Supreme Court New South Wales Medium Neutral Citation: Nassif v Sun [2021] NSWSC 990 Hearing dates: 10, 11, 12, 13, 14 May 2021 Date of orders: 9 August 2021 Decision date: 09 August 2021 Jurisdiction: Equity Before: Parker J Decision: See [189]-[191] Catchwords: EQUITY – equitable remedies – rescission in aid of rights at law – equitable compensation – proprietary company – shareholders' agreement with procedure for compulsory acquisition on default – director of company executes transfer purportedly on plaintiff's behalf – compulsory acquisition procedure not properly followed – transfer executed without authority but registered – whether defendant had separate specifically enforceable entitlement to transfer of the shares – requirements for doing equity and restitutio in integrum – laches – value of shares for the purposes of equitable compensation PROCEDURE – standing to bring proceedings – alleged prior assignment of plaintiffs' rights to a third party – requirements for valid assignment at law and in equity – whether proceedings defeated by misjoinder or non-joinder Legislation Cited: Conveyancing Act 1919 (NSW), s 12 Uniform Civil Procedure Rules 2005 (NSW), r 6.23 Cases Cited: Akierman Holdings Pty Ltd v Akerman (No 2) [2020] NSWSC 970 Alati v Kruger (1955) 94 CLR 216 Crawley v Short [2009] NSWCA 410 Greater Pacific Investments Pty Ltd v Australian National Industries Ltd (1996) 39 NSWLR 143 Nelson v Nelson (1995) 184 CLR 538 Redman v Permanent Trustee Co of NSW Ltd (1916) 22 CLR 84 Texts Cited: Heydon, J D, M J Leeming and P G Turner, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) Category: Principal judgment Parties: Steve Nassif (First Plaintiff) Macquarie Units Pty Limited (Second Plaintiff) MC 0380 Pty Limited (Third Plaintiff) Jianwei Sun (First Defendant) Sunchen Pty Limited (Second Defendant) Sunshine Group Australia Pty Limited (Fourth Defendant) Representation: Counsel: N Kirby (Plaintiffs) N Kidd SC (First, Second, Fourth Defendants) Solicitors: LCI Legal (Plaintiffs) Lawside Lawyers (First, Second, Fourth Defendants) File Number(s): 2018/338916 Publication restriction: Nil Judgment 1. These proceedings arise out of a dispute about the ownership of a twenty-five per cent shareholding in a company called Sunshine Group Australia Pty Limited ("SGA"). SGA was incorporated in 2014 for the purpose of buying three resort businesses at Cairns in North Queensland. The businesses were referred to in these proceedings as the "Cairns Assets". The eventual purchase price of the Cairns Assets was $5.8 million. 2. The first plaintiff, Mamoun Nassif, is also known as Steve Nassif. He is a Sydney-based property developer. It was he who picked up the opportunity to purchase the Cairns Assets which resulted in this litigation. 3. At the time he became aware of the opportunity, Mr Nassif had only recently been discharged from bankruptcy. In order to raise the funds for the purchase, he turned to Sun Jianwei. Mr Sun is a Chinese Australian businessman who is also known as David Sun. His main business is in foreign exchange and he is based in Sydney. 4. It was agreed that Mr Sun and Mr Nassif (through companies) would be equal shareholders in SGA. Mr Nassif's company was the third plaintiff, MC 0380 Pty Limited ("MC 0380"). Mr Sun's company was the second defendant, Sunchen Pty Limited ("Sunchen"). The parties entered into a shareholders' agreement to formalise their relationship. 5. On incorporation of SGA, there were 100 shares issued, of which fifty were issued to Sunchen and the other fifty to MC 0380. Later MC 0380's shares were transferred to the second plaintiff, Macquarie Units Pty Limited ("MU"), another company controlled by Mr Nassif. A new shareholders' agreement was entered into so as to reflect the change. 6. In order to complete the purchase, some of the monies were to be borrowed by SGA from a bank, with the parties each guaranteeing half of SGA's liability and contributing the remaining funds required, by way of loan to SGA, in equal shares. But Mr Nassif, it appears, was unable to meet his funding obligations out of his own resources. He persuaded Feng Ling, also known as Gina Feng, to act as guarantor for MU's half-share and to provide the remaining funds needed for MU's remaining loan contribution to SGA. 7. Ms Feng is also of Chinese origin. In China she was a doctor but in Australia she has worked as a nurse. She had met Mr Nassif through an earlier property venture. 8. In order to accommodate the arrangements between Mr Nassif and Ms Feng, Mr Nassif and Mr Sun entered into a further agreement, referred to in the evidence as the "side agreement", which contemplated that the guarantee and the other funds required from MU would be provided by the end of June 2014. There is a dispute about whether this happened in time, but in any event settlement of the purchase did not take place at that time and was eventually rescheduled for late August. 9. Just before the scheduled settlement, a dispute arose between Mr Nassif and Ms Feng. This resulted in the arrangement between Mr Sun and Mr Nassif being rejigged again. Another agreement, referred to in the evidence as the "share sale agreement", was entered into. This resulted in Sunchen acquiring half of MU's shareholding in SGA and agreeing to underwrite the whole of the bank debt, leaving MU with a twenty-five per cent share and a correspondingly reduced financing obligation. 10. The purchase of the Cairns Assets was completed with the assistance of $1.25 million which had been provided by Ms Feng and was being held in a solicitor's trust account in the name of SGA. All the other monies required came from Mr Sun. Mr Sun, taking the view that Mr Nassif was in default, took control of SGA and the Cairns Assets himself. But Ms Feng wanted her $1.25 million back and litigation ensued. 11. In the end Mr Nassif had provided no funds of his own to the venture. About two months after completion, Mr Sun moved to appropriate MU's residual twenty-five per cent shareholding in SGA. Mr Sun had another director of SGA, Deborah Brighton, execute a transfer of MU's twenty-five per cent shareholding to Sunchen for nil consideration. Ms Brighton purported to do so as MU's attorney, pursuant to a clause in the shareholders' agreement which provided for compulsory acquisition of a party's shares in the event of default under the agreement. 12. The transfer of shares was effected in October 2014. Mr Sun then paid Ms Feng out. Sunchen remains the sole shareholder in SGA, which has been used by Mr Sun for other property ventures as well as continuing to hold the Cairns Assets. Claims and defences for determination 1. The plaintiffs began these proceedings in 2018. The proceedings have had a somewhat tangled history which it is unnecessary to recount. Following a pre-trial directions hearing in March this year, about eight weeks before the trial was due to begin, the plaintiffs made extensive amendments to their statement of claim. 2. The hearing before me began on 10 May. The evidence occupied five days, with lengthy cross-examination of some of the witnesses, including on credit. But in the course of final submissions there were extensive further changes to the ways in which the parties, and especially the plaintiffs, put their cases. The result was to reduce the area of relevant factual dispute almost to nothing. 3. At an earlier stage of the proceedings the plaintiffs made claims for damages against Mr Sun personally, but these were abandoned at the hearing. The only relief now sought is against Sunchen. 4. The plaintiffs seek declarations that the purported transfer of the twenty-five shares in SGA from MU to Sunchen is void and of no effect, and that the transaction is liable to be rescinded in equity. Alternatively they seek an order that Sunchen pay MU equitable compensation in an amount equal to the value of the shares. If they are unable to obtain relief in equity, they seek to recover the value of the shares by way of restitution or damages for breach of contract. 5. In the end, there was no dispute that the purported transfer of the shares in SGA in October 2014 was undertaken without authority. The shareholders' agreement provided that a compulsory transfer required various steps to be taken, including a valuation to fix the price of the shares in question. In final submissions, counsel for the defendants accepted that none of this had been done and, as a result, Ms Brighton had no power to execute the transfer on MU's behalf. 6. Nevertheless the transfer has been carried into legal effect. The shares have been registered in the name of Sunchen since 2014. This has entitled Sunchen, and continues to entitle Sunchen, to exercise the rights attached to the shares under SGA's constitution. If the transfer is to be reversed, the plaintiffs need equitable relief in the nature of rescission. 7. Rescission is available under equity's exclusive jurisdiction and also in its jurisdiction in aid of rights at law: J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) at [25-035]. In Akierman Holdings Pty Ltd v Akerman (No 2) [2020] NSWSC 970 at [95]-[127], I analysed the authorities and concluded that one of the circumstances in which equity will grant rescission in aid of rights at law is where a transaction has been entered into without authority. 8. That conclusion was not disputed in the present case. The questions are whether MU is entitled to rescission of the transfer so as to re-vest the twenty-five shares in it, or, if not, to pecuniary relief in the nature of equitable compensation, restitution or damages. 9. Two preliminary contentions are advanced on Sunchen's behalf, either of which, if successful, would defeat the plaintiffs' claims in their entirety. The first contention is that the plaintiffs lack standing, having assigned the rights on which they sue to a third party prior to the commencement of these proceedings. 10. Sunchen's second contention is that, although the compulsory acquisition procedure under the shareholders' agreement was not properly complied with, Sunchen nevertheless had a specifically enforceable right to transfer of the shares as a result of other contractual provisions between the parties. Reliance is placed on both the side agreement and the share sale agreement in this regard. 11. Sunchen resists the plaintiffs' rescission claim on three further bases. First, it is alleged that the plaintiffs have unclean hands. Next, Sunchen points to the fact that it has solely funded SGA's operations since 2014, including the undertaking of further property ventures which were never contemplated by the shareholders' agreement. It is said that rescission should be refused because the plaintiffs are not prepared to do equity by making proper allowance for this (as will be seen, I think the real point is that the parties cannot fairly be returned to the status quo ante). Thirdly, Sunchen points to the four year delay in bringing proceedings and relies on the defence of laches. 12. Suchen also resists the plaintiffs' alternative claim for equitable compensation. Finally, if equitable relief is refused, it is contended for Sunchen that the plaintiffs have failed to establish any entitlement to restitution or damages for breach of contract. Summary and analysis of the evidence Chronology of events 1. MC 0380 was incorporated in October 2009. MU was incorporated in March 2013. Mr Nassif was not a shareholder of either company, but he was appointed as sole director of both MC 0380 and MU on 1 March 2014. 2. Mr Sun had previously been involved with Mr Nassif in the purchase, through a company called SSL Development Australia Pty Limited ("SSL"), of a property at Mission Beach, also in North Queensland. Mr Nassif came across the property in October 2012 and wished to purchase it for development purposes. In November he entered into negotiations with the vendor and the purchase price was agreed at $2.325 million. A deposit of $100,000 was paid and contracts were exchanged in April 2013. The purchaser was named as Mr Nassif's mother-in-law as trustee for a Nassif family trust known as the Simeonova Trust. 3. Mr Nassif then set about sourcing finance for the project. In August 2013 he was introduced to Mr Sun through a friend. Mr Nassif told Mr Sun about the Mission Beach property and around one month later, Mr Sun contacted him expressing an interest in investing, along with a Chinese investor, Li Zhaolun. Mr Nassif arranged for Mr Li's daughter, Lisa, and Mr Sun to inspect the property, after which they agreed to proceed with the investment. 4. SSL was incorporated in November 2013 as the vehicle for the development. MC 0380 held forty per cent of the shares, Sunchen held thirty-two per cent and Mr Li held twenty-eight per cent. On 26 November 2013 the April contract with Mr Nassif's mother-in-law was rescinded and a new contract was entered into with SSL as purchaser. Settlement of the purchase occurred on the same date. 5. The purchase price for the Mission Beach property, and other acquisition and development costs, were to be funded by the shareholders of SSL. There were arrangements between Mr Sun and Mr Nassif about Mr Sun lending Mr Nassif the money, or some of the money, for his contribution, but it is not necessary to go into these for the purposes of this judgment. In the end it seems that virtually all of the funding came from Sunchen and Mr Li (see [104] below). 6. In February 2014 Mr Nassif travelled to Cooktown for the purposes of pursuing another opportunity which involved the proposed purchase of a gold mine. At the site of the mine, he was introduced to a businessman named Sona Singh Bhela, who appears to have operated as a facilitator of business deals. In the course of Mr Nassif's visit to North Queensland, Mr Bhela introduced him to a solicitor in Cairns named Anthony Mirotsos, the principal of a firm called Omega Lawyers. 7. Shortly after their meeting, Mr Bhela contacted Mr Nassif to tell him about the Cairns Assets, which were being sold by the receivers of a company called H&S Vision Pty Limited. The three resorts were known as "Cairns One", "The Lakes" and "The Keys". Although the evidence is not clear on this, it seems that the resort accommodation was made up of residential units, some of which were owned by investors, and the assets being sold by the receivers included both the management rights to the units and the ownership of some of them. 8. Mr Nassif contacted Mr Sun and told him about the opportunity. Together, they flew to Cairns and met with Mr Mirotsos and Mr Bhela. After inspecting the properties, Mr Nassif and Mr Sun made an initial offer of $6.2 million, which was accepted in principle by the receivers. 9. SGA was incorporated on 5 March 2014 as the vehicle for purchasing the Cairns Assets. Sunchen and MC 0380 were issued fifty shares each. The initial directors were Mr Nassif and Mr Sun. 10. Shortly after the incorporation of SGA, Mr Bhela introduced Mr Nassif and Mr Sun to an accountant named Chris Norton from a firm of accountants called Halpin Partners in Cairns. Mr Norton had contacts with finance brokers and banks in Cairns and it was through him that finance would ultimately be obtained from Westpac Banking Corporation. 11. After their meeting with Mr Norton, Mr Nassif and Mr Sun decided to proceed with the purchase. On 17 March Mr Sun (for Sunchen) transferred $620,000 into the Omega Lawyers trust account, representing ten per cent of the proposed purchase price. 12. On 25 April Sunchen and MC 0380 entered into a written shareholders' agreement which was prepared by Mr Mirotsos. The agreement specified that the primary object of the company was the management and letting of commercial and residential properties. Each shareholder was to have a representative director, with Mr Sun to represent Sunchen and Mr Nassif to represent MC 0380. 13. The agreement also provided for the parties to contribute, by way of loan, any funds needed by SGA to complete the purchase. Each party was required to lend up to $1.5 million. If Mr Nassif and MC 0380 were unable to raise the necessary funds, that would trigger a procedure under which Sunchen could compulsorily acquire MC 0380's shares in SGA. The necessary "cleared funds" had to be provided within 90 days. 14. SGA then entered into the purchase contract for the Cairns Assets and applied for a loan from Westpac. The purchase price was reduced to $5.8 million after the receivers decided to withhold some of the units which had been offered for sale. This reduced the deposit to $580,000, which was paid out of Sunchen's $620,000 held in trust. The remaining $40,000 was later returned. 15. The purchase contract was not in evidence. It seems however that completion was initially scheduled for the end of June, and that in the meantime SGA was permitted by the receivers to take over the operation of the resorts. Ms Brighton, who had been managing the resorts for the receivers, was employed by SGA for this purpose as the general manager of the resorts. On 30 May she was appointed as a director of SGA. 16. Also involved in managing the resorts was Peter Buckland, a businessman who had previously been a manager of one of Mr Sun's businesses in Port Macquarie. In June Mr Buckland was appointed as manager of SGA, with Ms Brighton reporting to him. 17. Meanwhile, in early May 2014 Mr Nassif had contacted Ms Feng about investing in the Cairns Assets. Ms Feng met Mr Nassif some ten years beforehand and had not been in contact with him since. Mr Nassif explained to Ms Feng that he had entered into a deal with Mr Sun to purchase three resorts in Cairns, but did not have the money for settlement. He asked Ms Feng if she would provide money to complete the deal. 18. For reasons which are not directly addressed in the evidence, Mr Nassif then decided to transfer his half-share in SGA from MC 0380 to MU. The transfer was notified to the Australian Securities and Investments Commission ("ASIC") on 15 May. 19. Ms Feng initially refused to get involved, but on 21 May, after a visit to Cairns with Mr Nassif, she indicated she was interested. Despite wanting to use her own solicitor in Sydney, Ms Feng was persuaded to retain Mr Mirotsos to act for her on the investment. As well as acting for SGA on the purchase of the Cairns Assets, and for Mr Sun (through Sunchen) and Mr Nassif (through MC 0380 and MU) on their dealings with each other as shareholders in SGA, Mr Mirotsos was now acting on both sides of the proposed investment deal between Mr Nassif and Ms Feng concerning MU's interest in SGA. It was a totally untenable position. 20. The arrangement between Ms Feng and Mr Nassif was that she would provide Mr Nassif's half-share required for the purchase of the Cairns Assets, in exchange for a twenty-five per cent economic interest in SGA. The remaining twenty-five per cent interest was to be retained by Mr Nassif. Half of the money she was going to provide would be repaid to her by Mr Nassif over time (see [52] below). 21. The vehicle for the investment was to be a unit trust established under the name of the Nelson Unit Trust. The trust deed for that Trust is in evidence. It bears a typed date of 5 March, but Ms Feng did not become involved until May and Mr Nassif accepted in cross-examination that it was actually executed on 6 June. 22. The trust deed provided that there were 200 units in the Nelson Unit Trust, half of which were held by Ms Feng, and the other half were held by Nassif Constructions Pty Limited, apparently another company controlled by Mr Nassif. The trust deed recorded the initial trustee as MU, but was accompanied by a deed of appointment of new trustees dated 6 June under which MU was replaced by Mr Nassif and Ms Feng as co-trustees. Why this was done is not explained in the evidence. 23. Meanwhile, on 30 May ASIC was notified that Mr Nassif had ceased to be a director of SGA. The reason for this does not appear from the evidence. It may be that it was done in anticipation of Ms Feng being appointed in his place, as later happened on 30 June (see [53] below). 24. Mr Sun was introduced to Ms Feng in mid-June. On 20 June Ms Feng paid $400,000, which represented the first tranche of her investment, into trust with Omega Lawyers. This was credited to an account in the name of SGA. 25. To reflect the change in shareholding from MC 0380 to MU, and Ms Feng's involvement in the deal, on 23 June the original shareholders' agreement was rescinded and a new agreement was entered into between Sunchen and MU. Ms Feng replaced Mr Nassif as MU's representative director. The shareholder finance provisions were also amended. The maximum amount of the loan to be provided by each shareholder was reduced to $1.35 million. The time for MU to provide its "cleared funds" was fixed as 4 pm on 27 June. 26. Also on 23 June Mr Sun and Mr Nassif entered into the side agreement (see [8] above). This agreement provided that should "the Director of MU" not sign a guarantee to Westpac for the purpose of raising loan capital, MU would transfer its shares in SGA to Sunchen before 4 pm on 30 June 2014. 27. On 24 June a formal agreement between Ms Feng and Mr Nassif was drawn up by Mr Mirotsos ("the Feng Nassif Deed"). The recitals to the Deed stated that MU was acting for the Nelson Unit Trust, and that MU's fifty per cent shareholding of SGA was held on trust "for [Mr Nassif] in units in [the Nelson Unit Trust]". 28. Under the Deed, Ms Feng agreed to purchase units in the Nelson Unit Trust for $1.35 million. Clause 2(f) provided that after the settlement of the Cairns Assets, Ms Feng was to be appointed as a director of SGA. Clause 2(h) provided that Mr Nassif was to repay an amount of $650,000 to Ms Feng within eight years, with five per cent simple interest to apply annually. 29. On 27 June Ms Feng made a further payment into the Omega Lawyers trust account in the amount of $400,000. Sunchen also paid $645,460 into the account, as requested by Mr Mirotsos, to assist with the settlement. Both payments were credited to the SGA ledger. On 30 June Ms Feng was appointed as a director of SGA. 30. Although the shareholders' agreement and the side agreement had imposed deadlines at the end of June for the provision of finance, the purchase was not completed then. Negotiations with Westpac (which I discuss in more detail below) continued into July. 31. On 8 July Ms Feng paid a further $450,000 into the Omega Lawyers trust account. By this point, she had contributed a total of $1.25 million to SGA to enable the purchase of the Cairns Assets to proceed. Mr Sun, on behalf of Sunchen, had contributed a total of $1.225 million ($645,460 plus the deposit of $580,000). 32. Completion of the first phase of the purchase was scheduled for the end of August. But in mid-August, apparently due to a tip-off from Mr Sun, Ms Feng became concerned about whether her position was adequately protected. She retained an independent solicitor, Raymond Lee, to act for her. 33. Ms Feng had originally believed that in entering the Deed with Mr Nassif, she was acquiring an economic interest in SGA. However, she was advised that whilst MU held shares in SGA, those shares were not trust property of the Nelson Unit Trust, and MU was not the trustee of that Trust. The Deed therefore gave Ms Feng no economic interest in SGA. Following this, she decided that she did not wish to proceed with the purchase. Mr Lee wrote to Mr Mirotsos advising that the monies held on trust should not be released without Ms Feng's written consent. 34. It was in these circumstances that Mr Sun and Mr Nassif executed the share sale agreement (see [9] above) on 26 August (the agreement was actually dated 26 June, apparently in the belief that this would avoid stamp duty which would otherwise have been payable). The agreement provided for Sunchen to provide three-quarters of the money for settlement of the Cairns Assets, and to act as sole guarantor, in exchange for seventy-five per cent of the shares in SGA. Mr Nassif was still obliged to find the remaining quarter of the money for settlement, in the specified sum of $675,000. On the same date notice was given to ASIC that twenty five shares in SGA had been transferred from MU to Sunchen. Ms Feng was also removed as a director of SGA. 35. The purchase of the Cairns Assets settled in three tranches between 26 August and 2 September. The purchase was funded in part by a $3.59 million loan from Westpac which was solely guaranteed by Mr Sun, and in part from the monies in the Omega Lawyers trust account (for which Mr Mirotsos obtained instructions from Mr Nassif on behalf of MU). Following the settlement there remained a credit of $198,651 in the account. 36. On 3 September Ms Feng commenced urgent proceedings in this Court against Mr Mirotsos to secure the return of the $1.25 million she had paid into the Omega Lawyers trust account, and the amount still held in trust was made the subject of a freezing order. Later it was paid into court. 37. As the defendant to Ms Feng's proceedings, Mr Mirotsos was in a very awkward position. She had effectively paid for the whole of the contribution which MU was to make to SGA for the purchase of the Cairns Assets, on the basis that MU was to have a half-share of SGA, but her position had not been secured and MU had now been reduced to a one-quarter shareholder. 38. Mr Mirotsos' first response was to persuade Mr Sun to pay $675,000 (half of the $1.35 million figure referred to in the shareholders' agreement) into trust so that it could be used to pay out Ms Feng. As Sunchen now held three quarters of the shares in SGA, there was a certain logic to it taking over a further quarter of the settlement funding. 39. The payment was made on 8 September. Mr Mirotsos credited the monies to MU. He then paid Ms Feng $593,466 ($600,000 less $6,534 previously paid out of the moneys held in trust for SGA prior to settlement, representing fees for the establishment of the Nelson Unit Trust). This left $81,534 held in trust under the name of MU. 40. But Ms Feng was still short by $650,000 (plus the $6,534, the deduction of which she disputed) and her proceedings continued. Mr Nassif, it seems, had no means of his own to fund his remaining quarter-share of the project. Mr Mirotsos therefore sought to obtain the money from Mr Sun. He proposed that Mr Sun compulsorily acquire MU's remaining twenty five shares in SGA and contribute the remaining monies needed to pay Ms Feng out. 41. To reassure Mr Sun of the soundness of his proposal, Mr Mirotsos obtained an opinion from counsel, which was provided on 17 October. In his advice, counsel explicitly noted that if Sunchen did seek to acquire MU's shares, it would need to follow the "exact procedure" laid down in the shareholders' agreement for compulsory acquisition. After some hesitation, Mr Sun agreed to proceed and gave Mr Mirotsos the go-ahead to draw up the necessary documents. 42. On 21 October Mr Sun flew to Cairns for a board meeting of SGA. Ms Brighton, Mr Buckland, Mr Mirotsos and Mr Bhela were also present. Ms Brighton, relying on advice from Mr Mirotsos, signed a transfer of MU's remaining twenty five shares to Sunchen, purportedly as MU's attorney. A resolution was then passed to consent to the transfer. 43. Sunchen then paid $575,000 into the Omega Lawyers trust account in accordance with Mr Mirotsos' proposal. Mr Mirotsos used this to pay Ms Feng $457,883 and the $198,651 which had been paid into court from the trust account was paid out to her. Thus, in the end Ms Feng was repaid her $1.25 million and her proceedings against Omega Lawyers settled. The remaining $117,117 was returned to Sunchen. 44. Sunchen therefore ultimately paid a net $2.36 million in connection with the purchase of the Cairns Assets, made up of a net $580,000 for the deposit; $645,460 paid prior to settlement; and a net $1.133 million to settle Ms Feng's proceedings. The $81,534 which had been credited to MU was not returned and was later paid out by Mr Mirotsos on Mr Nassif's instructions. 45. Meanwhile a decision had been made by Mr Li and Mr Sun that SSL should sell the Mission Beach development property. The property was then purchased by Mr Sun on behalf of SGA at a public auction in late November 2014. The price was $1.76 million, which was funded by Mr Sun. 46. Mr Nassif had objected to the sale. In December he consulted a solicitor, Paul McMahon, about Mr Sun's conduct in acquiring MU's remaining twenty-five per cent shareholding in SGA and in selling the Mission Beach property. I set out the evidence on this (which is sparse) in more detail below. At least one statutory demand appears to have been served on SGA or SSL. Mr McMahon prepared a deed of settlement and release which proposed that MU would give up its claims against Mr Sun and Sunchen in return for a fifty per cent share of SGA (and thus fifty per cent indirect interest in both the Cairns Assets and the Mission Beach property). But if this proposal was ever put to Mr Sun (the evidence on that is unclear) he did not agree with it. After March 2015 Mr Nassif took no further action for more than three and a half years. 47. According to Mr Sun's evidence, from November 2014 he spent hundreds of unpaid hours managing the proposed redevelopment of the Mission Beach property. As at June 2020, SGA had incurred a further $894,356 in holding and development costs. Mr Sun also spent over $350,000. In 2016 he lodged a development application ("DA") with the Cassowary Coast Regional Council, however it was later withdrawn after it became apparent that it was not going to be approved. 48. Later, in April 2018, Mr Sun caused SGA to acquire a further development property at Atherton in North Queensland. The purchase price was $1.1 million and the purchase was completed on 31 May. This purchase was also funded by Mr Sun and again he said that he had undertaken hundreds of hours of unpaid work on its redevelopment. As at June 2020, SGA had incurred a further $148,103 in holding and development costs. In March 2019 a DA was lodged in relation to the property, but its current status is not clear on the evidence. Mr Sun's evidence that he undertook extra unpaid work in both the Mission Beach and Atherton properties was uncontested. He said he did this in the belief that Mr Nassif did not challenge the share transfer. 49. Meanwhile, in March 2018 Mr Nassif learned that an offer had been made for the Mission Beach property which valued it at $7.7 million. This apparently resulted in his decision to bring a claim against Mr Sun. The present proceedings were begun in November 2018. SSL was originally named as the third defendant, but in the meantime the company had been deregistered. The claims against it were ultimately abandoned in the plaintiffs' amended statement of claim. Witnesses 1. There were five witnesses for the plaintiffs and two for the defendants. The plaintiffs' witnesses were Mr Nassif, Ms Feng, Mr Bhela, Ms Brighton and Mr Mirotsos. All of the witnesses except Ms Brighton were cross-examined. 2. The events described in the proceedings were not such as to enhance Mr Nassif's commercial reputation. His method of doing business seems to have involved undertaking obligations which he could not himself meet and then trying to obtain other people's money to satisfy those obligations. When placed under the pressure of actually coming up with the money to complete the purchase of the Cairns Assets, he used Ms Feng's money to meet MU's obligations in a way which showed scant regard for her interests. 3. Counsel for the defendants challenged Mr Nassif extensively in his evidence about this and other matters, but with the simplification of the issues which took place in the course of final submissions it has become unnecessary to resolve those challenges. There was also some challenge to aspects of Mr Bhela's evidence but again it is unnecessary to go into detail about that for the purposes of this judgment. 4. Mr Mirotsos was cross-examined by video link from gaol in Queensland where he was serving time following his conviction on an unrelated matter. I have already mentioned that he faced an untenable conflict in his duties as a solicitor as a result of acting for multiple parties whose interests turned out to conflict. As a solicitor he had even less excuse than Mr Nassif for disregarding Ms Feng's interests and he was very fortunate in the end to be able to persuade Mr Sun to provide the money to pay her back. 5. Having failed to protect Ms Feng's interests as an investor in the project, Mr Mirotsos then turned on Mr Nassif by promoting the appropriation of MU's remaining shares in SGA by Mr Sun. So keen was Mr Mirotsos to achieve this that he persuaded Ms Brighton to execute the transfer of MU's shares in SGA to Sunchen when he had received advice from counsel in black and white which made it clear that she had no legal right to do so, although I doubt that this made any practical difference to the outcome. 6. Had I not assumed that Mr Mirotsos has already been struck off I would have referred the papers to the Queensland Law Society to take action against him over his disgraceful conduct. But however much criticism Mr Mirotsos deserves for what happened, as a witness his evidence was ultimately peripheral and to the extent relevant at all did not appear to be in dispute. 7. Ms Feng was a last-minute witness. Up until a few days before the trial began, she had refused, not surprisingly, to co-operate with Mr Nassif. There was no time for an affidavit to be prepared for the purpose of these proceedings, and Ms Feng gave evidence in chief orally, supplemented by her affidavit from her 2014 proceedings, which I allowed to be read. 8. It was difficult to escape the feeling that Ms Feng must have done some sort of deal behind the scenes with Mr Nassif to share the benefit if the proceedings were successful, and that this might have coloured her evidence. On the one factual issue which remained necessary to decide, concerning the Westpac guarantee, I did not find her evidence persuasive (see [98]-[101] below). Again, in the end it is not necessary to make any general comments about her credibility for the purpose of resolving this case. 9. The defendants' witnesses who had been involved in the relevant events were Mr Sun and Mr Buckland. Mr Sun was the only witness to be cross-examined. Counsel challenged him on some points, but it is unnecessary to resolve those challenges to dispose of the proceedings. Provision of bank guarantee by Ms Feng 1. In the end, the only factual issue to be resolved in this case was whether Ms Feng provided a guarantee to Westpac by 30 June 2014, or indeed at all. Ironically, the witness who might have known most about this issue, Mr Norton, was not called by either side. Efforts were made to obtain documents from Westpac but they were only partly successful. 2. The loan application by SGA was not in evidence, but it was apparently made at some point in April or May 2014. On 4 July Brett Cummins, a relationship manager at Westpac, sent the following email to Mr Norton concerning the application: We have finally received final credit approval for the Sunshine Group Australia P/L and it is in terms of the "Expression of Interest" document with the only notable difference being joint guarantees given by David Sun and Gina Feng limited to $2M and loan documentation to be prepared by Gadens. 1. On the same day Mr Norton sent an email to Mr Nassif and Mr Sun advising of the bank's approval. That email was then forwarded to Ms Feng on 5 July by Mr Nassif. Mr Norton suggested that she and Mr Sun would need to be available the following week to "arrange signature of the loan documents". 2. At the hearing, Ms Feng produced a bundle of documents whilst in the witness box. It emerged that they had been given to her by her solicitor, Mr Lee, who had received them from Mr Sun. Among the bundle was a letter dated 8 July addressed to the directors of SGA. The letter enclosed a finance agreement which included details of the approved loan facility for SGA. 3. There was also a letter from Westpac addressed to Mr Sun personally dated 9 July. Enclosed was a document titled "Guarantor Disclosure Statement" dated 10 July, a guarantee and indemnity document to be signed by Mr Sun, a commercial mortgage memorandum and Westpac's general terms of security. There was no equivalent letter addressed to Ms Feng in evidence. 4. On 25 August, after Ms Feng decided to withdraw from the deal, she sent an email to Mr Cummins requesting that no money be transferred to settle the purchase of the Cairns Assets until her solicitor had given approval. On 26 August Scott Webb, another relationship manager at Westpac, responded to Ms Feng explaining that settlement was being completed that day, but that Mr Sun would be funding the purchase. 5. According to Ms Feng, on 1 September she received a call from Mr Nassif who told her that Mr Sun "needs to provide the bank with more security" and would be travelling to Cairns on 2 September to "sort the loan out". On 2 September Mr Sun signed the guarantee and indemnity document that was enclosed to the letter sent to him on 9 July. 6. On 5 September Ms Feng sent the following email to Mr Webb: As per our telephone conversation before, can you confirm that 2 million dollars under my guaranto [sic] was cancelled, and no any fund was released under my guaranto [sic]. Thanks. 1. Mr Webb responded to Ms Feng on 8 September as follows: As per your email, your guarantee to Sunshine Group Australia Pty Ltd has been cancelled and no funds under the existing corporate structure released. 1. In evidence is a subpoena to Westpac dated 7 February 2021. The subpoena sought production of, among other things, "documents recording guarantor(s) for the loan" from Westpac to SGA. Westpac complied with the subpoena on 10 March. Among the documents produced was the guarantee signed by Mr Sun dated 2 September 2014, but there were no guarantees signed by Mr Nassif or Ms Feng. 2. In cross-examination, Ms Feng was first asked about the bundle of documents she had provided during the hearing. She agreed with counsel's suggestion that the first time she saw the letter addressed to the directors of SGA was at some point after 8 July. She also agreed that the letter from Westpac to Mr Sun dated 9 July, which enclosed the Guarantor Disclosure Statement, was brought to her attention at some stage on or after 10 July. Ms Feng was unable to recall whether she received similar documentation which was addressed to, and was to be signed by, her personally. 3. However, Ms Feng was adamant that she had signed a guarantee in favour of Westpac. The following exchange took place at the hearing: Q. The materials that Mr Lee gave you did not include a copy of any guarantee that you had signed in favour of Westpac. A. No. Q. And the true position is, Ms Feng, that you're not sure even to this day whether you, in fact, signed a guarantee in favour of Westpac. A. I'm very certain I signed it. HIS HONOUR: Q. Where is it? A. In the bank – Westpac bank office in Cairns. Q. Were you given a copy? A. No. He let me sign a few more form then go. 1. Counsel suggested that if any guarantee was signed, it must have happened at some point after 8 July. Ms Feng disagreed and contended that she had "signed on this date", referring to a Westpac "Statement of Position" that had been signed by her on 24 June. According to her affidavit, on 24 June she had flown to Cairns to meet with Mr Nassif and Mr Bhela for the purposes of signing documentation relating to the deal. Counsel suggested that the only document she signed on that date was the Statement of Position. Ms Feng disagreed. Counsel continued: Q. Ms Feng, Westpac had not even made a loan offer involving you as a guarantor until 8 July 2014, had it? A. I've got this letter. Which tells me it's been officially approved. Q. The reason, as you understood, that you were signing a statement of position on 24 June 2014, was so that the bank could consider whether it was willing to make a loan offer, with you as a guarantor? A. So, that - I remember this says, ask me to go there to sign, and I signed again, in my memory. That was the case. . . . Q. My question was, you - your understanding, when you signed your statement of position of 24 June 2014, was that Westpac wanted that document, so that it could go away and consider whether the bank was willing to make an offer of a loan to SGA, with you as a guarantor; isn't that your understanding? A. Yes. . . . Q. You became aware that the bank had given that approval, I suggest, sometime on or after 8 July; correct? A. 4 July. 1. Ms Feng then produced another document from the witness box, which was the email from Mr Norton dated 4 July suggesting that Westpac had given a loan approval at that time (see [85] above). Counsel continued: Q. Ms Feng, what I'm suggesting to you is that you could not possibly have signed any guarantee in favour of Westpac before 4 July 2014 having regard to the emails that you've produced to the Court today. A. I did indeed sign one, but I don't remember when. . . . Q. I suggest to you, Ms Feng, that you did not sign any guarantee in favour of Westpac, did you? A. That's not true. I did sign it. Q. The only document you signed at the Westpac branch was the statement of position document on 24 June 2014. A. No. Q. You were informed on 5 July by an email from Mr Nassif that you would need to go to Cairns to sign a guarantee in the following week, correct? A. Yes. Q. You didn't go to Cairns after 5 July 2014. A. I did go. Q. Why did you go to Cairns after 5 July 2014? A. I had to go there to sign a lot of things. Q. What things did you have to sign in Cairns after 5 July 2014? A. So, I don't remember, and I also think something signed. There was Anthony, Steve and so - so on. So, I don't remember very clearly, but I went there a few times all for the purpose of signing things. Q. But you don't say that you signed a guarantee in favour of Westpac when you went to Cairns after 5 July. A. I did sign the - a guarantee in favour of the bank. 1. Counsel for the defendants submitted that on the evidence, the Court would comfortably conclude that Ms Feng did not sign a guarantee in favour of Westpac before 30 June, and probably did not sign one at all. In response, counsel for the plaintiffs submitted that I should accept her emphatic evidence that she did sign a guarantee when she was in Cairns on 24 June. 2. I do not accept that Ms Feng's evidence on the issue was as emphatic as counsel contended. In fact it was inconsistent. Whilst she initially asserted that she had signed a guarantee on 24 June, she later changed course and said that it was after 5 July when she received the email from Mr Nassif. I was left with the impression that Ms Feng had little, if any, recollection of the events in question. 3. The fact is that, apart from her oral testimony, there is simply no evidence to suggest that Ms Feng signed a guarantee prior to 30 June. The overwhelming likelihood is that all Ms Feng signed on 24 June was the statement of her financial position in support of the loan application, and the guarantee itself was not generated until after the loan had been approved on 4 July. This of course is what happened with Mr Sun, whose guarantee documentation is in evidence. 4. This does not, however, mean that Ms Feng did not sign a guarantee at all. Curious as it is, the fact that no such guarantee was contained in the bundle of documents produced by Westpac on subpoena is not, in my view, conclusive. The email from Mr Cummins to Mr Norton on 4 July clearly contemplated that Ms Feng would provide a guarantee in the amount of $2 million. The later correspondence between Ms Feng and Westpac, after Ms Feng had withdrawn from the purchase of the Cairns Assets, proceeded on the basis that she had done so. There is no reason to doubt this evidence, and none was suggested by counsel for the defendants. 5. On balance, the evidence suggests that Ms Feng provided a guarantee to Westpac at some point after 9 July when the security documents were sent out for execution. But given I have concluded that she did not do so before 30 June, it is not necessary to make a finding as to the precise date. Sale of Mission Beach property and pursuit of claims by Mr Nassif 1. In evidence is a letter dated 18 November addressed to Mr Li, Mr Sun and Mr Nassif as directors of SSL from a Sydney law firm called Clamenz Lawyers. The letter recorded that Clamenz had been instructed by "the directors" of SSL to act for the company. It is clear that Mr Nassif was not involved in giving instructions to Clamenz, and I infer that the firm's instructions came from Mr Li and Mr Sun. 2. The purpose of the letter was to set out the ground rules for the auction sale of the Mission Beach property, which was then nine days away. Presumably it was written to bolster Mr Li's and Mr Sun's position in the event of any future legal action by Mr Nassif about the sale. 3. The letter recited that on 16 September the directors had agreed unanimously to have the property sold at a public auction. According to the letter they also unanimously agreed that the net proceeds of the sale would be divided among the parties according to their contributions to the expenditure on the property. Those contributions were given as 55.78% ($1.374 million) for Mr Li, 42.72% ($1.052 million) for Sunchen and 1.49% ($36,852) for the Simeonova Family Trust (Mr Nassif). Any surplus would be distributed to the shareholders in accordance with their shareholdings. 4. On 25 November, Mr Nassif wrote to Clamenz, rejecting their letter which he described as "self serving". Mr Nassif asserted that no resolutions had been passed by the directors on 16 September; there had only been discussions, about which each of the parties was to obtain his own independent legal advice. Mr Nassif's position was that the proposed sale should be cancelled. The letter ended by reserving Mr Nassif's right to seek an interlocutory injunction against the sale. 5. On the same day, Mr Nassif wrote to Knight Frank in Cairns, who were the agents for the sale. The letter stated that Mr Nassif as director had not approved the sale and provided a copy of his letter to Clamenz. Mr Nassif demanded that the auction be cancelled forthwith and stated that he had instructed his solicitors to lodge a caveat over the property to restrain any further unauthorised dealings with the company's assets. 6. It seems that no caveat was actually lodged. As I have already mentioned the sale proceeded on 27 November and SGA's winning bid was $1.76 million. The completion date was 27 January. Mr Mirotsos' firm, Omega Lawyers, was to act for SGA on the purchase. 7. According to Mr Nassif, after he found out that the sale had gone ahead, he consulted a solicitor in Sydney named Paul McMahon. He said Mr McMahon agreed to act for him on a speculative basis and recommended that a statutory demand be sent. Although the demand itself is not in evidence, it appears from other correspondence that at least one statutory demand was issued and posted by registered post on 19 December. 8. Mr Nassif also said that he was advised by Mr McMahon to establish a new company and assign the benefit of his claims to that company. According to Mr Nassif, this was part of ensuring that Mr McMahon would be paid for his work. 9. A new company was indeed established, called Immohold Pty Limited. A search of the company is in evidence. It records that the company was incorporated on 4 December 2014 with Mr Nassif as the sole director. Mr Nassif also appears to have been the sole shareholder, holding fifty shares. 10. On 30 January 2015, Mr Sun wrote to Mr Nassif on SGA's letterhead in response to what he described as Mr Nassif's "corporate debt demand" issued on 19 December. The letter stated: Sunshine Group Australia Pty Ltd refutes the allegations that the company owes you any money and that the debits you claim in the debit demand are false and without merit. Sunshine Group Australia Pty Ltd will defend any action taken by you to enforce these debit demands and will recover all costs that we incur by your false claims. 1. The date for the settlement of the purchase of the Mission beach property was eventually fixed for 10 February. By this stage Clamenz had been replaced as the solicitors for the vendor, SSL, by Koh & Ling, another Sydney law firm. Following the settlement, the proceeds were divided in accordance with the percentages set out in Clamenz's letter of 18 November. This resulted in a cheque being drawn in Mr Nassif's favour for $22,444. 2. Starting on 17 February, Mr Sun sent a series of emails to Mr Nassif. Mr Sun apparently had possession of Mr Nassif's bank cheque from the settlement. He invited Mr Nassif to pick the bank cheque up but asked him to bring his own cheque for $30,000 for repayment of a loan to him in November 2013. There was no response to these emails and on 13 March Mr Sun wrote advising that he would "cash out" the bank cheque in his own favour and that Mr Nassif still owed him $7,556. 3. At some stage in March 2015, Mr McMahon prepared a deed of release and settlement for Mr Nassif. The parties to the draft deed were Mr Nassif, MC 0380 and MU (collectively described as "Nassif") of the one part and Mr Sun and Sunchen (collectively described as "Sun") of the other part. The recitals stated that the Nassif parties considered they had claims against the Sun parties arising out of: 1. the lodgement of allegedly false documents with ASIC between March 2014 and October 2014, in particular the notification purporting to change the 21 October notation recording the purported transfer of MU's shareholding to Sunchen; 2. unspecified breaches by Mr Sun and Ms Brighton of their duties as directors of SGA; and 3. letters to body corporate managers by Ms Brighton from November 2014 onwards (presumably recording MU's removal as a shareholder of SGA). 1. The recitals continued: K. As a result of the above actions including the alleged breach of directors duties, oppression of minority shareholders and the consequences of issuing and lodging information with the ASIC which may be false and misleading and which affect the rights of NASSIF and which actions NASSIF believes are wrongful. NASSIF assigned all his/its rights and actions against SUN to Immohold Pty Ltd. L. On the 19th December 2014 NASSIF issued Statutory Demands against both SSL and SGA demanding payment of monies owed to him and to a company of which he is sole director, i.e. Immohold Pty Ltd A.C.N. 603 214 133. Both these demands were served upon both SSL and SGA and have not been set aside, withdrawn or contested by either SSL or SGA or SUN. M. Failure to pay the respective debts constitutes an act of bankruptcy for which NASSIF and Immohold Pty Ltd may petition to the Federal Circuits Court for the appointment of a receiver / liquidator of SGA and SSL. 1. The operative clauses of the agreement provided that Sun agreed to transfer to Nassif, or Nassif's nominee, Immohold, shares in SGA representing fifty per cent of its issued capital (cl 2.1); Nassif would pay the nominal sum of $50 for the transfers (cl 2.2); and the consideration for the transfer was the forbearance by Nassif commencing legal action against Sun and Sun's servants and agents. In the event of default in making the transfer Nassif and Immohold might proceed with enforcement action (cl 4.1). Upon completion Mr Nassif, MC 0380 and MU would release any claims (cl 6.1). The deed provided for execution by Nassif, apparently on behalf of the Nassif parties. 2. There is no other evidence about Immohold thereafter apart from what appears from the search. That records that in December 2015 Susan Calleja was appointed as a director. Ms Calleja is shown by the search to have shared a residential address with Mr McMahon. At about the same time as she was appointed, there was a change of share structure which appears to have resulted in a further 950 shares being issued to a company in Luxembourg about which nothing is known. 3. In May 2017 Mr Nassif ceased to be a director and the registered office was changed to an address called "McMahon Buildings" in Casino. Later the principal place of business was moved to Casino, and then the registered office and principal place of business were moved to Tweed Heads which is where Ms Calleja and Mr McMahon seem to have been living. 4. In December 2017 Ms Calleja appears to have acquired all 1,000 of the shares on issue. It seems clear enough that by this stage, if not before, Mr Nassif had ceased to have any involvement with the company. It was eventually struck off in April this year. At the time it was struck off Mr McMahon was the sole director and sole shareholder. 5. In his affidavit, Mr Nassif said that following the auction on 27 November he was told about the sale by the agent and a few days later he spoke to Mr Sun. Mr Nassif said that Mr Sun was fed up with him and that Mr Sun would do as he liked, as Mr Nassif had no money to pay solicitors to resist him. It was after this that Mr Nassif consulted Mr McMahon. 6. Mr Nassif went on to say that he was told by Mr McMahon that the draft deed of release and settlement had been sent to Mr Sun, but this evidence was admitted only as evidence of what Mr Nassif was told by Mr McMahon, and not as evidence of the fact. Mr Nassif said that around this time he was told by one of his acquaintances that Mr McMahon was a confidence trickster and lost faith in him. 7. Mr Nassif said that in April 2015 he spoke to Mr Sun and they had the following conversation: Mr Nassif: David what you doing about the Deed of Release and Settlement. Mr Sun: Nothing. I am not signing it. Mr Nassif: Do you think what you are doing is right and fair? Mr Sun: Yes I have put all the money in so I should own everything. Mr Nassif: You know that is not our deal. Mr Sun: Bad luck. Talk to my solicitor. 1. In his affidavit, Mr Sun gave quite a different account. He said that after the sale of the Mission Beach property, and even after March 2015, he remained in occasional contact with Mr Nassif and relations were not unfriendly. In particular, he said that occasional reference would be made to the conduct of SGA's business without Mr Nassif indicating that he had any claim to the assets, or that he bore Mr Sun ill-will over what had happened. Mr Sun flatly denied the conversations deposed to by Mr Nassif to which I have referred above. He adhered to this evidence in cross-examination. 2. This evidence is difficult to reconcile with Mr Sun's letter of 30 January 2015. The brief cross-examination of Mr Sun about the letter was not illuminating. In the end, it is not necessary to make any findings on what happened, other than to note that there was no direct evidence that the deed of release was ever sent to Mr Sun, and it was not suggested to Mr Sun in cross-examination that he had received it. 3. For the purposes of this case the critical factual issue which arises is whether there was indeed an assignment from Mr Nassif to Immohold as recounted in the recitals to the draft deed of release. No actual release was produced. But counsel for the defendants invited me to infer that one had been executed in accordance with recital L and with the evidence given by Mr Nassif about the reason for incorporating Immohold in the first place. 4. There are difficulties with drawing this inference. There is no evidence that Mr McMahon actually was a qualified solicitor, and Mr Nassif's evidence, although not corroborated, casts some doubt on that. Those doubts are strengthened by the amateurish way in which the deed of settlement and release was drafted. 5. If at the time he prepared the deed, the claims by the Nassif entities had truly been assigned, there would have been no need to have made them parties to the deed; the claimant party would have been Immohold. In fact Immohold, although referred to in the deed, was not named as a party. 6. And insofar as they refer to Immohold, the operative provisions of the deed were not consistent. Clause 2.1 described Immohold as the "nominee" of the Nassif parties. Reference was made in cl 5 to Immohold bringing proceedings against the Sun parties in the event of default, but the release in cl 6.1 did not include Immohold as a releasor. 7. The uncertainty in the deed leads me to doubt that Mr McMahon had any clear idea of what an assignment actually entailed so far as vesting causes of action formerly held by Mr Nassif, MC 0380 and MU in Immohold. In these circumstances I am not prepared to draw the inference sought. I am not satisfied that a written assignment of MU's claim in favour of Immohold was ever executed. Standing 1. Counsel for the defendants contended that, as recited in the draft deed of settlement and release prepared in March 2015 (see [114]-[116] above), the plaintiffs' claims in the proceedings had been assigned to Immohold and the plaintiffs were no longer able to pursue them. I have just explained why I am not satisfied, on the evidence, that any such assignment was executed. The defence therefore fails. I should however note in passing that even if I were satisfied that an assignment had been executed the defence would not necessarily have succeeded. 2. Insofar as the plaintiffs' action is based on causes of action at law (for breach of contract or in restitution) then an effective assignment would have required compliance with the Conveyancing Act 1919 (NSW), s 12. The requirements of that section include not only an assignment in written form, but also notice to the party against whom the cause of action lies (in this case Sunchen). There is no evidence that any such notice was ever given. 3. Insofar as the plaintiffs rely on equitable causes of action (rescission or equitable compensation) the better view appears to be that compliance with s 12 is not mandatory: see Meagher, Gummow & Lehane at [6-030]-[6-045]. Nor is notice to the person against whom the cause of action lies: see Meagher, Gummow & Lehane at [6-435]. An equitable assignment of equitable property is immediately effective. 4. But does this mean that if there was an assignment of the equitable claims it is not open to the plaintiffs to bring the claim? In Redman v Permanent Trustee Co of NSW Ltd (1916) 22 CLR 84 Isaacs J stated (at 95, citations omitted): … it is established beyond question that where there is an assignment in equity of a purely equitable interest, the assignee, and the assignee alone, is regarded in the eye of a Court of Equity as having any interest whatever in the property assigned. So clear is this that the assignor in such circumstances is not only not a necessary, but not even a proper, plaintiff and his joinder as such was at one time, and before the later procedure provisions as to misjoinder, fatal to the suit. 1. Clearly under the old equitable practice if there had been a valid assignment in equity of the plaintiffs' equitable claims, only Immohold would have been entitled to pursue those claims and to that extent the standing defence would have been sound. But equally clearly Isaacs J treated the rule, to the extent that it was "fatal to the suit", as a procedural one which applied "before the later procedure provisions as to misjoinder". 2. Those "later procedure provisions" are now found in r 6.23 of the Uniform Civil Procedure Rules 2005 (NSW). Had I been satisfied that the equitable claims had been validly assigned to MU that rule would still have required me not to allow the proceedings to be defeated by non-joinder or misjoinder. Rather than dismissing the proceedings, it seems to me that the point could have been met by joining Immohold (or the Commonwealth, which has succeeded to Immohold's rights as a result of its deregistration) and making an order in its favour, or perhaps by accepting an undertaking from the plaintiffs to account to it for the proceeds of the assigned claims. 3. Finally, all of this discussion pre-supposes a valid assignment in equity. That would require valuable consideration to have been given by Immohold. But even if I were able to infer that there had been an assignment executed, there is nothing in the evidence to establish that such an assignment was given for valuable consideration. Accordingly I cannot be satisfied that there was a valid equitable assignment in any event. Separate entitlement to transfer of MU's shares 1. The starting point for the argument from counsel for the defendants was cl 2(a) of the side agreement dated 23 June 2014, which provided: Should the Director of MU not sign any guarantee to the Westpac Banking Corporation for the purpose of raising capital to purchase The Lakes, Cairns One and The Keys (in receivership) for a loan valued at approximately $4,000,000 MU will transfer its shares in SGA to [Sunchen] by way of express right before 4pm on 30 June 2014. 1. There was a dispute between the parties as to whether the "Director" was Mr Nassif or Ms Feng. However nothing turns on this. Clearly Mr Nassif did not provide a guarantee and I have found that Ms Feng did not do so before 30 June. 2. Counsel for the defendants also relied on cl 11.1.7 of the shareholders' agreement, which provided that the compulsory share acquisition procedure would be triggered if: [MU] are unable to raise funds or capital for [SGA] for the purchase of management rights, freehold properties and other associated businesses from the receiver of H&S Vision for the purpose settlement for the purchase therein, and on the terms contained within those agreements. To avoid any doubt and in order to satisfy this clause 11.1.7, [MU] must provide those cleared funds by 4pm 27 June 2014. 1. As counsel for the plaintiffs pointed out, cl 11.1.7 did not specify how much was to be provided. Counsel submitted that breach of this obligation had not been established, and noted that ultimately Ms Feng provided only $1.25 million towards the settlement and even so $200,000 was ultimately left over in the trust account. 2. The question is what money was required as at 27 June, and the fact that a lesser sum than $3.5 million was needed is ultimately not determinative. In any event, as at 27 June Mr Sun had provided $1.225 million; on no view could the $800,000 provided by Ms Feng have been sufficient. MU was thus in breach of its obligations under the shareholder's agreement as at 27 June (and as at 30 June). 3. Counsel for the defendants submitted that on 30 June equitable ownership of MU's shares in SGA passed to Sunchen by force of cl 2(a) of the side agreement. Counsel submitted that from that point Sunchen had a specifically enforceable right to transfer of the shares, which would give rise to an equitable interest in them on the application of the maxim that "equity regards as done that which ought to have been done" (see Meagher, Gummow and Lehane at [3-185]). 4. Counsel next relied on the terms of the 26 August share sale agreement. The parties to that agreement were also identified as Sunchen and MU, although they were somewhat confusingly defined and referred to as "David" and "Steve" in the agreement. 5. The recitals to the agreement stated: A. [SGA] is purchasing a number of hotel resort properties. B. Steve desires to sell to David 50% of the shares he holds in [SGA]. C. The terms and conditions of the sale are set out below. 1. The relevant operative provisions were set out in cll 2 to 5 (amendment original): 2.0 Steve will sell 50% of the his share [sic] in [SGA] to David for the consideration that David will provide Steve's bank guarantee with Westpac Bank for Steve's 25% of the loan with the bank to allow the settlement of the contract to purchase with the receivers of HS Vision Pty Ltd to be finalised. 3.0 David to provide the bank guarantee for Steve for the period of the loan with Westpac and in return if Steve wants to sell his 25% in Sunshine Group Australia while the guarantee is in place then he must sell to David at the initial purchase price $675,000 which incorporates any loans made by Steve. If Steve releases David from the bank guarantee for his 25% share of the loan then Steve can sell his share at fair market valuation. 4.0 Steve will provide clear funds of $675,000 for his portion of the initial deposit for the purchase for the purpose of settling the sale with the receivers of HS Vision Pty Ltd to be finalised. 5.0 Steve agrees that David being the major shareholder in Sunshine Group Australia agrees that [sic] David is to be the Managing Director and is the sole person for bank authorisations subject to normal company procedures and laws. 1. Counsel submitted that the provisions of the share sale agreement had to be seen in the light of the effective transfer of ownership which, according to counsel's submission, had occurred on 30 June. Counsel characterised the agreement as affording MU an opportunity, in effect, to "buy back" half of the shares transferred, but only if MU complied with the obligation in cl 4.0 to provide $675,000 in "cleared funds" for the settlement of the purchase. 2. Counsel contended that the funds in the Omega Lawyers trust account did not qualify as "cleared funds" for this purpose. Ms Feng had, prior to 26 August, made it clear that she did not consent to the monies being used without her prior consent. No consent was obtained. There was also no possibility of MU and Mr Nassif complying with their obligations under the Feng Nassif Deed because that Deed presupposed that MU would have fifty per cent of the shares in SGA, not merely twenty five. Furthermore, there was no power to act under the trust deed of the Nelson Unit Trust. 3. At first sight, this appears a formidable objection. Indeed counsel for the plaintiffs did not really contest it. But on reflection I am not sure that it is correct to say that "cleared funds" were not provided. 4. The evidence shows that Ms Feng's money was credited by Mr Mirotsos to SGA's trust ledger. Once that had happened, the monies were indistinguishable from cash held in a bank account by SGA. Even if the appropriation of Ms Feng's money to SGA before her position was secured may have been a breach of obligations, express or implied, in the Feng Nassif Deed, that would not have prevented it from being legally effective. 5. Furthermore, the evident purpose of the requirement of "cleared funds" was to ensure that monies were provided in a form in which they could be used to settle the purchase of the Cairns Assets. The money was in fact used for the purposes of the settlement. The commercial purpose of the requirement was thus satisfied. It was only afterwards that Mr Sun provided the funds necessary to repay Ms Feng. 6. It seems to me that as between Sunchen on the one hand and MU on the other, the necessary "cleared funds" were provided. The fact that MU or Mr Nassif (or Mr Mirotsos) may have breached their obligations to Ms Feng in doing so is immaterial. 7. In any event, I do not accept that as at 26 August MU's twenty-five per cent share already "belonged" to Sunchen, subject to Sunchen complying with its obligations so as to recover it. 8. I am prepared to accept for the purposes of the argument that the failure by MU to provide the bank guarantee by 30 June gave Sunchen a contractual entitlement under the side agreement to appropriate to itself MU's fifty per cent holding in SGA. But that is not what Sunchen did. Instead, Sunchen in effect gave MU a further chance to continue to participate in the acquisition of the Cairns Assets. Even when the dispute with Ms Feng arose Sunchen permitted MU to continue as a twenty-five per cent shareholder. By 26 August, the date of the share sale agreement, if not before, Sunchen had waived any right to proceed with the acquisition of MU's shares under the side agreement. 9. Furthermore, I do not think that the wording of the share sale agreement is consistent with counsel's characterisation. It would have been quite understandable from a commercial point of view if the share sale agreement had provided that upon failure to provide the $675,000 in cleared funds, MU's twenty-five per cent shareholding would automatically pass to Sunchen, by analogy with cl 2(a) of the side agreement. But that was not the language of the share sale agreement. 10. It must be remembered that the agreement was described by the parties as a share sale agreement, not a share forfeiture agreement. Clause 2 provided that Mr Nassif (ie, MU) was to sell fifty per cent of "his" shares to Mr Sun (ie Sunchen). In return Sunchen was to guarantee MU's twenty-five per cent share of the loan. There are two important aspects of this language. First, MU's fifty per cent shareholding was still described as belonging to it despite the failure to satisfy the conditions in the side agreement. And second, in the context, the reference to the sale was to half of that fifty per cent shareholding which was being transferred immediately, not the residual half being retained by MU. 11. The simple fact is that the share sale agreement made no provision for what would happen if Mr Nassif was unable to come up with the "cleared funds" to satisfy the funding obligation attached to his residual twenty-five per cent holding. Counsel's submission that there would in that event be an automatic forfeiture could only be sustained on an implication. There is no need to consider this in depth. In my view there is simply insufficient textual foundation for such an outcome in the agreement. 12. For these reasons I do not accept that Sunchen had an independent entitlement, as a result of the terms of the side agreement or the share sale agreement, to appropriate MU's remaining twenty-five per cent shareholding to itself after 26 August. This defence fails. Rescission 1. As already noted, the plaintiffs' principal claim is to have the October 2014 transfer of twenty-five per cent of the shares in SGA reversed. To these claims the defendants put forward three equitable defences. I will deal with them in turn. Doing equity and restitutio in integrum 1. Counsel for the defendants pointed out that in the end MU had contributed nothing to the acquisition of the Cairns Assets. In fact, Sunchen had provided all of the funds required to pay back Ms Feng. Counsel noted that MU had in fact received $81,534 out of the money paid by Sunchen (see [68] above). 2. Then there was the fact that SGA had acquired and developed the Mission Beach property and, later, the Atherton property. Mr Sun's evidence that this had required considerable further funding and management effort was not contested (see [71]-[72] above). Counsel for the plaintiffs pointed out that these other investments went beyond what had been contemplated in the shareholder's agreement. 3. At the hearing, counsel for the plaintiffs ultimately submitted that in order to do equity, MU would be required to comply with its obligations under the share sale agreement. MU would either lend $675,000 to SGA, or take an assignment of Sunchen's debt in that amount, and pay interest at statutory rates from 26 August 2014 to reflect its delay in compliance with its obligations. Counsel for the defendants submitted that compliance seven years after the event, given everything which had been done by Mr Sun to build up SGA in the meantime, went nowhere near doing equity. 4. Counsel for the defendants pointed out that an equitable claim should be dismissed if the plaintiff is not prepared to do equity: see Meagher, Gummow and Lehane at [3-050]. But I did not understand that to be MU's position. Counsel for the plaintiffs did not assert that MU should not be put on terms for the grant of equitable relief in the nature of rescission; the debate was about what the terms should be. In my view the real point being made on Sunchen's behalf was that, given the subsequent events, returning the parties to their prior positions in a way which would achieve "practical justice" (restitutio in integrum) was impossible (see Alati v Kruger (1955) 94 CLR 216 at 223-224). 5. Counsel for the plaintiffs pointed out that most of the contribution which had been made by Sunchen to building up SGA had been through the provision of loans. The suggestion appeared to be that equity could adequately be done by MU agreeing to take over a share of the now extant loans on the same terms as applied to Sunchen. But this does not adequately recognise that when the loans were made there was no certainty that the ventures undertaken by SGA would be a success. To offer to bear a proportionate share of the loans now that the ventures have proved successful is hardly the same thing. 6. I think it is clear from the evidence which I have set out above that the decision to acquire the Mission Beach property from SSL in the name of SGA would have been taken by Mr Sun in the knowledge that the sale was objected to by Mr Nassif. Whether that objection was reasonable, of course, was another matter. 7. But the Atherton property was acquired much later and after a long period during which Mr Nassif made no attempt to assert any rights against SGA. Mr Sun's evidence that he only acquired the property in SGA because he believed that there was no dispute about the shareholding was not challenged (see [72] above). In these circumstances, counsel for the plaintiffs frankly acknowledged his difficulty in seeking relief which would give MU an indirect one-quarter share of that venture. 8. During the hearing, a number of ideas were floated for how adjustments could be made which would ensure that Sunchen retained the whole benefit of the investment in the Atherton property (and possibly the Mission Beach property as well). One possibility would be to impose a condition on the transfer of the shares that MU should pay to have the stamp duty and other transactional costs involved in transferring the Atherton property (and possibly the Mission Beach property) out of SGA and into a new vehicle separately owned by Sunchen alone. 9. On reflection I think this is too complex. I am inclined to think that the most direct way of doing equity would be to require that Sunchen pay one-quarter of the current value of SGA. This would effectively give Sunchen the benefit of the value that it has created in the Cairns Assets and in the other properties since 2014. In addition, MU would have to take over one quarter of the current shareholder loans on the same terms as apply to Sunchen, and repay the $81,534 (plus interest from 2014). 10. It seems that the motivation for bringing the proceedings was so that MU could get, through a restored holding in SGA, a share of the capital gain from the redevelopment of the Mission Beach property (see [73] above). Imposition of the conditions which I have described would deprive MU of that advantage and would, I suspect, be unacceptable to it. In view of the conclusion which I have reached that MU is not entitled to rescission for other reasons, I do not need to pursue this any further. Laches 1. Counsel for the defendants pointed out that, on the evidence, Mr Nassif was aware of the acquisition of MU's shares in SGA, and that this had been done without his authorisation or consent, since almost immediately after it had happened. Yet he delayed for more than four years in bringing proceedings, and in the meantime allowed Mr Sun to bear all of the risk and do all the work required to build up the value of SGA. 2. Counsel submitted that it was a clear case of delay coupled with prejudice, of the type which attracts the equitable defence of laches. Counsel relied in particular on the decision in Crawley v Short [2009] NSWCA 410. That case concerned companies which operated pub businesses. One shareholder acquired the interests of a second shareholder in circumstances which were said to involve oppression and, several years later, the plaintiff sought to have the transaction reversed. It was held that that claim was barred by laches. 3. Counsel for the plaintiffs sought to distinguish Crawley v Short on its facts. Counsel pointed out that in that case the claim to have the share acquisition reversed was brought well after the proceedings had begun, and after the decision had earlier been made not to agitate it in the proceedings. Counsel submitted that this was the real explanation for the outcome. Counsel further submitted that if there was a laches defence it could only apply to the extent that a claim was indirectly being made to the Atherton property. 4. I do not accept these submissions. The authorities clearly show that the length of delay required to establish the defence of laches depends on the nature of the claim, and where the claim is to a speculative asset the margin for permissible delay is short. In Crawley v Short Young JA said at [177]: There have been a series of cases where former partners in a mining partnership had acted unconscionably, but action was not taken until after the former partners had, at great expense, made the mine prosperous. Examples are Senhouse v Christian (1795) 52 ER 387; 19 Beav 356n; Norway v Rowe (1812) 34 ER 472; 19 Ves 144 and Hart v Clarke (1854) 52 ER 385; 19 Beav 349. Such claims were barred by laches. This was even the result where the mine did not require large sums to be spent on it, but the plaintiffs had protested for many years but took no action, Clegg v Edmondson (1857) 44 ER 593; 8 De GM & G 787. Such cases are factually close to the present. See also Meagher, Gummow and Lehane at [38-025]. 1. Nor do I think that the defence of laches should somehow be limited to the purchase of the Atherton property. I do not see how the defence could operate partially. It either operates to prevent rescission of the transfer of the whole twenty-five per cent parcel of shares or it does not operate at all. 2. In Crawley v Short, Young JA referred at [179] to "volatile commercial property" and the shares in SGA certainly answer that description. In the period leading up to Sunchen's appropriation of the shares, Mr Nassif had made no attempt to fund MU's share of the settlement obligations himself. He took no immediate action on becoming aware of the share transfer on 21 October. It is true that in November he appears to have objected to the sale of the Mission Beach property to SGA, but as he expressed it his opposition appeared to be an oppression-style objection based on his shareholding in SSL. 3. The evidence leaves it unclear whether Mr Nassif, or Mr McMahon on his behalf, complained to Mr Sun about the SGA share transaction between December 2014 and March 2015. But if complaint was made, that only makes the failure to pursue the issue for more than three years after March 2015 more unreasonable. In my view MU's claim for rescission is indeed barred by laches. Unclean hands 1. Counsel also advanced a defence of unclean hands. This was based on three aspects of the plaintiffs' conduct: 1. MU's breaches of its obligations to Sunchen, in particular its failure to provide the necessary finance and bank guarantee by 30 June, and its alleged failure to provide the $675,000 in "cleared funds" by 26 August (see [145] above); 2. MU's involvement in the application of Ms Feng's money contrary to her instructions (see [57]-[59] above); 3. the backdating of the share sale agreement, apparently in an attempt to avoid paying stamp duty (see [58] above). 1. I do not propose to address these submissions at any length. I am inclined to think that in no case was there a sufficient connection between the misconduct, or alleged misconduct, and the equity sued for. At most, in the case of the stamp duty avoidance, it might have been appropriate to condition the grant of any equitable relief on an undertaking by MU to pay any applicable stamp duty (see Nelson v Nelson (1995) 184 CLR 538). In view of the conclusions that I have already reached elsewhere, that equitable relief is unavailable I do not need to say any more about it. Equitable compensation 1. I must now consider the plaintiffs' alternative claim for equitable compensation. This alternative claim does not give rise to any question about doing equity. While the inability of the plaintiffs to provide restitutio in integrum may prevent the rescission of the share transfer, it does not prevent recovery of compensation for the loss of the shares: Greater Pacific Investments Pty Ltd v Australian National Industries Ltd (1996) 39 NSWLR 143 at 153. 2. But the argument before me took place on the assumption that if the defence of laches were established, it would prevent the grant not only of relief in the nature of rescission, but also the grant of any other equitable relief, including equitable compensation. At the end of the argument I expressly reminded the parties of this, and there was no demur from counsel for the plaintiffs. 3. On reflection, there may be room to debate this as a matter of principle. It is one thing to say that a delay can cost a plaintiff the right to obtain rescission of a transaction, and recovery of an asset transferred in the transaction, if other dealings affecting the nature and value of the asset have intervened. It is less clear why that delay should prevent a later claim being made for compensation, at least if that claim is confined to the value of the asset at the date of the transaction. 4. But there is a further practical problem. The plaintiffs could only be entitled to compensation for loss actually suffered as a result of the appropriation of the shares. 5. There was no evidence before me, of an expert nature or otherwise, as to the value of MU's shares in SGA as at 21 October 2014, or any other relevant date. Once the transaction was completed on 26 August or shortly afterwards, SGA's assets consisted effectively of the Cairns Assets, for which it had paid $5.8 million (plus costs and fees). But the acquisition of those assets had been 100% funded by borrowings, either from the bank or from the shareholders. 6. I can only assume that the price of $5.8 million represented the fair market value for the assets at the time of acquisition. In those circumstances, the sale of those assets would have yielded the amount paid, less the costs of sale. On this view, the net value of SGA at the date of settlement was nil (in fact, it would have been negative because of the transaction costs). There is no reason to think that the position would have been substantially different two months later when the shares were acquired on 21 October. 7. The onus lay on the plaintiffs to establish that the shares had substantial value. In my view the plaintiffs have failed to do so. 8. For these reasons it is unnecessary to consider theoretical questions about the availability of equitable compensation any further. This includes any questions about unclean hands. Common law relief: breach of contract and restitution 1. In my view, the most straightforward common law remedy available in the present case would be an action for restitution of the value of the shares as at the date they were acquired without authority (together with interest at statutory rates from that date). If instead of transferring the shares a payment of MU's money had been made without its authority, there would clearly be an action for money had and received. Historically there was no action for "property had and received" but as a result of the abolition of the restrictions inherent in the old forms of action, that should not be an obstacle to the bringing of a restitutionary cause of action. I set out my reasons for these views in Akierman (No 2) at [78]-[82]. 2. If this is correct, MU was entitled to sue Sunchen directly for restitution of the value of shares appropriated without authority in October 2014. Even if no restitutionary cause of action were available, however, that would make no difference. The acquisition of the shares without properly going through the procedure laid down in the shareholders' agreement would appear to have been a breach of contract, with the same consequence. 3. On my findings, MU would be entitled to recover the value of the shares when they were wrongly appropriated by Sunchen, if it could be proved that the shares had substantial value. But for reasons I have already given, this has not been proved. MU's claim in restitution (or for damages for breach of contract) fails. Conclusions and orders 1. I have already noted that the plaintiffs' claims against Mr Sun personally (which were the only claims made by Mr Nassif personally) have been abandoned. On MU's claims against Sunchen I have concluded that: 1. Sunchen's standing defence fails; 2. so too does Sunchen's defence alleging a separate contractual entitlement to appropriate the shares to itself; 3. but MU's equitable claims are defeated by the defence of laches; and 4. MU's claims at law for restitution or damages for breach of contract fail for want of proof of loss. 1. The plaintiffs' claims must therefore be dismissed. I see no reason why costs should not follow the event. Any application for any alternative costs order can be made in accordance with the Rules. 2. The orders of the Court are: 1. Judgment for the defendants. 2. Order that each of the plaintiffs pay the costs of its or his claims against the defendants. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 August 2021