developed his contact with Mr Larsen, Mr Sharif's written communications with Mr Young, the terms of his email to Mr Kevin Brown dated 18 July 2019 and the notes that Mr Sharif made for his meeting with Mr Gregory and Mr Larsen after Mr Gregory told Mr Sharif that he could not work with him anymore. These and other documents reveal how significant it was to Mr Sharif to be able to secure an opportunity to work with a start-up. It is most unlikely in those circumstances that he would have mentioned his course of study by adopting a description that did not include the same terminology that he had used elsewhere, namely that he had obtained a bachelor of electrical engineering degree in Germany. 181 Further, on 29 May 2019, soon after commencing work at Vitruvian, Mr Sharif prepared content in which he described himself as holding 'a Bachelor Degree in electrical Engineering (major in software engineering) from Heinz Nixdorf (Germany)'. Also, the emails that he sent at this time referred to his LinkedIn profile (see, for example, his email to Prof Nosaka dated 27 May 2019). For reasons that have been given, the profile at that time described him as having a bachelor of electrical engineering. These matters indicate that it was usual for Mr Sharif to describe himself as having a bachelor's degree in electrical engineering. Given the purpose of the Clancy's meeting it is more likely than not that he described himself in those terms to Mr Gregory on that occasion. 182 There were other aspects of Mr Sharif's evidence that cast doubt on the credibility of his version of events and exposed his tendency to overstate or embellish his experience and qualifications, though he was frank about the fact that he had never worked as a CEO. 183 In an email dated 18 July 2018 to a person that Mr Sharif was keen to have as a mentor, Mr Sharif referred to himself as '[m]anaging freelancers globally on hundreds of projects' (which appears to be a reference to when he was self-employed and working on web-design, search engine optimizing, hosting and email management) and as having experience in '[a]utomotive finance products (B2B & B2C)' (which appears to be a reference to when he was selling insurance and finance to customers in car dealerships), '[l]arge automotive franchise business operations' (which also seems to refer to working at those car dealerships), 'graphic design' (which may refer to when he was at uDrew) and 'mobile phones and mobile contract sales (B2B & B2C)' (which appears to refer to his time working at Crazy Johns). In documents that Mr Sharif prepared for Vitruvian he described himself as having 20+ years' experience in 'B2B & B2C sales, marketing, finance, insurance and project management'. Sometimes, he used the figure 15+ years. 184 In fact, Mr Sharif had very little real business management experience and, save for the short period at uDrew when the evidence is unclear as to the nature of his role, his work had been in sales. 185 Another example of overstatement concerned his description of himself as the overall winner of the Western Australian Innovator of the Year in 2018. There were many references in the documents prepared by Mr Sharif to the award of Western Australian Innovator of the Year. They appeared in contexts where they indicated that Mr Sharif was the recipient of the award. His evidence explaining those references was to the effect that about four months after he joined uDrew he was at the award ceremony for the 2018 Innovator of the Year. When it was announced that uDrew won the award he went up to stand with Mr Young to receive the award. As has been mentioned, it was Mr Young who had established uDrew and it was uDrew that was the recipient of the award. At that time, Mr Sharif had recently started working at the company. On any view, it was a considerable exaggeration in those circumstances for Mr Sharif to present himself as the recipient of the award. Yet, the documents prepared by Mr Sharif for Vitruvian presented him in that way. 186 Another aspect of his evidence concerning what was said at the Clancy's Meeting casts doubt on the credibility of Mr Sharif's account of that meeting. Mr Sharif denied telling Mr Gregory during the Clancy's Meeting that he had made money through an online pornography business. In his statement of evidence, Mr Sharif went further and stated that he had never been the owner of an adult content website or involved in an adult content website or business. When cross-examined he accepted that at various times he had described himself as one of the largest online porn webmasters in Germany. He sought to explain the apparent inconsistency on the basis that the business that he had conducted in Germany was a blog system where people who wrote adult content would see adult advertisements which were generated by third parties. His explanation was that the revenue from the site was derived from advertisements not from pornographic content. He resisted the proposition that he would describe himself as an online porn webmaster. When cross-examined he said that was the terminology used at the time in Germany but he had never operated a porn website. However, it is the terminology that he used in his email to the potential business mentor of 18 July 2018, about two months after the Clancy's Meeting. Issue (2): If yes to (1), did Mr Gregory (and by him, Vitruvian) rely upon the statement of Mr Sharif in agreeing, on behalf of Vitruvian, to engage Mr Sharif to issue a 15% shareholding to Mr Sharif? 187 For the following reasons, Mr Gregory placed no particular reliance upon the statement made by Mr Sharif at the Clancy's Meeting about his degree. 188 The contemporaneous email exchange between Mr Larsen and Mr Gregory at about the time of the Clancy's Meeting shows the basis upon which he was being put forward by Mr Larsen to Mr Gregory. Mr Larsen described him as having a good heart, tons of drive and 'not super experienced'. The focus was upon his energy (or what was elsewhere referred to in the evidence as hustle). On Mr Larsen's account the reason he thought Mr Sharif was a good fit was that he had formed the view that Mr Sharif was good at networking, talking to people and at closing sales, skills that he thought would complement those of Mr Gregory. I infer that statements to similar effect were made by Mr Larsen to Mr Gregory at the time. They are not at all concerned with his education. Quite the contrary, they are focussed upon Mr Sharif's skills at networking and sales, skills that are not of a kind that may be expected to be acquired by undertaking studies in electrical engineering. 189 When cross-examined, Mr Larsen's evidence was to the effect that it was the need for Vitruvian to be able to drive sales and the sales experience of Mr Sharif that were the reasons why he suggested Mr Sharif to Mr Gregory. Further he had formed the view that Mr Sharif was good at networking, good at talking to people and good at closing sales. In the circumstances of the evidence as to the nature of the relationship that had developed between Mr Larsen and Mr Gregory and the content of the contemporaneous emails and messages, I conclude that in all likelihood Mr Larsen presented Mr Sharif to Mr Gregory in those terms. 190 Therefore, the way in which Mr Sharif was presented to Mr Gregory did not direct attention to the kind of skills that a person may acquire in undertaking an electrical engineering degree. 191 As is evident from the chronological account of events based upon the contemporaneous documents, there were exchanges between Mr Sharif and Mr Gregory that described the work and effort of Mr Sharif at Vitruvian in quite favourable terms. Despite the length of time that Mr Sharif worked at Vitruvian with Mr Gregory there is no contemporaneous document expressing any concern about his work. 192 From the time when Mr Sharif started at Vitruvian until the time when Mr Gregory decided that he could no longer work with Mr Sharif, there was ample opportunity for Mr Gregory to observe Mr Sharif's work. If, as Mr Gregory suggested, from the outset Mr Sharif's work had not met his expectations (based upon what he was told about the bachelor's degree) then his conduct in allowing Mr Sharif to have carriage of many matters for the company over a considerable period would make no sense. Yet, that is what occurred. 193 Further, after a few months, Mr Sharif spoke to Mr Gregory about the difficulties that he was experiencing meeting his family commitments on the agreed amount of $60,000 per year. Mr Gregory agreed to increase the payment to $100,000 per year. His willingness to do so is inconsistent with the version of events that he advanced at the hearing which was to the effect that Mr Sharif's working had been entirely lacking in any effectiveness. 194 It seems likely that Mr Gregory was impressed by Mr Mactiernan when he arrived on the scene in late February or early March 2020. He was particularly impressed with what Mr Mactiernan was able to prepare when it came to a revised deck (as was Mr Larsen). Yet, even confronted with that comparison, he did not question the continued involvement of Mr Sharif. He sent emails in February, March and April 2020 praising the work done by Mr Sharif, including his work in preparing the pitch deck. Then, in April 2020 he proceeded to take steps to put in place the allocation of the 15% shareholding to Mr Sharif and to prepare the shareholders' agreement. The draft of the shareholders' agreement confirmed Mr Sharif's position as CEO of Vitruvian and he also told Mr Sharif at that time that the next step was to appoint him to the board. 195 These actions must be compared with the basis upon which Mr Gregory sought to justify his actions on 30 June 2020 in cancelling Mr Sharif's shareholding in Vitruvian. That basis is set out in the letter from Bennett + Co of that date, the terms of which Mr Gregory accepted he had read and approved before it was sent to Mr Sharif. The letter included a list of the respects in which it was alleged to have become apparent to Mr Gregory that Mr Sharif was not able to perform the services for which he was contracted. The list was said to pertain to the period from May 2019 to May 2020. 196 The list included claims that Mr Sharif was unable to prepare an investor deck 'to a reasonable standard of someone with a technical degree', that he 'did not know how to use a spreadsheet to prepare a financial model to include in an investor deck', that he was 'unable to assist in the designing, fabricating or any aspect of completing the physical product development', could not answer elementary questions about wiring and voltage, 'could not assist with the software user interface or the development of an app' and used freelance workers to complete all of the technical work. 197 The letter also asserted that 'it became obvious that [Mr Sharif] did not have the technical capabilities required to develop the product and business in a timely manner or at all'. As to that aspect, Mr Gregory was taken to evidence in which his own capabilities were described in the following terms: … the founder of the project is qualified in Applied Physics. He has the knowledge and experience to understand the physical system (the human body) and to design and assemble the mechanical, electrical and electronic components, as well as program the system and graphical user interface to enable it to be controlled. 198 In that context, he agreed that the object of having Mr Sharif step in was 'to free you up to concentrate on developing the device and let this other person do the other things'. Mr Gregory also gave evidence that in early 2019 Mr Larsen told him that Mr Sharif would be a very good fit for an early stage enterprise 'because he was a hard worker, amazing salesman and could think about the commercial side of the business'. It was not the case that the agreement made with Mr Sharif was on the basis that he had technical engineering skills. 199 Mr Larsen also gave evidence in his reply statement of evidence to the effect that following the engagement of Mr Sharif with Vitruvian, Mr Gregory was working on building the product and so the responsibility to set up and nurture relationships with members of the advisory board fell to Mr Sharif. This evidence is inconsistent with suggestions by Mr Gregory that Mr Sharif was engaged because of some belief that he had the technical expertise to work on the product. 200 On Mr Gregory's evidence, throughout his time at Vitruvian Mr Sharif failed to demonstrate the skills and abilities that he said he expected of Mr Sharif because he had said that he had an engineering degree. The oral testimony of Mr Gregory as to these complaints was stilted and very generalised. Save for the recounting of a single incident relating to wiring in the product, it was unsupported by the details or examples that would be expected if Mr Gregory genuinely formed views of the kind asserted in the letter on the basis that Mr Sharif, by his statement about the degree, had induced in Mr Gregory a view about the standard of his skills and abilities that was not evident in the work that he was producing at Vitruvian. 201 As to performance, Mr Gregory knew that Mr Sharif had not been a CEO before. He knew that his employment experience was in sales. He had no reason to expect from his employment experience that Ms Sharif could prepare an investor deck or a financial model. He was not presented to Mr Gregory by Mr Larsen in those terms. Quite the contrary. He was proposed as a person who did not have lots of experience. 202 On Mr Gregory's version of events, the reason why he brought Mr Sharif's involvement with Vitruvian to an end was because of his poor performance. If that was so, you would expect him to be able to explain with some detail the alleged deficiency. Yet when he gave evidence of the conversations at the time, he could not recall what was said and he could offer no elaboration of any respect in which Mr Sharif's work was, to use his words, 'of poor quality and unacceptable'. His evidence as to what occurred at the meeting with Mr Larsen and Mr Sharif on the evening after he told Mr Sharif that he could not work with him anymore was particularly unconvincing. Beyond saying that he said to Mr Sharif that work was done but it was not very good, his evidence was that he could not recall anything about the meeting. 203 Mr Larsen's evidence of the same meeting was that it was quite long (he said it went for no more than an hour and a half). He said that Mr Gregory said that he didn't trust Mr Sharif and that something had happened in recent days that had caused that to happen. His summary of the meeting was that Mr Gregory wanted Mr Sharif out of the business, that he did not trust him anymore and that Mr Gregory felt that Mr Sharif was 'a dangerous character in the business in multiple aspects'. Significantly absent from Mr Larsen's version of the meeting is any suggestion that Mr Gregory's concern was with poor performance or inability to undertake the work. When cross-examined he confirmed that he didn't mention underperformance of Mr Sharif at the meeting. If indeed these matters had loomed large then you would expect them to have been mentioned by Mr Larsen when giving evidence of his recollection of the meeting. 204 Further, there was no suggestion that somehow the alleged deficiencies in the work undertaken by Mr Sharif when measured against Mr Gregory's alleged expectations based upon the statement by Mr Sharif had a degree were somehow hidden from Mr Gregory. Indeed, given the documentary evidence about communications between Mr Sharif and Mr Gregory about the pitch deck, the fact that they both attended at the Warehouse where the machines were located, tested and tried out by many people to provide feedback and comments and the fact that Mr Gregory maintained that he was the one who worked on the product it is difficult to see any basis upon which deficiencies of the kind alleged would not have been readily apparent to Mr Gregory if indeed they were manifest and were of significance to him as he alleged. 205 When cross-examined as to why there was no mention of any alleged underperformance by Mr Sharif at the time that terms of settlement were proposed to Mr Sharif by Mr Larsen, Mr Gregory's evidence was most unconvincing. His explanation was to the effect that by the time of the offer of settlement 'there was more than enough verbal communication communicating that Mr Sharif had underperformed'. I do not accept this evidence. It is contrary to the contemporaneous documents, particularly the terms in which Mr Sharif was praised by Mr Gregory and the conduct of Mr Gregory in April 2019 in presenting the shareholders agreement in which Mr Sharif's position as CEO was confirmed. It is also contrary to his own witness statement in which he said that he never told Mr Sharif directly that he was underperforming. 206 To these matters must be added the unsatisfactory nature of the way in which Mr Gregory sought to explain the conversation in late 2019 in which Mr Sharif referred to the fact that he had better get his degree. As has been explained, his account of his response to that statement sits uncomfortably with his claim that, when he entered into the agreement with Mr Sharif, he attributed significance to the statement by Mr Sharif that he had a degree in electrical engineering. The emphasis upon the significance of the statement in the Bennett + Co correspondence is also inconsistent with the fact that there was no mention of the statement in the statements of evidence that he filed in the proceedings, an omission that he could not explain. 207 Mr Gregory was cross-examined as to why there was a reference in the letter from Bennett + Co in June 2020 to the conversation in late 2019 (which gave him the 'first inkling' that Mr Sharif did not have a degree) but it was not referred to in the earlier settlement negotiations or raised when he terminated Mr Sharif in May 2020 - which, on his version of events, was because he had been underperforming. Mr Gregory claimed to have evaluated Mr Sharif's performance in May 2020 and concluded that he was underperforming. His evidence was that it was based on a 'continual daily evaluation … of [Mr Sharif's] performance and his behaviour'. 208 When pressed as to why, if Mr Sharif's performance had been poor throughout and he had an inkling that he did not have a degree in late 2019 it was not until June 2020 in the Bennett + Co letter that there was any mention of the conversation in late 2019 he proffered the following unconvincing explanation (which is inconsistent with the course of events as revealed by the contemporaneous documents): Mr Sharif was - was the benefit of my long-term - long suffering patient, kindness and latitude to enable him to - for the beginning of his performance - beginning of this employment through to the end, to rise to the occasion - to rise into the roles - titles that I had allowed him to use. The fact that it was three months or six months or nine months is - is evidence of my patience and forbearance. 209 I do not accept this explanation which was proffered for the first time in cross-examination. Rather, the evidence shows that Mr Gregory had been pleased with what had been achieved by Mr Sharif but something happened that caused Mr Gregory to suddenly change his mind about him in May 2020. Up until then he had been willing to confirm his appointment as CEO by a formal shareholders agreement, to issue his 15% shareholding and to say that the next step would be to make Mr Sharif a director. Therefore, I reject his explanation that he had concerns about Mr Sharif's work being below that which he expected based upon his statement that he had a bachelor's degree in engineering which concerns were based upon continual daily evaluation and it was only because of his forbearance that he did not act upon the 'first inkling' that Mr Sharif did not have a degree. 210 There was another unsatisfactory aspect to Mr Gregory's evidence. Throughout Mr Sharif's time as CEO of Vitruvian he was described as a co-founder. At a number of points in his evidence Mr Gregory said that he 'allowed' Mr Sharif to take the titles of CEO and co-founder. This evidence tended to suggest that they were descriptions that Mr Sharif took on for himself, which was not the case. Mr Gregory said he thought allowing Mr Sharif to be described as a co-founder would inspire loyalty and productivity. This evidence was inconsistent with the fact that Mr Gregory agreed from the outset to a 15% shareholding in Vitruvian for Mr Sharif. It is also inconsistent with references to Mr Sharif as a co-founder, particularly in emails sent by Mr Larsen and Mr Mactiernan to third parties. 211 Most significantly, Mr Gregory's evidence as to the use of the term co-founder is inconsistent with the terms of the settlement offer made to Mr Sharif which was described as an offer for founder equity and which proposed terms on the basis that Mr Sharif was a founder. Indeed, the email sent on 28 May 2020 with the settlement offer had the subject 'Offer for Founder equity on departure from Vitruvian'. It will be recalled that the Mr Gregory read and approved that document which was framed on the basis that Mr Sharif was a founder of Vitruvian. The reluctance to accept that description as applied to Mr Sharif is an example of Mr Gregory's attempt, after the event, to recast what happened to suit his own interests. His attempt to explain the terms, in retrospect, as 'an incredibly generous and magnanimous offer to inspire [Mr Sharif] to be loyal and productive' rather than an enticement to join Vitruvian (a start-up) as its CEO should not be accepted. 212 When asked about the favourable comments in emails to Mr Sharif, Mr Gregory said that he used very positive language to encourage Mr Sharif to perform or make him feel appreciated. Having regard to the terms in which those emails were expressed, I do not accept that evidence. 213 When asked why having witnessed Mr Sharif's performance for almost a year he was willing to enter into a shareholders' agreement to secure his tenure as CEO he offered the following unconvincing explanation: Despite my better judgment having observed his performance over the course of nearly a year, I had been putting in place steps to make good on a contract that was agreed nearly a year ago because I'm a man of my word. 214 In effect his answer was that despite having an inkling that Mr Sharif did not have a degree in electrical engineering and despite that being a significant part of why he had made an agreement with Mr Sharif and despite forming the view that his performance was poor he nevertheless proceeding to propose the terms of the shareholders' agreement securing Mr Sharif's tenure as CEO. Further, he then went on to say that the next step was to appoint him as a director and even after terminating his role as CEO offered settlement terms on a basis which raised no complaint about Mr Sharif's performance. 215 I conclude that the claim to the effect that Mr Gregory placed significance upon the statement made by Mr Sharif that he held a bachelor's degree in electrical engineering is a revisionist version of the events that was constructed after the settlement negotiations with Mr Sharif failed and at a point in time when Mr Gregory was looking for some basis to remove Mr Sharif from the share register of Vitruvian. It was not until 8 June 2020 after the settlement offer to Mr Sharif was rejected that Mr Gregory focussed upon the issue of Mr Sharif's degree. At that time, he made a request of Mr Larsen for a copy of Mr Sharif's CV. In doing so he said that he knew that was a bit remiss of him to be trying to source it now. Plainly, he had paid no attention to matters that might be included in such a CV at any time before then. Further, it appears that he only accessed the LinkedIn page of Mr Sharif as a result of a suggestion by Mr Larsen. 216 I find that Mr Gregory gave no particular significance to the statement made by Mr Sharif about his degree at any time until after the negotiations with Mr Sharif in June 2020 failed to result in any agreement. By that time, Mr Gregory was searching for a reason to justify the cancellation of Mr Sharif's shares because he viewed him as a 'pain on the register'. Issue (3): Did Mr Sharif continue to represent that he held a bachelor's degree in electrical engineering by sending the August Email? 217 It appears that this issue is a false issue when it comes to misleading or deceptive conduct and the relief to which Vitruvian says it would be entitled as a basis for justifying relief under s 1322 of the Corporations Act. To succeed in supporting a claim of that kind, Vitruvian must establish a basis upon which the Court should grant relief setting aside the agreement made with Mr Sharif from the outset. Therefore, the question is whether Mr Gregory (acting on behalf of Vitruvian) was misled into making the agreement. 218 There is no suggestion from Mr Sharif that Vitruvian could not be entitled to relief because at some point it became aware that the representation was false and yet proceeded to act by issuing the shares to Mr Sharif. Nor is it claimed by Vitruvian that there was some basis for the relief that it sought under s 1322 that was founded upon the continuing representation. Finally, as has been observed, no separate relief was sought by Vitruvian under the Australian Consumer Law. 219 Nevertheless, if the matter goes further and the question of continuing representations is thought to be relevant then I find, on the facts, that Mr Sharif continued to represent that he held a bachelor's degree. Issue (4): If yes to (3), did Mr Gregory (and by him, Vitruvian) rely upon the representations by continuing to engage Mr Sharif and by issuing a 15% shareholding to Mr Sharif? 220 Again, this seems to be a false issue when it comes to the nature of the relief sought by Vitruvian and the basis upon which it seeks that relief under s 1322 of the Corporations Act. This is not a case where Vitruvian claims that if it was not misled into entering into the agreement then it was misled into performing the agreement. Nor is it a case where Mr Sharif says that Vitruvian is not entitled to relief because it became aware of the true position. There is no separate relief that is sought that depends upon the alleged reliance on the continuing representation. 221 For reasons that have already been given I do not accept that Mr Gregory relied upon the false representation about Mr Sharif's degree when the original agreement was made for him to work at Vitruvian on the basis that he would be paid a salary and would be issued with a 15% shareholding in Vitruvian. It follows from the findings that I have made that the lack of reliance upon that statement continued up until the time when advice was sought from Bennett + Co being the point in time when Mr Gregory became aware that the representation was not true. Issue (5): Having regard to the answers to (1) to (4), is Vitruvian entitled to statutory relief rescinding ab initio the agreement with Mr Sharif on the basis that he engaged in misleading or deceptive conduct? 222 It follows from my finding as to reliance that Vitruvian has not demonstrated a basis upon which the Court might consider whether it is appropriate to declare the agreement made with Mr Sharif to be void ab initio (being statutory relief that may be granted in appropriate circumstances, see s 243(a) of the Australian Consumer Law). Although at some points the case for Vitruvian was expressed in terms that it had some form of entitlement to rescind the agreement made with Mr Sharif, it was accepted that the grant of statutory relief to that effect involves the exercise of a discretionary power. The power to do so is conferred to enable the Court to make remedial orders 'in appropriate cases to ensure a fair result': see Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 298 (a statement made in respect of the equivalent provision in the statutory predecessor to the Australian Consumer Law). The discretionary nature of the relief means that even if (contrary to my findings) reliance had been demonstrated to have been placed by Mr Gregory as at the time of making that agreement in committing to its terms on behalf of Vitruvian there would be further matters that would need to be considered before any such relief might be granted. Indeed, it has been said that 'the court must consider all the circumstances before it in the exercise of its discretion': Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 564. 223 In the present case, the facts before the Court indicate two matters of possible significance that would count against the exercise of the discretion to declare the agreement void ab initio. 224 The first matter arises from the fact that the agreement was performed for a year. During that time, Vitruvian received the benefit of the performance by Mr Sharif of the terms of that agreement. The performance was undertaken on the basis that Mr Sharif had received the benefit of a 15% interest in the shares. As has been mentioned, Vitruvian did not persist in a claim that there was no value in that performance. Further, it confined the extent to which it relied upon evidence that it said demonstrated deficiency in performance by Mr Sharif to support for its claim that the representation about the degree was misleading or deceptive. For reasons that have been given, that was a flawed approach. In those circumstances, the fact that performance continued for a considerable period counts against the exercise of discretion in favour of the relief to which Vitruvian claimed it was entitled. 225 The second matter arises from the conversation that both parties accepted occurred in late 2019 in which Mr Sharif said to Mr Gregory that he had better finish his degree. On the case advanced by Mr Sharif as to reliance, the conversation was said to support a finding that there had been no reliance. For reasons that have been given, it is one of many aspects of the evidence that supports the conclusion that there was no reliance upon the statement made by Mr Sharif that he held a bachelor's degree in electrical engineering. However, if reliance had been demonstrated as at the time of entry into the agreement then an issue would arise as to whether there was some form of affirmation or election by Mr Gregory on behalf of Vitruvian to proceed with performance of the agreement after late 2019. Significantly, it was not until some months after that date that the relevant shares were issued to Mr Sharif and the terms of a shareholders' agreement were proposed by Mr Gregory that stated that Mr Sharif was to be the CEO of Vitruvian. Therefore, it may have been necessary to receive further submissions as to the significance of that aspect if indeed the reliance case of Vitruvian had been accepted insofar as it concerned the decision to enter into the agreement with Mr Sharif. Issue (6): Having regard to the answer to (5), is Vitruvian entitled to relief under s 1322 and, if so, in what terms should that relief be expressed? 226 Section 1322(4) confers power upon the Court on application by an interested person to make all or any of the following orders: (a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; (b) an order directing the rectification of any register kept by ASIC under this Act; (c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a); (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit. 227 By the terms of s 1322(6)(c), the Court must not make an order under s 1322 unless it is satisfied 'that no substantial injustice has been or is likely to be caused'. 228 In addition, a declaratory order of the kind described in s 1322(4)(a) cannot be made unless the Court is satisfied that the order is in respect of something that 'is essentially of a procedural nature' (s 1322(6)(a)(i)) or that the person concerned acted honestly or that it is just and equitable that the order be made (s 1322(6)(a)(ii) and (iii)). Further, in the case of an order under s 1322(4)(c), by the terms of s 1322(6)(b), the Court must not make an order relieving a person of civil liability unless the Court is satisfied that the person subject to the liability acted honestly. 229 The orders sought by Vitruvian under s 1322 were (a) an order declaring that all share capital transactions undertaken by Vitruvian since 30 June 2020 are not invalid by reason of the failure to comply with s 256B and s 256C of the Corporations Act 'or any contravention of a provision of the Corporations Act or a provision of Vitruvian's constitution in respect of [the cancellation of the shares held by Mr Sharif]'; and (b) an order relieving Vitruvian and its directors and officers from the whole of any civil liability arising out of such contravention or failure. 230 The case for Vitruvian under s 1322 was put on the basis that because of Mr Sharif's misleading or deceptive conduct and Vitruvian's justifiable rescission of the agreement, the cancellation of his shares was not oppressive. It also advanced an alternative claim to the effect that the relief sought should be ordered because Vitruvian acted honestly and there would be no substantial injustice if the order was made. The alternative claim was put more broadly in opening submissions but was expressed more narrowly in closing submissions where, for example, no submission was made that the failure to comply with the Corporations Act was procedural in nature. 231 It follows from the answer to issue (5) that to the extent that the relief sought under s 1322 was sought to be justified on the basis of an alleged entitlement to statutory relief that would rescind the agreement ab initio, the entitlement to that relief has not been established. Therefore, as to that basis for relief under s 1322 the application must be refused. 232 To the extent that Vitruvian relied upon the allegations about a failure by Mr Sharif to meet an expected standard in the performance of his work in order to support the claimed relief, those allegations were only relied upon to support the flawed submission that they demonstrated falsity in the representation. Therefore, as to the submissions that relied upon those matters as the basis for relief under s 1322, it is also the case that the application must be refused. 233 As has been observed the claim that there was a total failure of consideration was not pressed. Therefore, it is not the case that Vitruvian seeks to support the relief on the basis that it was fair for the shares to be cancelled because Mr Sharif had provided nothing for them. 234 It only remains to consider the submission by Vitruvian that it would be appropriate to grant relief under s 1322 even if Vitruvian failed in demonstrating an entitlement to statutory relief that would rescind the agreement ab initio. The submission advanced was to the effect that an order should be made because the cancellation of shares by Vitruvian was done honestly and was done following advice and without any intent to take shares from Mr Sharif in a manner that was inconsistent with the legal requirements. 235 For reasons that are given below, the conduct of Vitruvian, Mr Gregory and J & S Gregory Pty Ltd was oppressive of Mr Sharif and it is appropriate for the Court to make an order under s 233 in favour of Mr Sharif. Having regard to those findings I am not satisfied that no substantial injustice has been caused to Mr Sharif from the conduct the subject of the orders sought under s 1322. I do not accept that any prejudice to Vitruvian would justify a grant of relief under s 1322 that would somehow absolve Vitruvian from exposure to orders that may be appropriate by way of relief from the consequences of that oppression. 236 It follows that it is not necessary to address the submission to the effect that Mr Gregory (and thereby Vitruvian) acted honestly. Therefore, I deal with that aspect only briefly with a view to making any factual findings that may be relevant if the matter proceeds further. 237 Where there is a requirement imposed by s 1322 to demonstrate that a person has acted honestly, the Court must be affirmatively satisfied that the person concerned has acted honestly. In my view, a condition of that kind could not be met by pointing to an absence of evidence of dishonesty. The relevant circumstances as known must be deposed to in support of the application. Authorities to the effect that the Court looks to an absence of evidence of dishonesty must be understood to mean that where the Court is satisfied that a fulsome account has been given of matters known by those bringing the application, the Court may conclude that the affirmative obligation has been discharged by the Court being able to reach a conclusion from what has been put before the Court that there is nothing to suggest dishonesty: see, for example, G8 Communications Ltd, in the matter of G8 Communications Ltd [2016] FCA 297 at [35]. In that regard, I respectfully agree with the way in which the matter was put by McKerracher J in Queensland Bauxite Ltd, in the matter of Queensland Bauxite Ltd [2018] FCA 2113 at [35]: 'Honesty can properly be inferred in circumstances where the explanation for the relevant conduct does not reveal any evidence of dishonesty'. 238 The requirement that the person acted honestly incorporates the ordinary meaning of honesty and in deciding whether the Court is satisfied as to that requirement, account is taken of whether the party seeking relief has acted promptly to remedy the error: ICandy Interactive Limited, in the matter of ICandy Interactive Limited [2018] FCA 533 at [54]-[56] (Banks-Smith J). 239 In the present case there was complete disregard of the statutory requirements. Although Mr Gregory acting on behalf of Vitruvian took advice from Bennett + Co which was to the effect that he could cancel the shares, the error in the advice was pointed out soon after the cancellation by lawyers acting for Mr Sharif yet nothing was done by Vitruvian thereafter. Mr Gregory offered no convincing explanation as to why nothing was done after the failure to comply with the requirements of the Corporations Act was exposed. He did not point to any further legal advice that was obtained. The application for relief under s 1322 was not brought promptly and there was no explanation for the delay. Mr Gregory, and by him Vitruvian, knew of the issue in July 2020. Vitruvian proceeded thereafter to make significant share issues in September 2020, March 2021 and April 2022 before bringing the application for orders under s 1322 on 27 April 2022 almost two years after the problem with the cancellation of the shares was exposed. 240 As is explained below, the action in cancelling the shares was oppressive and was part of a plan to advance the interests of Mr Gregory by diluting the interest of Mr Sharif which was implemented by Mr Gregory and Vitruvian immediately after the cancellation of the shares. It was implemented in a manner that was to the considerable benefit of J & S Gregory Pty Ltd, a company controlled by Mr Gregory. 241 Mr Gregory contemplated the possibility of a challenge to the cancellation at the time that he took advice from Bennett + Co and chose to proceed, at least in part, upon an assessment that Mr Sharif lacked the financial capacity to be able to bring court proceedings challenging the cancellation of his shareholding. 242 To the extent that Mr Gregory says that he relied upon advice that he could cancel the shares, the advice depended upon instructions that were provided by Mr Gregory. For reasons that have been given those instructions were not accurate when it came to the alleged significance of the representation by Mr Sharif about his degree. They also diminished the nature of the role that Mr Sharif was engaged to undertake. The evidence of Mr Gregory which sought to place significance upon what had been said by Mr Sharif about his degree was a reconstructed version of events given to suit the personal commercial interest of Mr Gregory. The claim alleged in correspondence and in the pleadings for Vitruvian to the effect that there had been a total failure of consideration was not maintained. The attempt to characterise Mr Sharif as a mere contractor is exposed as disingenuous once there is regard to the history of dealings particularly the recognition by Mr Gregory from the time that Mr Sharif commenced working at Vitruvian as CEO, the inclusion of express provision to that effect in the shareholder's agreement provided to Mr Sharif by Mr Gregory in April 2020 and the statement by Mr Gregory at about that time that the next step was for Mr Sharif to be appointed as a director of Vitruvian. 243 In the above circumstances, the blatant and continuing disregard of the requirements of the Corporations Act without any reasonable explanation to the personal advantage of Mr Gregory as part of conduct that involved the oppression of Mr Sharif as a shareholder of Vitruvian falls within that category of case alluded to by Palmer J in Hall v Poolman [2007] NSWSC 1330; (2007) 215 FLR 243 at [325] (albeit in respect of a different kind of contravention) as one in which there has been such a failure to conform to the requirements of the law that it demonstrates dishonesty in the sense that there was no genuine attempt to understand and comply with the requirements of the legislation concerned with the circumstances in which there may be a selective cancellation of shares. 244 As to whether it may be just and equitable for the order sought to be made, insofar as it is sought by Vitruvian in respect of its conduct and that of Mr Gregory as a director, for the reasons that have been given, it could not be said that it would be just and equitable that the order sought be made. Issue (7): Were the affairs of Vitruvian conducted oppressively or unfairly prejudicially to Mr Sharif as a member of Vitruvian? 245 As has been explained, the way in which the case was conducted for Mr Sharif exposed four respects in which it was alleged that that affairs of Vitruvian had been conducted in a manner that was oppressive to him. After dealing with matters of general principle, I will address each of the four respects in which Mr Sharif claimed to have been oppressed. General principles 246 The circumstances in which orders may be made under s 233 of the Corporations Act were summarised in the following way in Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55 at [8]-[9] (Siopis, Rares and Davies JJ); … Conduct will be oppressive if that conduct was unfair according to ordinary standards of reasonableness and fair dealing: Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 … As Brennan J stated in Wayde … oppression, at a minimum, imports unfairness. The test of unfairness requires an objective assessment of the conduct in question with regard to the particular context in which the conduct occurs. The question is whether objectively in the eyes of the commercial bystander there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the conduct or decision fair. 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 acts that is material … 247 Accordingly, the standard is objective. However, evidence of purpose or motive may be relevant. 'For example, if the decision-maker was motivated to make a decision to achieve some particular unfairness against a member, that fact might enable it to be concluded more readily that the effect of the decision is as the decision-maker intended (namely, unfair)': Wilmar Sugar Australia Limited v Mackay Sugar Limited [2017] FCAFC 40 at [73] (Dowsett, Jagot and White JJ). 248 In evaluating whether there has been oppression, there must be regard to the circumstances of the particular relationship: Joint v Stephens [2008] VSCA 210 at [136]. The Court does not assess the commercial wisdom of the conduct that has been undertaken. Rather, it considers whether the conduct is outside the bounds of that which reasonable directors would consider to be fair: RBC Investor Services Australia Nominees Pty Limited v Brickworks Limited [2017] FCA 756 at [42] (Jagot J). Whether the exclusion of Mr Sharif from the management of Vitruvian was oppressive 249 Wrongful exclusion from management of a company may be a form of oppression: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2019) 238 CLR 304 at [176]. 250 In the present case, the parties had considered entering into a shareholders' agreement. Two versions had been proposed. The version proposed by Mr Gregory in April 2020 recognised Mr Sharif as the CEO. However, there was no suggestion that the terms upon which he had been engaged to work for the company or the terms upon which he had been issued shares included any agreement as to his ongoing involvement in the management of the company. Indeed, throughout the time that he worked for Vitruvian, Mr Sharif was not a director with Mr Gregory being the sole director. There was a suggestion just prior to his removal as CEO that his appointment as a director would be the 'next step' but that was not a basis upon which to conclude that his shareholding in the company had been acquired on terms or on some form of common expectation that he would have an ongoing management role. This is not a case where the affairs of Vitruvian were said to have been conducted on a basis akin to a partnership in which all 'partners' may be expected to have a role in the ongoing management of the affairs of the company. 251 In short, there is no basis in the evidence to support a conclusion that the removal of Mr Sharif as CEO was 'wrongful' in some way having regard to the circumstances that pertained to Vitruvian and his appointment as CEO. At all times there was the possibility that Mr Gregory as the director of the company could resolve to remove Mr Sharif as CEO. No submission was advanced as to why it would be unfair for that to occur. Further, save for matters concerned with the issue of further shares in Vitruvian (which are advanced as a separate basis for the oppression claim) there is no respect in which it is said that the affairs of Vitruvian were managed in a manner that involved an exclusion of Mr Sharif. For example, there is no evidence of any requests for information made by Mr Sharif that were refused or any respect in which he sought to provide input into the decisions being made concerning the management of the affairs of the company that were refused. 252 There was a dispute between the parties as to the significance of Mr Sharif being identified as a co-founder of Vitruvian. No specific submission was developed by reference to that title to support the oppression claim and it was not a matter that was explored in any detail in cross-examination. In those circumstances, it is not a matter to which I have regard in considering the oppression claim. 253 Therefore, the exclusion of Mr Sharif from the management of Vitruvian was not oppressive. Whether the cancellation of Mr Sharif's shares without his consent and without complying with the statutory procedure for a selective reduction of capital was oppressive 254 A company may reduce its share capital in a manner that is fair and reasonable, does not materially prejudice creditors and has been approved under s 256C: see s 256B of the Corporations Act. If the reduction is a selective reduction to be effected by a cancellation of shares (which it was in the present case) then the reduction must be approved by the shareholders in general meeting and by a special resolution passed at a meeting of shareholders whose shares are to be cancelled: s 256C. 255 Therefore, the cancellation in the present case deprived Mr Sharif of the benefit of the protections afforded by s 256C. It did so in circumstances where the legislation provided for a selective buy-back procedure, a course that Vitruvian might otherwise have been expected to consider if it wished to remove Mr Sharif from the register. 256 By the time of the hearing, the only commercial reason offered to justify the selective cancellation of the shares of Mr Sharif was the misleading or deceptive conduct of Mr Sharif that was said to be of a character that would entitle Vitruvian to statutory relief rescinding the agreement pursuant to which the shares were issued to him. However, for reasons that have been given, Vitruvian has failed in demonstrating a basis for that relief (and, as has been explained, even if it had been established there are reasons why such relief may not be appropriate). 257 The terms of the communications with Mr Sharif after he was removed as CEO of Vitruvian demonstrate that the shares had been issued unconditionally to Mr Sharif. In his evidence, Mr Gregory accepted that there was an obligation to issue the shares to Mr Sharif by reason of the terms that had been agreed at the time that he started at Vitruvian. Indeed, as has been noted, he explained his actions in April 2020 in arranging for the issue of the shares to Mr Sharif on the basis that he was honouring that agreement. 258 I find that a reasonable director in the position of Mr Gregory would conclude that it was unfair to selectively cancel the shareholding of Mr Sharif. Even if a director genuinely believed that the company had a strong case to seek statutory relief rescinding ab initio an agreement pursuant to which the shares had been issued (a finding that I do not make in respect of Mr Gregory) then a reasonable director would commence proceedings seeking that relief and would not resort to unlawful self-help of the kind taken by Mr Gregory in the present case. 259 Therefore, I find that the cancellation of the shares was oppressive. Whether the course followed by Vitruvian in formulating and implementing a plan to dilute Mr Sharif's shareholding by not allowing him to participate in future capital raisings was oppressive 260 On the evidence, I am satisfied that Mr Gregory, acting in his own interests and on behalf of each of Vitruvian and J & S Gregory Pty Ltd as the majority shareholder in Vitruvian, formulated a plan to dilute Mr Sharif's shareholding. However, a subjective purpose of that kind would not, of itself, be sufficient to demonstrate oppression. It is still necessary to demonstrate that actions that were taken were objectively unfair in the relevant sense. 261 To the extent that Vitruvian issued shares because it was in need of further capital or it was appropriate to establish an employee share scheme, there could be no oppression even if the consequence was to dilute the shareholding of Mr Sharif for the reason that he did not have funds to participate or was not entitled to any benefit under the employee share scheme. As has been noted, save for the issue of shares on 14 July 2020 (as to which, see below) there was no attempt by Mr Sharif to seek to demonstrate that there was no commercial reason for the issuing of further shares that occurred after his shares were cancelled. Therefore, it is not the issue of the shares, of itself, that is claimed to be unfair. Rather, it is the issue of those shares after Mr Sharif's shares were invalidly cancelled that is said to be unfair. The sequence of events deprived him of the opportunity to participate in the issue of further shares if he had been a shareholder (as indeed Mr Larsen and J & S Gregory Pty Ltd were able to participate). To that extent, being deprived of that opportunity was a further consequence of the selective cancellation of Mr Sharif's shares and formed part of the oppressive conduct. 262 Prior to the hearing, Mr Sharif abandoned formulations of his case which were to the effect that he had some form of entitlement based upon the agreement reached with Mr Gregory that he was entitled to an entrenched 15% shareholding. That course appears to have been well advised. 263 If the plan to dilute had been advanced as the sole rationale for the capital raisings that followed thereafter then it may have been an instance where the subjective intention assisted in reaching a conclusion that the further share issues were oppressive. However, as has been explained, that was not the basis upon which Mr Sharif's case was advanced. 264 For those reasons, it was not the formulation of the plan to dilute that was oppressive. Rather, it was the action taken to implement the plan which involved the cancellation of the shares of Mr Sharif before any capital raising was undertaken with the consequence that Mr Sharif was unable to participate. Therefore, even if he was subsequently able to establish that he should be reinstated to the register his interest in the company would have been substantially diluted by intervening events. It was this aspect of the conduct that made it unfair in the relevant sense especially as Mr Sharif was a 15% shareholder who had invested a substantial amount of time and effort into Vitruvian on the basis that it was a start-up. 265 Whether Mr Sharif suffered any loss as a result which would justify relief being granted would depend upon whether he could and would have participated in any such issue, that is to say whether he had any interest in doing so and whether he had the financial capacity to do so. That question is the subject of issue (8). Whether the issuing of shares that occurred on 14 July 2020 (which was sought to be justified on the basis that it involved a conversion of loans to equity) was oppressive 266 The evidence from Mr Gregory and Mr Larsen as to what occurred when it came to the share issue on 14 July 2020 was somewhat confused. It must be considered in the context of the contemporaneous documents, including the file notes of the meetings at Bennett + Co when Mr Gregory discussed what to do in relation to the shareholding of Mr Larsen. 267 In his statement of evidence, Mr Gregory said that around the time of the cancellation of Mr Sharif's shares he decided to convert unsecured loans that he had made to equity in Vitruvian. Mr Gregory said that the amounts that had been lent by him, J & S Gregory Pty Ltd and another company (Gregory Parties) totalled $339,631.91. He said that a valuation that had been obtained of between $0 and $1,250,000 for Vitruvian was used as the basis for the share issue which was at $3.39 per share being 100,000 shares. The valuation itself was objected to and was not received into evidence. Therefore, there is no evidence from which to conclude that the shares were issued at value. All that the evidence established was that the valuation had been used, not that the valuation itself was reasonable or reflected a proper assessment of value in any respect. 268 As to value, it may be observed that a few months later (after a share split which increased the shares on issue to 20 million), about 12.7 million shares were issued, some at $0.36 per share and some at $0.21 per share (as well as those to form part of the employee share scheme). The implied valuation for the 20 million shares that is reflected in the issue of a further 12.7 million shares at $0.36 per share is many multiples of the price at which the share issue occurred on 14 July 2020. There is no explanation for the differential. As to the state of Vitruvian's product as at June 2020, Mr Gregory's evidence was that he was expecting to commercialise the product and he 'was going to do something about that'. This was a matter that would affect the value of the shareholding at that time and continue to do so a few months later. That is to say, there is no indication that some event occurred between July and September 2020 in relation to the progress of the development and marketing of the product that would materially affect the value of the shares in Vitruvian. 269 In a supplementary statement of evidence, Mr Gregory described the share issue that occurred on 14 July 2020 as being part of a recapitalisation of Vitruvian. He referred to the issue of 11,090 shares to Mr Larsen at the unit price of $3.39 (being a total amount of $37,595.10). He also said that as part of the recapitalisation he assigned his intellectual property rights to Vitruvian. It was not suggested in the course of the hearing that the assignment had some significance for the value of the shares in Vitruvian or indeed had any significance. There was extensive evidence before the Court to the effect that the activity of developing the product, engaging design consultants, arranging manufacture, commitment of funds to Vitruvian by Mr Gregory and Mr Larsen, the preparation of investor decks for investment in Vitruvian, the website content and dealings with Mr Mactiernan all occurred on the basis that it was Vitruvian that had the rights to the product. On Mr Gregory's account Vitruvian was set up to develop and commercialise the product. Obviously, it could not do so unless it had some form of rights to the relevant intellectual property. Therefore, in the context of the evidence as a whole, I do not regard the fact of the assignment as having any significance for reaching conclusions as to whether the share issue on 14 July 2020 was oppressive conduct in respect of the way in which the affairs of Vitruvian. 270 On Mr Larsen's account, he lent $37,595.10 to Vitruvian in or about July 2020 for the purpose of it being able to continue its operations. In his statement of evidence, Mr Larsen said that the debt was converted to equity as part of a financial restructure of Vitruvian. When cross-examined he did not accept that it was debt that was converted to equity. He described the issue of shares as just a 'paperwork shuffle'. He could not remember why there was such a specific amount involved. He explained the dealing as one in which he was asked to lend money that would be converted to equity. He said that he did not think that he was asked separately as to the loan and then the conversion to equity. 271 The documents show that the relevant shares were issued to Mr Larsen on 14 July 2020, but that he applied for the shares by instrument dated 27 July 2020. There is a share certificate issued to Mr Larsen for 11,090 shares in Vitruvian and it shows the amount paid as $37,595.10. 272 Taking account of Mr Larsen's original shareholding of 140 shares (and the original shareholding of J & S Gregory Pty Ltd), the issue of those shares meant that Mr Larsen maintained a 10% shareholding in Vitruvian (rather than the 11.76% interest that he held as a result of the cancellation of the shareholding of Mr Sharif). Therefore, the effect of the share issue that occurred on 14 July 2020 was that Mr Gregory through J & S Gregory Pty Ltd became a 90% shareholder thereby, in effect, taking up the percentage interest that had been held by Mr Sharif. 273 In the file note of a meeting with Bennett + Co on 12 June 2020 there is a record 'after kick him out can issue shares … Loan dollars now and convert to equity after he is out'. Mr Gregory was cross-examined about those entries. It was put to him that the steps taken in July 2020 were to give effect to that advice. Mr Gregory gave evidence to the effect that he could not recall why he was being given advice to that effect. He also denied that the steps that were taken were to give effect to that advice. I do not accept that evidence. It is plain from the note that advice was being given about a loan being converted to equity after Mr Sharif's shares were cancelled. The cancellation of Mr Sharif's shares occurred at the end of June 2020. Based upon my finding as to the unreliability of the account given by Mr Gregory, the evidence of Mr Larsen and the content of the file note I conclude that Mr Gregory was giving effect to advice that was given by Bennett + Co. 274 It was put to Mr Gregory that the reason that he conferred with Bennett + Co in June 2020 was to devise a strategy to get rid of Mr Sharif's shares. His answer was to the effect that Vitruvian was in real distress at that time. There is no indication of any such concern in any contemporaneous document. It was not suggested by Mr Larsen. Rather, those documents indicate a very upbeat position for Vitruvian with a capital raising planned and confidence in the ability to do so based upon the deck that had been prepared by Mr Mactiernan. There was interest from investors in addition to Mr Larsen. As Mr Gregory said elsewhere, there was an expectation that there would be a capital raising. 275 It is plain from the file notes of Bennett + Co that Mr Gregory was seeking advice as to the basis upon which he could remove Mr Sharif as a shareholder and as to what Mr Sharif would have to do if he wanted to seek reinstatement as a shareholder. For reasons I have already given, it was not the case that Mr Gregory had attributed any significance to statements made by Mr Sharif about having a degree in electrical engineering. 276 There was evidence to the effect that the existence of a substantial shareholding in the company by a person who was no longer associated with the company might affect the ability of the company to raise capital. Those views were expressed by Mr Larsen and were also to be found as part of the basis upon which the settlement proposal was presented by Mr Larsen to Mr Sharif after his shares were cancelled. However, the evidence to that effect reinforces a conclusion that the purpose of Mr Gregory in consulting Bennett + Co was to seek a basis for removal of Mr Sharif as a shareholder before any capital raising. 277 On the evidence, I find that the dealing with Mr Larsen was not a conversion of a loan to equity. Rather, I infer that he contributed funds so as to maintain a 10% interest as part of a dealing in which the shares held by J & S Gregory Pty Ltd were increased on the basis of a conversion to equity of loan funds that had been advanced by the Gregory Parties. The only additional funds that were secured by Vitruvian as part of the so-called recapitalisation on that date was the amount contributed by Mr Larsen (the funds from the Gregory Parties having already been committed as loans). There is no commercial reason advanced as to why there needed to be a conversion of the loan amounts to equity at that time. The value at which that conversion was undertaken was not established. The dealing had the effect that Mr Gregory, through J & S Gregory Pty Ltd, was able to take up the 15% equity held by Mr Sharif prior to the cancelation of his shareholding. 278 Further, there was evidence from Mr Gregory that the issue of shares that occurred a few months later had been contemplated for some time. There is no evidence of a commercial rationale for the conversion of the loans to equity and the further contribution of equity by Mr Larsen not forming part of the subsequent capital raising. Also, there was no valuation evidence to support the share issue on 14 July 2020. Measured by reference to the terms of the subsequent share issue a few months later the issue on 14 July 2020 was at a discount of many multiples in favour of the Gregory Parties and Mr Larsen. 279 In the context of the contemporaneous events, the fact that the share issue occurred two weeks after the cancellation of the shares held by Mr Sharif, the valuation implicit in the shares issues that occurred in September 2020 and the notes of the advice from Bennett + Co, I find that the issue of the shares on 14 July 2020 was prejudicial to the interests of Mr Sharif. There was no true commercial justification for the issue at the time and its purpose, viewed objectively, was to dilute the interest of Mr Sharif if he was able to secure reinstatement of his shareholding, being a prospect that Mr Gregory contemplated at the time. Issue (8): If yes to (7), to what extent could and would Mr Sharif have participated in the capital raising that occurred after his shares in Vitruvian were cancelled? 280 Both parties approached the issue of relief on the basis that it was to be informed by what Mr Sharif could and would have done when it came to further capital raising if the cancellation of his shares had not occurred and I proceed accordingly. Assessment of what Mr Sharif could and would have done if oppressive conduct had not occurred 281 Having regard to the conclusions reached in relation to issue (7), this issue should be approached on the basis that the share issue that occurred on 14 July 2020 should be treated as oppressive conduct such that the sequence of events that would have been followed by reasonable directors was as follows: (1) a share split to facilitate the capital raising; (2) an opportunity for founding shareholders to participate in the share issues that followed; (3) any conversion to equity of loans to Vitruvian by the Gregory Parties would have occurred at the same time and price at which parties could subscribe for shares; and (4) Mr Larsen would not have been afforded the opportunity to subscribe for shares as at 14 July 2020. 282 Further, I find that in order for the share split to reflect the shareholding that would have existed if there had not been oppression it would have involved a split of the shareholding of 140 shares (Mr Larsen), 210 shares (Mr Sharif) and 1,050 shares J & S Gregory Pty Ltd to produce 20 million shares on issue (being the total shares on issue after the share split of 10 September 2020). 283 On that basis, the shareholdings after the share split and before the share issues that were undertaken by Vitruvian for the purpose of capital raising would have been two million (Mr Larsen), three million (Mr Sharif) and 15 million (J & S Gregory Pty Ltd). No consideration would have been payable for the shares. 284 Thereafter, there would have been the capital raising that occurred in September 2020. The question is whether but for the oppressive conduct Mr Sharif could and would have participated in that further capital raising. There was no suggestion that existing shareholders would have been restricted from participating in the capital raisings that occurred after the shareholding of Mr Sharif was cancelled. 285 As has been explained, the opportunity that would have been presented to Mr Sharif, but for the oppressive conduct, was whether to subscribe for shares pro rata with other investors after the share split. It appears that investors who held a SAFE note were able to secure shares at that time at a discount of $0.21 per share pursuant to agreed terms. They included J & S Gregory Pty Ltd and Mr Larsen (as to 1,265,000 shares and 287,063 shares respectively). There was no suggestion that Mr Sharif had indicated any willingness to participate in that process or had entered into an agreement in that regard. Other shares were issued at about that time to a subsidiary of a private equity firm. They were issued at $0.36 per share. There was a further issue in March 2021 at $0.37 per share. In 2022, there were share issues in April 2022 and May at $1.77 per share. Some shares issued in April 2022 were issued at $1.41 per share. 286 Therefore, the opportunity that was available was to subscribe for shares in Vitruvian an unlisted company in which Mr Sharif had been involved for about 12 months and during which time he was able to form a view as to whether to invest. The opportunity was to subscribe for shares at $0.36 per share in September 2020 and at $0.37 per share in March 2021. 287 In his statement of evidence, Mr Sharif said that if he had been given an opportunity to subscribe for shares in Vitruvian then he would have purchased enough shares to maintain his 15% interest if he had the financial capacity to do so. He said that if he did not have the financial capacity to do so then he would have purchased as many shares as he could. Of course, evidence given in those terms begs the question as to what was his financial capacity to subscribe for shares at the relevant points in time. 288 Mr Sharif said that he would have used funds in bank accounts that he held jointly with his wife and that he would have tried to minimise his expenses so that he had more funds available. He also said that if he had used the amounts in the bank accounts then one way he would have tried to fund the purchase of shares was to use the family home as security. He gave evidence that the family property was sold in December 2021 for $1,125,000 and, at that time, the amount received after discharging the loan obtained to purchase the property was about $400,000. This was the extent of the evidence as to the equity in the family home. There was no evidence as to whether Mr Sharif and his wife would have been able to raise further funds prior to the sale of the home by offering security over their equity in the home. There was no evidence as to the likely cost of doing so (assuming it was possible). The evidence was given in the most general of terms. 289 Mr Sharif also gave evidence as to the availability of monies in superannuation that he said could have been used. 290 Finally, Mr Sharif also said that he would have asked his wife's parents to lend money and would have asked anyone he could find to lend him the money. This last statement can be rejected as being no more than assertion. There was no evidence from anyone that they would have been willing to lend money for that purpose at the relevant time. 291 I turn now to whether Mr Sharif's other evidence as to what he might have done should be accepted. 292 I begin by summarising the matters advanced by the Vitruvian defendants (in addition to more general submissions as to Mr Sharif's credibility) as reasons why the claims that Mr Sharif could and would have subscribed for shares in Vitruvian should not be accepted. They were to the following effect: (1) Mr Sharif had the burden of proving that he could and would have participated in the share issues after his shares were cancelled; (2) Mr Sharif's statements were mere assertions unsupported by any analysis of his financial circumstances, particularly the living expenses of his family and his other commitments; (3) Mr Sharif's evidence indicated that he had been burning through his savings when he was being paid $100,000 per annum by Vitruvian and that he would not be able to meet his living expenses with earnings at that level; (4) there was no evidence from Mr Sharif's wife as what she was willing to do with cash and assets in which she had a joint interest; and (5) on the evidence, the proceeds of the sale of a Toyota Camry motor vehicle were used up in meeting living expenses. 293 The evidence of the financial circumstances of Mr Sharif and his wife as at the time of the first share issue in September 2020 is to the effect that they had cash of about $50,000, two motor vehicles (one of which was a Toyota Camry which was sold in around October 2020 for $12,900) and equity in their family home of about $400,000. The Toyota Camry was replaced with the financed purchase of a Tesla vehicle. From those funds, Mr Sharif and his wife had to meet family expenses. 294 There was also evidence of amounts held in superannuation accounts. However, it was not until early 2021 that these amounts were transferred into a self-managed superannuation fund. The total balance when transferred was of the order of $80,000. Of course, even on a self-managed basis it would be difficult to justify in accordance with statutory requirements anything more than a modest amount of those funds being invested in a start-up enterprise like Vitruvian where there was no ready market for the shares. For those reasons, I am not satisfied that any of the superannuation amounts would have been available to Mr Sharif to subscribe for shares in Vitruvian. 295 At the time that he was working for Vitruvian, Mr Sharif and his wife were using their savings to supplement his earnings and he told Mr Gregory and Mr Larsen that he expected that he would use up his savings by about July 2020. When cross-examined about the significance of those events for his evidence to the effect that he would have invested his available cash into Vitruvian, somewhat reluctantly, Mr Sharif accepted that he was burning his savings because the amount that he was being paid by Vitruvian was not enough to cover his family's living expenses. He resisted answering questions about the amounts involved in meeting living expenses. He also resisted the proposition that his wife was not working until he was taken to his own notes to the effect that his wife had put her work on hold so that Mr Sharif could focus on Vitruvian. 296 Mr Sharif was cross-examined about the extent to which he would consult with his wife about significant expenditure of monies held in their joint bank account. He resisted propositions to the effect that he would consult his wife. He was asked specifically about a decision to buy shares in a company and it was put to him that a decision of that kind he would make with his wife. He gave different versions of what would occur. At times he said he would let her know before making a decision to buy shares. He also said that he would speak to her about what her opinion was if she disagreed. He said that he might proceed if his wife disagreed because his wife would put the responsibility on to him to make the call. When pressed, he accepted that if his wife was in full disagreement then he would not go ahead. 297 Mr Sharif's wife was available to give evidence but was not called so it may be inferred that her evidence would not have assisted the case advanced by Mr Sharif. I am inclined to draw that inference. The issue was squarely raised. It was an important one for the conduct of the case. 298 There is no suggestion that the financial circumstances of Mr Sharif and his wife improved in any material respect over the two year period when there was the opportunity to subscribe for further shares in Vitruvian. Over that period their cash resources reduced such that by March 2021 they were of the order of $25,000. Even after receipt the realisation of the equity in the family home their cash resources fell to just over $300,000 as at May 2022. 299 There was no evidence as to the extent to which the financial circumstances of Mr Sharif and his wife were affected by the conduct of the litigation. Further, the evidence of Mr Sharif as to what he would have done did not address the circumstance that would have arisen if indeed he had maintained his 15% shareholding after the share split and had been offered an opportunity to participate in further capital raisings thereafter. In those circumstances he would have been in a position where he maintained a substantial shareholding and although further capital raisings would reduce his percentage holding, the capital contributed would enhance the value of the company as a whole. 300 I accept that Mr Sharif would have been keen to purchase shares in Vitruvian if financial circumstances permitted him to do so. Mr Sharif had formed a favourable view as to the prospects of the company and thought that he had been made a millionaire through his involvement. However, I do not accept that he would have had available to him, in effect, all of the joint financial resources that he held with his wife. 301 For the following reasons, I find it to be more likely than not that Mr Sharif would not have contributed further funds to secure further equity in the circumstances where the conduct that I found to be oppressive did not occur. 302 Significantly, on the findings I have made, the share issue of 14 July 2020 would not have taken place and Mr Sharif would have held three million shares (being a 15% interest) after a share split of the kind I have described. The evidence as to what he could and would have done must be evaluated in that context. 303 As to the subjective evidence given by Mr Sharif as to what he would have done, it is evidence of an hypothetical and I prefer to be guided by an objective assessment as to what was likely in the financial circumstances. Mr Sharif and his wife had been unable to meet their living expenses on the monies that Mr Sharif was paid by Vitruvian. His wife was not working. They had limited cash resources. It would be a very significant financial decision to commit equity from the family home to an investment of the kind presented by Vitruvian and, in the absence of evidence from Mr Sharif's wife, I am unable to conclude that it was likely that she would agree to such a course which would require her participation. I also have doubts as to Mr Sharif's own evidence having regard to my overall assessment of his credibility and the findings I have made as to reasons why I do not accept aspects of his evidence. 304 The amounts that would have been needed to maintain Mr Sharif's 15% interest would have been considerable and would have far exceeded his available cash resources. Save for the issue of shares to establish the employee share scheme, Vitruvian received value for those shares which third parties were prepared to contribute. As I have noted, there was no suggestion that the terms on which the capital raisings other than that which occurred on 14 July 2020 were uncommercial. The participation of third parties supports the conclusion that the share issues reflected a market assessment of the then current value of shares in Vitruvian. Therefore, Vitruvian received fair value for the shares that were issued and consequently although Mr Sharif's percentage shareholding would have reduced by the issue of further shares, the value represented by his shareholding would have been retained. 305 In those circumstances, I conclude that there would not have been a motivation for Mr Sharif to contribute funds so as to retain the value of his interest in Vitruvian. So, in circumstances where he retained three million shares which would be a significant ongoing interest, where the financial value of his interest was not at risk, where he was no longer involved in the company and where he would need to contribute very significant amounts to which he did not have access in order to maintain his percentage interest, having regard to the findings I have made as to the financial circumstances of Mr Sharif and his wife I am not persuaded that he would have made the modest further contribution that his available funds permitted. There was little to be gained at considerable financial burden to his family. Alternatively, assessment of what Mr Sharif could and would have done if only oppressive conduct was cancellation of Mr Sharif's shares and the plan to dilute and that conduct had not occurred 306 If (contrary to the conclusion I have reached) the oppressive conduct was confined to the cancellation of Mr Sharif's shares and the implementation of the plan to dilute by capital raising (and did not include the share issue that occurred on 14 July 2020) then I would make the following findings as to what Mr Sharif could and would have done. 307 At the time of the share issue that occurred on 14 July 2020, Mr Sharif would have held his 210 shares. At that time, Mr Larsen was presented with an opportunity to maintain his shareholding at 10%. There was no suggestion by the Vitruvian defendants that there was some reason why Mr Sharif would not have been given that opportunity. In those circumstances, it would have been oppressive to not extend the same opportunity to Mr Sharif that was extended to Mr Larsen. For those reasons, it may be concluded that if Mr Sharif was a shareholder at the time then he would have been afforded the same opportunity. 308 I find that Mr Sharif would have been keen to participate in the opportunity that was presented to Mr Larsen to acquire shares at $3.39 per share because, if he did not do so, he would face the prospect of his interest being substantially diluted before Vitruvian went to the market to raise capital from third parties. 309 In those circumstances, the incentive to Mr Sharif to invest in order to maintain the value of his interest Vitruvian would have been much greater compared to the case I have found (where Mr Sharif would have held three million shares when there were further capital raisings at market). 310 If (contrary to my findings) those different circumstances were those to be considered, then I would have found that Mr Sharif would have contributed further funds to the extent that he was able to do so. On that assumption, I find that the most he would have contributed for further shares in Vitruvian was $20,000. I would have made that finding having regard to the fact that it was not established that Mr Sharif's wife would have supported an investment in Vitruvian that used most of their available resources, that their joint cash resources were limited and they had a need to maintain cash reserves to meet ongoing family expenses. 311 Further, for reasons given in relation to the oppressive conduct as found, I conclude that if Mr Sharif made that contribution in July 2020 then he would not have made any further contribution when there were further capital raisings by Vitruvian at market. Issue (9): If yes to (7) and taking account of the answer to (8), should Mr Sharif be granted relief by requiring Vitruvian to issue shares to Mr Sharif or by requiring J & S Gregory Pty Ltd to transfer shares to Mr Sharif and if so in what terms should that relief be expressed? 312 In the circumstances I have described, the appropriate relief is to require J & S Gregory Pty Ltd to transfer three million shares in J & S Gregory Pty Ltd to Mr Sharif and to require that transfer to occur before there is any further issue of shares by Vitruvian. It is appropriate for that order to be directed against J & S Gregory Pty Ltd for the following reasons: (1) Mr Gregory was the sole director of Vitruvian at the time of cancellation of the shares of Mr Sharif and at the time of the dealings in the period July to September 2020 which have been found to be oppressive; (2) the conduct of Mr Gregory advantaged J & S Gregory Pty Ltd, in which he has an interest; (3) I find that the purpose of Mr Gregory was to advantage J & S Gregory Pty Ltd; (4) for reasons that have been given, it was J & S Gregory Pty Ltd that received the benefit of the cancellation of the shares of Mr Sharif by taking up a 90% interest; (5) no submission was advanced as to any particular characteristic of J & S Gregory Pty Ltd that would mean that it would be inappropriate to make orders directed at its shareholding in particular; and (6) there is no suggestion that any of the other shareholders who have subscribed for shares in Vitruvian have done so in circumstances where it would be just to consider relief which required Vitruvian to issue further shares to Mr Sharif (thereby affecting their interests). 313 If I had contemplated making an order that affected the interests of other shareholders then it would have been necessary to provide notice to those shareholders before doing so. Although those shareholders were given notice of these proceedings in appropriate terms by lawyers acting for Mr Sharif, Bennett + Co (by then known as Bennett) acting for Vitruvian subsequently communicated to those shareholders in terms that were inaccurate and inappropriate with the consequence that it cannot be concluded with any confidence that other shareholders, properly informed, had concluded that they were content to abide by the outcome of the s 1322 application to the extent that the outcome may have consequences for their interests. 314 I note that no case was advanced by the Vitruvian defendants to the effect that there was some reason beyond the competing claims in the proceedings as to the alleged misleading and deceptive conduct (noting again that the claim against Mr Sharif for breach of the agreement and the alleged total failure of consideration were not pressed as separate causes of action) as to why the relief sought by Mr Sharif should not be granted. No discretionary consideration was raised that was said to bear upon the appropriate form of order. 315 No doubt Mr Gregory had a view that he had been the instigator of Vitruvian and was responsible for the ideas that formed the basis for its product. By the time of the hearing he had formed a narrative in which Mr Sharif, despite working at the company for a year during which time he was referred to as CEO and as a co-founder and during which his efforts were praised by Mr Gregory, had made no contribution at all. It was a narrative that did not conform to the contemporaneous documents. It was a narrative that suited Mr Gregory's personal interests. It is a narrative which I do not accept. Therefore, even if those same matters had been advanced as a matter that should be brought to bear in considering the appropriate relief, as I do not accept them, I would not have been persuaded that they should be brought to account in determining the appropriate relief. Issue (10): If yes to (7) and no to (9) should there be an order for compensation to be assessed? 316 As I am persuaded that there should be relief granted requiring J & S Gregory Pty Ltd to transfer shares to Mr Sharif, issue (10) does not arise. Issue (11): Mr Sharif's alternative claim for breach of agreement 317 Mr Sharif claimed that the oral agreement reached with Mr Gregory about him commencing work at Vitruvian as CEO on the basis that he would be issued a 15% shareholding in the company was reached between Vitruvian, Mr Gregory, Mr Larsen and himself. As part of the agreement Mr Larsen was to be issued with a 10% shareholding. 318 As to the agreement, the Vitruvian defendants allege that the agreement was reached between Vitruvian and Mr Sharif and that it was an agreement that Mr Sharif would provide services to Vitruvian and Vitruvian would pay him $60,000 per year and issue him with 15% of the shares in the company. On their case, Mr Sharif was to assist in the development of prototypes of the product and in creating an appropriate investor deck and in general business development. 319 The significance of the alleged oral agreement for Mr Sharif's case was that he claimed that there were implied terms of the agreement that Mr Gregory would act in good faith when it came to the issue of shares and that he (and Mr Larsen) would be afforded the opportunity of participating in any capital raisings by Vitruvian on the same terms as any other parties 'to the extent necessary to obviate dilution'. It was not explained how such a term would work when it came to the introduction of new shareholders. Logically, it amounted to a claim that Mr Sharif and Mr Larsen could pre-empt when it came to a capital raising. If existing shareholders wanted to obviate dilution then they would all need to maintain their shareholding which could only occur if they were the only ones who could subscribe. There was no support for a position that only the shareholding of J & S Gregory Pty Ltd could be diluted. 320 There are many reasons why a particular shareholder may be invited to take up shares in a company. It is common for a shareholder whose interest may bring other strategic advantages to a company to be introduced. For a start-up like Vitruvian such opportunities are likely to arise, indeed are likely to be necessary to pursue. 321 Given the conclusions I have reached on the oppression claim, it is not necessary to consider the claim based upon the alleged implied term. Nevertheless, I will deal with the claims briefly. I do so on the basis that the agreement reached was both with Vitruvian and as between its shareholders. Indeed, given the two points at which a draft shareholders' agreement was proposed, it appears that the parties performed their agreement on the basis that it involved agreement as between the shareholders. 322 Had I been required to decide the point, I would have accepted that there was an implied term for the shareholders to act in good faith in the exercise of their powers as shareholders but rejected the claim that it was a breach of that duty to allow Mr Gregory as director to raise capital by issuing shares in circumstances where the existing shareholders could not participate. There are many reasons why it may be in the interests of a company to introduce new shareholders. It could not be said that any such issue would necessarily breach a duty to act in good faith. All would depend on the circumstances and the case as to why there was a breach of good faith was not developed. 323 Further, for the same reasons, I would reject the claim that there was an implied term of the kind alleged as to participation in future capital raisings. It would foreclose access to the introduction of new shareholders that may be required in order to advance the interests of Vitruvian as a start-up venture. Therefore, it could not be concluded that a term of the kind alleged would be reasonable, necessary and obvious. 324 In addition, the terms that might be agreed between shareholders as to what may occur in relation to future capital raising are many and varied. As the facts in the present case illustrate, there are matters to be negotiated as to that topic. 325 Finally, for reasons I have given, I am not persuaded that Mr Sharif would have exercised any right to take up shares if indeed there were obligations of the kind alleged. Factual findings as to the claim that Mr Sharif's work was unsatisfactory 326 As I have explained, in the result, the claims to the effect that Mr Sharif's work did not meet the standard to be expected were not of significance because they could not assist in establishing whether the representation as alleged was made or relied upon by Mr Gregory. Also, the claim that there had been a total failure of consideration was not maintained. Therefore, it is not necessary to deal with the allegations to the effect that Mr Sharif's work was not satisfactory. However, against the possibility that the matter goes further and I am shown to be wrong in that approach, I make the following factual findings as to the matters relied upon by Vitruvian. 327 First and foremost, for reasons that have been given, the claim that there was some unsatisfactory aspect to Mr Sharif's performance is inconsistent with the course of events up to the end of April 2020. The contemporaneous documents show that Mr Sharif was responsible for many activities and his efforts were praised. A few months after Mr Sharif started working at Vitruvian, Mr Gregory agreed to increase the payments to Mr Sharif to $100,000 per annum. He also proceeded to give effect to the agreed arrangements in April 2020 by issuing shares and proposing the shareholders' agreement confirming Mr Sharif as CEO and indicating that the next step would be to appoint him to the board of Vitruvian. The evidence of Mr Gregory to the effect that he formed a contemporaneous view that the work done by Mr Sharif was not to an appropriate standard must be rejected as unreliable. 328 Next, as has already been observed, despite a suggestion in Mr Gregory's oral testimony that he had told Mr Sharif orally about deficiencies in his work, in his witness statement his evidence was that he did not communicate with Mr Sharif to that effect. Further, there is no suggestion of a complaint of that kind in the negotiations with Mr Sharif after his shares were cancelled and it was only when they failed that the various matters were raised in the letter from Bennett + Co. 329 In addition to the above, I make the following further findings which support the conclusion that the Vitruvian defendants have not established that the work done by Mr Sharif was in breach of the agreement he made: (1) Mr Sharif was engaged to develop the business by applying his sales experience, his energy and his ability to hustle; (2) Mr Sharif was not engaged to assist with the development of the product which was a task being undertaken by Mr Gregory; (3) Mr Sharif was not engaged to prepare an investor deck, however the task of preparing a draft investor deck was within the parameters of developing the business; (4) the draft investor decks prepared by Mr Sharif were considered by Mr Larsen and Mr Gregory to be suitable for the purposes of Vitruvian at the time they were prepared; (5) the complaints raised by Mr Gregory concerning the work done by Mr Sharif in preparing the investor decks were raised in retrospect and were not concerns that he had at the time that the investor decks were prepared by Mr Sharif; (6) Mr Sharif was not engaged on the basis that he would prepare an investor deck of the kind prepared by Mr Mactiernan or that he was capable of preparing such a deck; (7) Mr Sharif was not engaged on the basis that he would undertake financial modelling or that he was capable of doing so; (8) the arrangements made by Mr Sharif for interns and freelancers to assist in undertaking work for Vitruvian was due performance of his engagement to develop the business at a time when Vitruvian had limited financial resources; (9) it is not possible to reach any conclusion on the evidence as to who was responsible for bringing in investors to Vitruvian as such outcomes depend upon all activities undertaken and there was no particular focus upon that aspect at the hearing; and (10) Mr Sharif did take steps to put in place a shareholders' agreement and, as Mr Gregory himself noted, it was he who dropped the ball in progressing the shareholders' agreement. Conclusion and orders 330 For the above reasons, the application by Vitruvian for orders pursuant to s 1322 of the Corporations Act must be dismissed with costs. The application by Mr Sharif for orders as provided for in s 233 on the basis of oppressive conduct contrary to s 232 should be allowed. The appropriate order to be made is to require J & S Gregory Pty Ltd to transfer three million shares in Vitruvian to Mr Sharif before the issue of any further shares by Vitruvian. The transfer should occur without consideration payable by Mr Sharif. There should be an order for costs in favour of Mr Sharif but that order will need to allow for the extent to which claims were not pursued. It should have regard to materials that the parties have been directed to file as to the question of costs. 331 I will direct the parties to bring in a minute of proposed orders or competing minutes if they are unable to agree and I will list the matter for a case management hearing to determine the procedure for resolving any dispute as to the appropriate terms in which orders should be made. 332 A declaration was also sought by Mr Sharif. I will consider whether a declaration is necessary and appropriate, and if so in what terms, when orders are proposed. I certify that the preceding three hundred and thirty-two (332) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin. Associate: Dated: 8 August 2023