Reported Decision : 40 ACSR 619 New South Wales Supreme Court CITATION : Shum Yip Properties v Chatswood Investment & Development [2002] NSWSC 13 revised - 1/03/2002 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4959/99 HEARING DATE(S) : 6, 7, 8 & 9 February, 14, 15 & 16 May, 5 & 6 July and 3 August 2001 JUDGMENT DATE : 12 February 2002 Shum Yip Properties Development Ltd (P) PARTIES : Chatswood Investment and Development Co Pty Ltd (D1) Rosanna Wong (aka Rosanna Ngan) (D2) Rolle Pty Ltd (D3) JUDGMENT OF : Austin J COUNSEL : R Kaye & R Glasson (P) M G Scheib (D) SOLICITORS : Lazarus Smith Lawyers (P) Crichton-Browne Crossley (D) CATCHWORDS : CORPORATIONS - winding up on just and equitable ground and for oppression - relief for oppressive conduct - minority shareholder is foreign, majority shareholder/director fails to provide information and to hold meetings and misuses company funds for unauthorised travel and other expenses - EQUITY - joint venture agreement - fiduciary duties - breach of duty - remedies Aequitas Ltd v Sparad No 100 Ltd [2001] NSWSC 14 Bagot Well Pastoral Co Pty Ltd v Reid (1993) 12 ACSR 197 Biala v Mallina (1993) 11 ACSR 785 Cadwallader v Bajco Pty Ltd [2001] NSWSC 1193 Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285 Fabre v Arenales (1992) 27 NSWLR 437 Foss v Harbottle (1843) 2 Hare 461 Glazier Holdings Pty Ltd v Australian Means Health Pty Ltd (No 2) [2000] NSWSC 6 Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) ATPR 41-831 Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539 Jones v Dunkel (1959) 101 CLR 298 CASES CITED : John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63 Karam v Australia and New Zealand Banking Group Ltd (2000) 34 ACSR 545 Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606 Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452 Norton v Lord Ashburton [1914] AC 932 Payne v Parker [1976] 1 NSWLR 191 Re Back 2 Bay 6 Pty Ltd (1994) 12 ACSR 614 Roberts v Walter Developments Pty Ltd (1992) 10 ACLC 804 Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549; Target Holdings Ltd v Redferns [1996] 1 AC 421 Warman International Ltd v Dwyer (1995) 182 CLR 544 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 DECISION : See under heading 'Conclusions' IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J TUESDAY 12 FEBRUARY 2002 4959/99 SHUM YIP PROPERTIES DEVELOPMENT LTD V CHATSWOOD INVESTMENT AND DEVELOPMENT CO PTY LTD & ORS JUDGMENT (revised 19 February 2002 to correct typographical errors) 1 HIS HONOUR: The plaintiff, Shum Yip Properties Development Ltd ("Shum Yip") is a Hong Kong company. In this proceeding it seeks, as its primary relief, an order that the first defendant, Chatswood Investment and Development Co Pty Ltd ("CIDC"), be wound up for oppression or on the just and equitable ground. Alternatively, the plaintiff seeks an order for the purchase of its shares or the appointment of a receiver of CIDC's property, pursuant to the statutory oppression provisions. If the Court decides to order the purchase of Shum Yip's shares, Shum Yip says that the purchaser should be CIDC. 2 Shum Yip seeks relief against the second defendant, Rosanna Wong ("Ms Wong"), for breach of her fiduciary and statutory duties as a director of CIDC, to act honestly and not to make improper use of her position; and against the third defendant, Rolle Pty Ltd ("Rolle") for knowing participation in Ms Wong's breaches of those duties. Ms Wong was, at all relevant times, a director of and the majority shareholder in Rolle. 3 Shum Yip entered into an agreement dated 22 May 1992 ("the joint venture agreement"), and there is a dispute as to the identity of the other party. If the Court finds that the other party was a company called Ngan's Investment Pty Ltd, which has been de-registered, Shum Yip seeks a declaration that the joint venture agreement has been terminated. If the Court finds that the other party was Ms Wong or Rolle, Shum Yip seeks relief for breach of the fiduciary duty of a joint venturer or breach of contract by that party. 4 The relief sought by Shum Yip against Ms Wong and Rolle is damages, or equitable damages, or damages under the statutory civil penalty provisions, together with interest and costs. 5 CIDC was formed as an investment vehicle for Shum Yip and the interests of Ms Wong and her husband, now divorced, Matthew Ngan. It acquired an office building located at 410-414 Victoria Avenue, Chatswood ("the Chatswood property"), under arrangements set out in the joint venture agreement. Shum Yip's main factual allegations against the defendants are that Ms Wong and Rolle failed to make the financial contributions required by the agreement, that Ms Wong used CIDC's money to meet unjustified and unauthorised expenses and excessive directors' fees, and that she failed to provide information or hold meetings of directors and members of CIDC. The case turns on my factual findings on these issues. The effect of changes to the Corporations legislation 6 The present proceeding has been affected by two changes to Australian corporations legislation. It was instituted under the Corporations Law in force prior to 13 March 2000. At that time, the statutory oppression remedy was found in the old s 246AA, the relevant statutory duties of corporate officers were found in the old ss 232 (2) and (6), and the statutory right to recover damages for breach of a civil penalty provision was found in the old s 1317HD. The relevant statutory grounds for winding up were in s 461 (1) (e), (f), (g) and (k). The right of a member to bring proceedings on behalf of a company complaining of breaches of the equitable and statutory duties of a director was governed principally by the rule in Foss v Harbottle (1843) 2 Hare 461 [67 ER 189] and the exceptions to that rule. 7 The Corporate Law Economic Reform Program Act 1999 (Cth), the relevant provisions of which took effect on 13 March 2000, · replaced the old statutory oppression remedy, s 246AA, with a new Part 2F.1 (ss 231-235) which was similar to, but not identical with, the old provision; · removed the old statutory duty to act honestly (old s 232 (2)) and substituted a duty to act in good faith in the best interests of the corporation and for a proper purpose (s 181 (1) - the difference in wording does not seem to have produced any change of substance, at any rate in the facts of the present case: see Ford's Principles of Corporations Law (Butterworths, looseleaf), paragraph [8.065]); · replaced the old statutory duty not to make improper use of position (s 232 (6)) with a closely similar provision (s182); · substantially reformed the civil liability provisions, while retaining in s 1317H a statutory right to recover damages for breach of a civil penalty provision, in terms which are probably no different in substance from the old s 1317HD (see Ford, paragraph [3.400], under heading "Compensation orders"); · did not significantly change the grounds for winding up by the Court, in s 461 (1) (e), (f), (g) and (k); · introduced, in Part 2F.1A, a new statutory derivative action, which replaced the derivative action at general law. 8 The new provisions regarding the duties of corporate officers (ss 181 and 182) did not purport to apply to conduct that occurred prior to 13 March 2000, and so after the amendments took effect, Ms Wong's conduct prior to that time remained to be judged under the pre-2000 provisions. Section 1471 provided that if an application had been made under s 246AA and had not been determined before 13 March 2000, then s 246AA continued to apply in respect of the application. In other respects, the winding up provisions were unaffected. Section 1473 had the effect that the old civil penalty provisions, including s 1317HD, continued to apply to a contravention of the old ss 232 (2) or (6). 9 The Corporations Law was replaced by the Corporations Act 2001 (Cth), effective on 15 July 2001. The operation of the transitional provisions in Chapter 10 of the new Act is intricate. Rather than seeking to preserve the provisions of the Corporations Law with respect to matters that occurred, and proceedings that commenced, before 15 July 2001, the transitional provisions of the new Act generally have the effect of substituting new, corresponding rights and liabilities and deeming new corresponding proceedings to have been commenced: see s 1370. For the purposes of the present case, the key provisions are ss 1401, 1408 and 1383. 10 Section 1401 applies where a right or liability has arisen under a provision of the old corporations legislation that was no longer in force immediately prior to 15 July 2001. Thus it applies where a person in the position of Ms Wong incurs a liability to a person in the position of CIDC for breach of a civil penalty provision regarding the statutory duties of corporate officers, and is exposed to a statutory action for damages under the civil penalty provisions, in the form in which those provisions existed before 13 March 2000. Section 1401 (2) says that the new corporations legislation is taken to include the provision of the old corporations legislation (with such modifications (if any) as are necessary) under which the pre-commencement right or liability arose, and as from 15 July 2001 persons with rights and liabilities under the old legislation acquire equivalent rights and liabilities under the provision taken to be included in the new corporations legislation (s 1401 (3)). Section 1408 has the effect of preserving the old transitional provisions, including ss 1471 and 1473, under which rights and liabilities that arose before 13 March 2000 have been preserved notwithstanding the Corporate Law Economic Reform Act. In effect, therefore, we are to read the new Corporations Act as if it contains provisions equivalent to the old ss 232 (2) and (6), 246AA, and 1317HD, in the form in which those provisions existed prior to 13 March 2000 (with any necessary modifications, but I cannot see that any modifications are needed). 11 Section 1383 of the new Act has the effect that, in the present circumstances, a new proceeding under the Act, equivalent to the proceeding before the commencement of the Act, is taken to have been brought in this Court, but the Court is taken to be exercising federal jurisdiction under the provisions of the new corporations legislation that correspond to the relevant old provisions. As Note 2 (b) to s 1383 (3) points out, the "provision of the new corporations legislation" under which such proceeding is taken to have been brought is the provision deemed to have been included in the new legislation by force of s 1401 - that is, a new provision having the same effect as the Corporations Law provision prior to the amendments of 13 March 2000. 12 The simple conclusion emerging from this tangled reasoning is that one continues to apply the substance of the pre-13 March 2000 provisions of Corporations Law, treating those provisions as if they were part of the new Corporations Act. For the remainder of these reasons for judgment I shall use the old section numbers, ss 232, 246AA and 1317HD, without specifying the statutory source, but in each case meaning to identify the artificial provision deemed to have been inserted in the new Act in the fashion that I have described. As far as I can tell, the old, intermediate and new provisions are so similar in substance that my conclusion as to the applicable law has a potential impact in the present case in only two respects. 13 First, Part 2F.1 differs from s 246AA as regards the persons who may bring a proceeding for relief. Section 246AA was more narrow than Part 2F.1. The former allowed a proceeding to be brought only by a member who believed that one of the grounds for an order was present. The latter allowed a proceeding to be brought by a member and certain others (such as a former member), and dispensed with the requirement that the applicant must believe that one of the grounds is present. Since Shum Yip is, and has at all material times been, a member of CIDC, nothing turns on the expansion of the categories of applicants. However (as I shall explain later), the defendants seek to make something of the requirement of s 246AA that the applicant must believe that one or more of the grounds is present. My conclusion about the transitional arrangements is that this requirement remains to be satisfied in the present case, notwithstanding the abandonment of the requirement by the amending legislation. 14 The second area in which changes in the law could have an impact in this case relates to standing to bring a derivative action. Shum Yip seeks statutory and general law relief in its capacity as a member/contributory of CIDC, and (as regards its fiduciary and contractual claims concerning the joint venture agreement) as one of the joint venture parties. It clearly has standing as a member to seek relief under the statutory oppression remedy, s 246AA, and to seek a winding up order as a contributory under s 462 (2) (c). Its standing to seek contractual and equitable relief with respect to the joint venture agreement arises out of the fact that it is a party to that agreement. The question is whether Shum Yip has any standing to seek relief against Ms Wong for breach of her statutory and general law duties as a director of CIDC. 15 The breaches of duty alleged against Ms Wong are failure to act honestly in the exercise of her powers and the discharge of her duties, and making improper use of her position as an officer of CIDC to gain advantage for herself (Further Amended Statement of Claim, paragraph 16). These are in substance allegations of equitable fraud, of a kind that could not be cured by resolution of a general meeting of members of CIDC. It is clear from the evidence that Ms Wong is in a position to prevent the directors of CIDC from resolving to institute proceedings against her for breach of duty. In these circumstances, a derivative action is available under the "fraud" exception to the rule in Foss v Harbottle (as to which, see Ford, paragraph [11.300]), if Shum Yip makes out its substantive allegations against Ms Wong, provided that the right to bring and maintain a general law derivative action has not been taken away by statute. 16 The amendments to the Corporations Law which took effect on 13 March 2000, and which were continued in relevantly the same terms by the Corporations Act, introduced a new statutory derivative action, which replaced the general law derivative action as from that date: s 236 (3). The provisions governing the new statutory derivative action require that the proceeding be brought in the company's name (s 236 (2)) and that leave be granted to the person bringing the proceeding under s 237. Neither of these conditions has been satisfied in the present case, although Shum Yip has submitted that it is open to the Court to grant leave under s 237 even after the conclusion of the final hearing of the case. 17 The question, whether the abolition of the general law derivative action has affected a proceeding commenced before 13 March 2000, is a difficult one. The transitional provisions in Chapter 10 of the Corporations Act are of no assistance, since the right to bring a derivative action under the general law for breach of directors' duties cannot be said to have accrued under a provision of the old corporations legislation (see s 1401 (1) (a)), and the present proceeding (to the extent that it is a proceeding asserting the right to bring a derivative action under the general law) is not proceeding under a provision of the old corporations legislation (see s 1383 (1) (b)). 18 I explored the matter recently in Cadwallader v Bajco Pty Ltd [2001] NSWSC 1193 (and note especially Karam v Australia and New Zealand Banking Group Ltd (2000) 34 ACSR 545, which I discussed in Cadwallader). I shall not reiterate the reasoning I expressed in that judgment. I adhere to the views I then expressed. In this case, as in Cadwallader, the proceeding was properly constituted as a derivative action under the general law, the company being joined as a defendant. I have found that a derivative action was available to Shum Yip under the general law, at the time of commencement of the proceeding. The proceeding was commenced prior to the commencement of s 236 (3). Shum Yip has not purported to "bring, or intervene in" any proceeding on behalf of CIDC since the commencement of s 236 (3). Therefore the right that it exercised before the commencement of that provision was validly exercised and the proceeding remains properly constituted under the general law, notwithstanding s 236 (3). 19 My conclusion, therefore, is that Shum Yip has standing to seek relief of all the kinds claimed in the Further Amended Statement of Claim, and does not need any order granting it leave to do so. I should record that, if it had been necessary for me to decide whether to grant leave to Shum Yip under s 237, procedural fairness would have dictated that I should allow the defendants to lead evidence and make submissions, and allow Shum Yip to respond, before making the decision. The acquisition of the Chatswood property and the joint venture agreement 20 Prior to 1992, Mr Ngan had developed a business relationship with a Chinese company called Shenzhen Properties and Resources Development (Group) Ltd ("Shenzhen Properties"). He dealt with that company through his Hong Kong company, Interform International Ltd. He first met Lin Bing, who was then a senior staff member of Shenzhen Properties, in about 1988. 21 In 1991 or early 1992, Mr Ngan had several discussions with Mr Lin in Hong Kong, concerning the possible purchase of an office building in Sydney. Mr Ngan located the Chatswood property in May 1992. On 20 May 1992, Ms Wong, then still married to Mr Ngan, went to the office of Herman Chow, an accountant, and signed various documents relating to the setting up of CIDC and Rolle (then called "Ngan's Company Pty Ltd"). Both companies were incorporated on that day. A meeting of the directors of CIDC was held on that day with Ms Wong and Mr Ngan being appointed directors, and Mr Chow being appointed secretary. Applications for shares by Rolle and Shum Yip were submitted at the meeting, and 100 ordinary shares were issued, 55 to Rolle and 45 to Shum Yip. 22 On 22 May 1992 Mr Ngan and Mr Lin executed the joint venture agreement in the Chinese language, in Hong Kong. Translated into English, the full text of the agreement was as follows: " AGREEMENT Mr. Ngan Wen Bo, representing the Ngan's Investment Ltd. or Mrs Rosanna Ngan, and Shum Yip Properties Development Ltd. agree to purchase the property at 410-414 Victoria Avenue, Chatswood at the price of (Aus.) $7,980,000.00 plus (Aus.) $680,000.000, totalling (Aust.) $8,660,000.00, and authorise and entrust Mrs. Rosanna Ngan and a designated person to purchase the said property at the price of (Aus.) $8,660,000.00. The two parties agree to organise the purchase of the above-mentioned property through Chatswood Investment & Development Co. Pty Ltd. The proportion of the shares of the company is as follows: Ngan's Investment Ltd. or Mrs. Rosanna Ngan's authorised person shall take 55% of the company; Shum Yip Properties Development Ltd. shall take 45% of the company. The joint venture's capital shall be (Aus.) $4,500,000.00, including the registered capital of (Aus.) $1,200,000.00 [2,500,000.00 was struck out] and the capital of (Aus.) 3,300.000.00 [2,000,000.00 was struck out] borrowed from the shareholders. The first instalment of nine hundred thousand Australian dollars in proportion of the respective shares of the two parties shall be remitted to Chatswood Investment & Development Co Pty. Ltd prior to 23rd May; The second instalment of three million five hundred and seventy thousand Australian dollars shall be remitted prior to 16th June to the above mentioned company, of which (Aus.) $680,000.00 shall be remitted into the account designated by the vendor prior to 16th June. The parties shall share all the profits and bear all the risks according to the percentage of the shares held. Each party shall hold one copy of this Agreement which will come into force after being signed. Ngan's Investment Ltd Shum Yip Properties Development Ltd (Signature) (Lin Bing- Signature) 22nd May 1992 in Hong Kong" 23 It appears that "Ngan Wen Bo" is Matthew Ngan. Mrs Rosanna Ngan is the second defendant, now Ms Wong. 24 A company called "Ngan's Investment Pty Ltd" existed. It was deregistered on 11 September 1998. Though the evidence is thin, it is likely in all the circumstances that the company identified in the agreement as "Ngan's Investment Ltd" is Rolle (called "Ngan's Company Pty Ltd" until it changed its name on 24 May 1995) rather than Ngan's Investment Pty Ltd. 25 That conclusion is controversial, but I have reached it for the following reasons. Ngan's Company Pty Ltd was formed in Australia concurrently with CIDC, upon Mr Ngan and Ms Wong signing the requisite documents on 20 May 1992, at a meeting with Mr Chow just prior to the execution of the joint venture agreement. Mr Chow's evidence, which I accept on this point, is that in May 1992 Mr Ngan asked him to establish a company to hold the Ngan interests in CIDC, and that Ngan's Company Pty Ltd was incorporated in accordance with those instructions. Immediately upon CIDC's incorporation, shares were allotted to Ngan's Company Pty Ltd, according to a share certificate that is in evidence. There is no evidence that any shares were allotted to Ngan's Investment Pty Ltd. In my opinion the reference in the agreement to "Ngan's Investment Ltd" is a simple error in description, and all relevant parties intend to identify Ngan's Company Pty Ltd. 26 As a matter of construction of the agreement, Mrs Wong was not personally a party to it. The agreement purports to have been signed on behalf of two companies, Ngan's Investment and Shum Yip. The second paragraph of the agreement refers to "the two parties", evidently meaning to designate the two companies. When dealing with the shareholdings in CIDC, the agreement refers to the person who is to take 55% as "Ngan's Investment Ltd or Mrs Rosanna Ngan's authorised person", implying that Ms Wong would have power to appoint a representative to hold the shares for the company, rather than for herself personally. 27 The first paragraph refers to Mr Ngan "representing Ngan's Investment Ltd or Mrs Rosanna Ngan", but in view of the other provisions to which I have referred, those words should not be taken to designate Ms Wong as a party or alternative party to the instrument. Rather, they should be read as indicating that the representatives of Ngan's Investment Ltd are either Mr Ngan or Ms Wong. The syntax of the sentence does not produce that result, but perhaps something has been lost in the translation, and in any event, that is the best way to make sense of the instrument as a whole. 28 The defendants allege that the joint venture agreement was varied between 22 May and 18 September 1992, to relieve Rolle of its obligation to contribute further capital and instead, to borrow funds for the purchase from HongkongBank. They claim that there were other consequential amendments. I shall return to the alleged variation of the agreement later. 29 Patterson Houen and Commins, solicitors, were retained (apparently by Mr Ngan or Ms Wong) to act on the purchase. They wrote to the Foreign Investments Review Board on 28 May 1992, seeking its approval of the purchase. On the same day, Mr Lin was appointed a director of CIDC. 30 In June 1992, Mr Ngan travelled to Sydney from Hong Kong, accompanied by a number of representatives of Shum Yip including Mr Lin. Mr Lin, Mr Ngan and Ms Wong met with the solicitors and the contract for the purchase of the Chatswood property was executed. 31 Contracts were exchanged on 26 June 1992. The contract provided for a purchase price of $7,980,000 and a 10% deposit of $798,000 payable to the vendor's agent on exchange of contracts. The vendor was Legal & General Investment Management Ltd. There is nothing to suggest that the purchase was otherwise than an arms' length transaction. The contract makes no mention of the additional $680,000 contemplated by the joint venture agreement. There is some evidence that expenses were incurred by CIDC in connection with the purchase and the establishment of CIDC, for stamp duty, legal fees and perhaps also land tax, but it is unclear whether the expenses were greater or less than $680,000. 32 CIDC opened a bank account with the National Australia Bank. Shum Yip made deposits to the account. It is not clear whether any deposits were made on behalf of the Ngan interests. A cheque for $638,400 was drawn on the account, representing 8% of the purchase price, leaving a balance of $159,600 (2% of the purchase price) to be paid. Rolle, Ms Wong and Mr Ngan contend that the remaining 2% was paid by Mr Ngan from Hong Kong. Shum Yip claims that this amount was not paid by Mr Ngan, or by Ms Wong or Rolle. I shall return to this dispute later. 33 During the period from June to September 1992, Mr Ngan and Mr Lin had a number of discussions concerning the financing of the purchase of the Chatswood property. CIDC applied to HongkongBank of Australia Ltd for a loan facility of $6.2 million, and the bank approved the application by letter dated 2 September 1992. 34 By letter dated 10 July 1992, a company called Heywood Ltd, with a post office box address in the British Virgin Islands, wrote to CIDC at Ms Wong's Killara address as follows: "This is to remind you that we have successfully introduced you to invest in Australia to buy a property in Chatswood. The services which we rendered to you included our feasibility studies, market research and arrangements for tour to Australia in different cities. Your company agreed to pay us Six Hundred Eighty Thousand Australian Dollars after you have completed your investment, we look forward to receiving your cheque at the earliest convenience. Thank you for your kind attention." 35 The signature on the letter has not been identified by the evidence. There is also in evidence another document on the letterhead of Heywood, with apparently the same unidentified signature, bearing the date 15 July 1992. The document is headed "Official Receipt", and purports to acknowledge receipt from CIDC of $680,000 "being in payment of consultant fee". 36 Ms Wong and Rolle (and Mr Ngan) contend that the sum of $680,000 was paid by Mr Ngan to Heywood from his personal resources, on behalf of and for the benefit of CIDC. Shum Yip disputes this contention, alleging that the transaction purportedly reflected in the letter and receipt was a sham and that nothing was paid by Mr Ngan to Heywood on behalf of CIDC or at all. I shall return to this dispute later. 37 On 31 July 1992, further shares in CIDC were issued to Shum Yip and Rolle. After the issue of those shares, Rolle held 660,000 shares (55%) and Shum Yip held 540,000 shares (45%) in a total issued capital of $1,200,000. 38 The completion of the purchase of the Chatswood property took place on 18 September 1992. Shum Yip guaranteed CIDC's borrowing from HongkongBank to limit of $6.2 million, and other security was provided by the Ngan interests - Mr Ngan, Ms Wong and Rolle gave unlimited guarantees, and a first mortgage was provided by Ms Wong over her home at Killara. 39 On 16 August 1993 Shum Yip wrote to Mr Ngan in the Chinese language, referring to a forthcoming visit by Mr Lin to Sydney, and of the need for "make-up" agreements to be executed as a consequence of CIDC having borrowed $6.2 million from HongkongBank. The defendants attach some significance to this letter. I shall consider their contention later. In any event, no further agreement appears to have been executed. Mr Lin's role 40 The position and role of Mr Lin is of central importance in this case, because Ms Wong says that the expenses challenged by Shum Yip were authorised on its behalf by Mr Lin. 41 Mr Lin worked for Shum Yip, and was apparently its managing director in April 1992 (according to an Inland Revenue Department form signed at that time). Until Mr Tian was appointed to Shum Yip in 1996, Shum Yip's interests in Australia were supervised primarily by Mr Lin, though a Miss Gan from Shum Yip travelled to Australia and met Mr Chow to finalise CIDC's accounts in March 1993. According to some minutes of a meeting of directors of CIDC said to have been held on 4 June 1993, Ms Wong was appointed managing director of CIDC at that time. 42 Ms Wong has given evidence that Mr Lin visited Australia in mid-1993 and inspected the Chatswood building, and said he was very happy with the figures reflected in CIDC's financial statements. She says he made a similar statement in April 1994 when she visited him in Hong Kong. For reasons I shall explain, I am not prepared to accept any part of Ms Wong's evidence that is self-serving, and therefore I do not accept her claim that Mr Lin told her in 1993 or 1994 that he was very happy with CIDC's financial statements. 43 In April 1994 Ms Wong and Mr Ngan were divorced. Then in about May 1994, Mr Chow arranged for the financial statements of CIDC to be audited, notwithstanding that the members of CIDC, represented by Mr Lin and Ms Wong, had resolved (according to minutes) on 31 December 1993 that it was not necessary to appoint an auditor. Apparently the audit was carried out because Mr Chow formed the view that company law required an audit of CIDC, after he was told (apparently wrongly) that Shum Yip was a public company listed in Hong Kong. It was carried out by a firm of chartered accountants called Cassim Calligeros Simos, and the auditors' report was issued on 5 October 1994. Their report was qualified, as they stated that the solvency of CIDC depended on the ongoing support of the shareholders. Parts of the audit working papers are in evidence as Exhibit D11. CIDC's financial statements for other years during the period 1992 to 2000 were not audited. 44 There is evidence to indicate that Mr Lin continued to purport to represent the interests of Shum Yip with respect to CIDC during 1994 and 1995. It appears that on 16 June 1994 Mr Lin signed a guarantor's consent in favour of HongkongBank to continue Shum Yip's guarantee of existing and future indebtedness of CIDC. On 9 August 1995, HongkongBank approved a loan facility to CIDC, in effect a renewal of the existing facility, with an aggregate limit of $6 million. The bank's letter of offer was signed by Ms Wong and Mr Lin, and additionally, Mr Lin signed a guarantor's consent to continue Shum Yip's guarantee of CIDC's existing and future indebtedness. 45 Representation of the Shum Yip interests began to change in July 1996, with the involvement of Tian Cheng Gang. Mr Tian has been the chairman of the board of directors of Shenzhen Properties and Resources Development (Group) Ltd, Shum Yip's parent company, since June 1996. In July 1996, he was appointed chairman of the board of directors of Shum Yip, and he continues to hold that position. 46 Nevertheless, according to Ms Wong, in 1996 or perhaps 1997 Mr Lin and his wife came to Sydney and met with her. She says Mr Lin and his wife visited her at her home in Killara and also went to Chatswood where they viewed the building from the outside. She claims that Mr Lin told her she had managed CIDC very well. In my opinion, it is unlikely that Mr Lin visited Sydney on behalf of Shum Yip at any time after July 1996, when Mr Tian became chairman of directors. According to Shum Yip's 1997 financial statements, Mr Lin resigned as a director of that company on 1 February 1997. By that time, of course, Mr Tian had established himself firmly in control of Shum Yip. I reject Ms Wong's evidence that Mr Lin told her, in 1996 or 1997, that she had managed CIDC will. 47 On 14 May 1997 Shum Yip sent a fax to Ms Wong informing her that "due to the resignation of Mr Lin Bing", Xu Bing had joined Shum Yip in March 1997. The fax asked Miss Wong to provide her contact telephone number or telephone Mr Xu, "in order to know more about our business for the above company in Australia". In fact Mr Xu had been appointed by Shenzhen Properties & Resources Development (Group) Limited to work in Shum Yip as its representative. He was appointed a director of Shum Yip on 30 July 1997, and became the managing director of that company. Mr Xu gave evidence that Shum Yip stopped paying a salary to Mr Lin from January 1997. That is consistent with the documentary evidence indicating that Mr Lin resigned as a director on 1 February 1997. 48 The conclusion that Mr Lin ceased to be employed by Shum Yip on 1 February 1997 is inconsistent with the evidence of Mr Tian, who said that he decided to change the staff of Shum Yip following his review of Shum Yip's investment in CIDC in June 1997. There is evidence, noted below, that Mr Lin assisted in the review, and that he signed a purported letter of resignation from the board of CIDC only on 8 August 1997. It seems to me likely, however, in view of the evidence in Shum Yip's financial statements and Mr Xu's recollection, that Mr Lin ceased to be a director of and employed by Shum Yip on 1 February 1997, but he continued to assist Shum Yip with respect to the affairs of CIDC until 8 August 1997, when he purported to resign from the CIDC board. 49 Ms Wong claimed that, in about the middle of 1997 (that is, after she received the facsimile from Shum Yip dated 14 May 1997), Mr Lin telephoned her from Hong Kong. He told her that he would be leaving Shum Yip shortly and that a new director would be replacing him. He said he would write to Ms Wong telling her about the appointment and that he would tender his formal resignation as a director of CIDC "when the time comes". I accept that this conversation occurred, substantially as stated by Ms Wong. It is plausible that Mr Lin would have contacted her after he resigned from Shum Yip, while he still had a relationship with Shum Yip because of the review of its foreign investments. It is also plausible that he told Ms Wong that he would be leaving Shum Yip shortly (that is, after the review) and that a new director - Mr Xu, in fact - would be replacing him. That evidence fits in with the fact that Ms Wong was notified of Mr Xu's appointment in May 1997. Therefore from May 1997 Ms Wong knew that while Mr Lin was still a director of CIDC, his resignation was likely at some future time. She expected him to write to her when he resigned. 50 On 8 August 1997 Mr Xu met Mr Lin in Shenzhen and arranged for him to sign a resignation as a director of CIDC. Mr Xu gave evidence that this was the last occasion on which he saw or spoke to Mr Lin. 51 On 12 August 1997, Shum Yip sent a fax to Ms Wong enclosing minutes of a meeting of the directors of Shum Yip held on 8 August 1997, and a document addressed to the board of directors of Shum Yip, also dated 8 August 1997, purporting to be a resignation by Mr Lin as a director of CIDC. The minutes recorded that the meeting was attended by two directors, Mr Tian and Ms Queenie Chee, and two resolutions were passed. The first resolved that Mr Tian be appointed as a director of CIDC with effect from the conclusion of the meeting. The second resolved, after noting that Mr Lin had tendered his resignation as director of CIDC, that the resignation be accepted with effect from the conclusion of the meeting. The resignation was in the form of a letter to the board of directors of Shum Yip, dated 8 August 1997, signed by Mr Lin, saying: "I, Lin Bing hereby resign as Director of Chatswood Investment and Development Company Pty. Ltd. As from August 8, 1997." 52 Of course, under the constitution of CIDC it was not possible to make changes to the composition of the board of directors by resolution of the directors of another company, Shum Yip, and Mr Lin's resignation should have been directed to the board of CIDC rather than Shum Yip. Nevertheless, the fax of 12 August 1997, which on its face was regularly transmitted to Ms Wong's facsimile number, put her squarely on notice that Mr Lin had purported to resign and as far as Shum Yip was concerned, Mr Tian had replaced him on the board of CIDC. Ms Wong had been led to expect that Mr Lin would write to her, but in view of the unequivocal nature of his letter of resignation, she had no good reason to doubt that as far as Mr Lin was concerned, his foreshadowed resignation from the board of CIDC had taken effect on 8 August 1997. 53 Mr Xu telephoned Mr Chow on 27 November 1997 to inquire about the appointment of Mr Tian as a director of CIDC. Mr Chow told him that the appointment had not been effected because it was necessary to sign a consent form. Mr Xu told Mr Chow to send the form as soon as possible. On 2 December 1997 Mr Chow wrote to Mr Xu by facsimile saying that "the appointment and resignation of directors should be approved by the board of directors" of CIDC. The letter enclosed a form of consent to act as director, to be signed by Mr Tian. The form was signed by Mr Tian, and returned to Mr Chow by registered post on 5 December 1997. 54 The records of the Australian Securities and Investments Commission indicate that Mr Tian was appointed a director of CIDC on 2 December 1997. At that time there were five directors, namely Ms Wong, Mr Chow, Mr Tian, Mr Lin and Olivia Ngan (the daughter of Ms Wong, who had been appointed to the board on 20 August 1995). 55 Several minutes of meetings are in evidence, purporting to show that Mr Lin attended directors' and shareholders' meetings at Killara in 1997 and 1998. The plaintiff says that these meetings did not occur. I shall address the issue later. Shum Yip's attempts to locate Mr Lin 56 Mr Xu gave evidence, which I accept, with respect to his attempts to contact Mr Lin to obtain information about CIDC. On 16 May 2000 he called the telephone number recorded in Shum Yip's files as the home telephone number of Mr Lin. This was the telephone number he had used to contact Mr Lin to arrange the meeting of 8 August 1997, at which Mr Lin had signed the letter of resignation. The person answering the telephone told him he had dialled the wrong number. He tried again on 19 May 2000 and was informed that the telephone number was no longer the telephone number for Mr Lin. He called the number again on 22 and 23 August 2000, and was informed on each occasion that he had dialled a wrong number. He telephoned Queenie Chee on 22 August 2000 and she told him she had not been in contact with Mr Lin since he left the company and did not know where he was. 57 There are no comprehensive telephone directories or a telephone inquiries service to provide non-commercial telephone numbers in China. Mr Xu went to Shenzhen on 23 August 2000, to visit the address recorded as the address of Mr Lin in Shum Yip's files. The address was given as a flat number in "Block 129" at a particular address. When he arrived at the address, Mr Xu discovered that there was no block 129. 58 A document in Shum Yip's file appears to record the mobile telephone number of Mrs Lin. Mr Xu telephoned her number before swearing his second affidavit (30 August 2000). He left a message on the answering machine but no one phoned him back. 59 As far as the documentary records of CIDC are concerned, Mr Lin did not resign as a director until 25 January 1999, by a document complying with article 65 (b) of the constitution of the company, bearing that date and taking effect immediately. It is not clear how the document came to be signed by Mr Lin, if indeed he signed it. Should any inference be drawn from the unavailability of Mr Lin? 60 The defendants appeal to the so-called rule in Jones v Dunkel (1959) 101 CLR 298. The rule has been formulated as follows: "The unexplained failure by a party … to call witnesses … may, not must, in appropriate circumstances lead to an inference that the uncalled evidence would not have assisted that party's case" ( Cross on Evidence , Australian edition by JD Heydon (Butterworths looseleaf), paragraph [1215]). 61 In Payne v Parker [1976] 1 NSWLR 191, Glass JA identified (at 201) three conditions for the application of the rule, namely: (a) the missing witness would be expected to be called by one party rather than the other, (b) his evidence would elucidate a particular matter, (c) his absence is unexplained. 62 This is an important issue, given the extent to which Ms Wong seeks to justify her conduct in respect of the affairs of CIDC on the basis that what she did had been authorised by Mr Lin on behalf of Shum Yip. If the Court were to infer that Mr Lin, had he been available, would not have given evidence to assist Shum Yip's case, Ms Wong's position would be greatly strengthened. (I should note that the inherent implausibility of some of Ms Wong's evidence would lead me to reject it even if I were to make a Jones v Dunkel inference in her favour, but it is not necessary for me to rely on this reasoning.) 63 In my opinion no inference adverse to Shum Yip should be drawn from the fact that Mr Lin has not give evidence. This is not a case where the fact that a witness did not give evidence should give rise to an inference that "the reason why the witness was not called was because the party expected to call him feared to do so": Fabre v Arenales (1992) 27 NSWLR 437, 449 per Mahoney JA. 64 In the first place, while one would in normal circumstances expect a former executive of the plaintiff company to be called by the plaintiff rather than its opponents, in the present case Ms Wong contends that Mr Lin was in contact with her, giving her authority and attending meetings, after he ceased to work for Shum Yip on 1 February 1997 and after he signed his purported resignation from the board of CIDC on 8 August 1997. Given the nature of Ms Wong's claims, it does not seem to me that Mr Lin was a witness that it would be natural for Shum Yip to produce. The making of a Jones v Dunkel inference depends upon the closeness of the relationship of the absent witness with the party who did not call him (Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) ATPR 41-831 at paragraph [64] per Hill and Finkelstein JJ), and it appears from the evidence that after 8 August 1997, at the latest, the relationship between Shum Yip and Mr Lin had come to an end. 65 Secondly, in my opinion the absence of Mr Lin has been explained. It is true that the search for Mr Lin was not exhaustive and comprehensive. However, Mr Xu's evidence satisfies me that Shum Yip has been unable to locate Mr Lin notwithstanding reasonable attempts to do so. In making this assessment, I take into account that the full extent of Ms Wong's reliance upon alleged authorisations by Mr Lin, and therefore the critical nature of the evidence he may be able to give, became evident only during her cross-examination at the hearing. Mr Lin's authority to bind Shum Yip 66 The defendants contend that the acts of Mr Lin in signing minutes of meetings and other documents should be seen as acts undertaken by him as managing director of Shum Yip for the period until July 1996, when Mr Tian became chairman of that company. That is correct. The consequence is that Shum Yip is bound by the actions of Mr Lin on its behalf up until July 1996, except to the extent that Mr Lin was acting outside the scope of the authority of a managing director or contrary to instructions from Shum Yip's board and, in either event, Ms Wong was aware of the limitation upon his authority. In my opinion the acts of Mr Lin in signing various documents, including the joint venture agreement and various financing documents, were within the usual authority of a managing director and were therefore acts binding Shum Yip. Equally, minutes of meetings signed by Mr Lin on behalf of Shum Yip during that period should be treated as properly verified by that company. There is nothing to indicate that Shum Yip's board had imposed any relevant limitation of Mr Lin's authority prior to Mr Tian's arrival in July 1996. 67 The defendants say that in the period from July 1996 to the time when Mr Lin resigned as a director of CIDC, his acts should be seen as the acts of a director of Shum Yip. I agree that whatever Mr Lin did during that period in relation to the affairs of CIDC, he is likely to have purported to do on behalf of CIDC. I also agree that as he was no longer managing director of Shum Yip, his only role and capacity in purporting to act on behalf of Shum Yip was as a director representing Shum Yip on CIDC's board. According to the law of agency, Shum Yip would be bound by the conduct of Mr Lin during this period only if he had Shum Yip's actual (express or implied or usual) authority to bind the company, or his conduct fell within his ostensible authority, or Shum Yip later ratified his conduct. 68 As to actual authority, nothing in the facts suggests that Mr Lin had any authority in the affairs of Shum Yip greater than the usual authority of a director during that time. The evidence indicates that after July 1996, Mr Lin ceased to have actual authority to represent Shum Yip in respect of its Australian investment. As a matter of Australian law, where a company has several directors, a director acting individually has no usual authority to bind the company: see Ford, paragraph [13.080] and the cases there cited. It was not contended that the law of the place of formation of Shum Yip, Hong Kong, is to any different effect. My conclusion is that after July 1996 Mr Lin had no actual authority to bind Shum Yip with respect to the affairs of CIDC. 69 In my opinion, however, Mr Lin had ostensible authority to act as the managing director of CIDC until 14 May 1997, when Ms Wong received Shum Yip's fax notifying her that Mr Xu had joined Shum Yip "due to the resignation of Mr Lin Bing". He had previously possessed actual authority as managing director of Shum Yip, and there is no evidence to indicate that Ms Wong was informed that his actual authority had ceased due to his resignation, until the facsimile of 14 May 1997. Ms Wong was entitled to rely on the continuation of Mr Lin's authority in those circumstances. 70 During the period from 14 May to 12 August 1997 (when Ms Wong received Shum Yip's fax attaching Mr Lin's purported resignation from the board of CIDC), the position was that Mr Lin had no authority to bind Shum Yip by acts undertaken by him otherwise than as a director of CIDC, but he retained his position as a director of CIDC and could act in that office. Therefore, any decisions taken validly by the board of directors of CIDC during this period were effective to bind Shum Yip. 71 After 12 August 1997 Mr Lin's authority to bind Shum Yip was further constrained. He clearly had no actual or ostensible authority to bind Shum Yip otherwise than in his capacity as a director of CIDC. His purported resignation dated 8 August 1997 did not comply with the requirements of CIDC's constitution because, being directed to Shum Yip, it was not a "notice in writing to the company" (article 65 (b)). Nevertheless, the facsimile of 12 August 1997 was an unambiguous notification to Ms Wong that Shum Yip intended to withdraw Mr Lin's authority to represent it as a director of CIDC. As a venturer participating by its director in an incorporated joint venture vehicle, Shum Yip had the implied contractual right to withdraw authority from its representative director and in the absence of his resignation, to insist that its co-venturer (Rolle) co-operate with it in the removal of the director. Upon receiving the facsimile of 12 August 1997, Ms Wong must have been aware that as far as Shum Yip was concerned, Mr Lin was no longer to act as a director of CIDC, and consequently that Shum Yip was invoking this implied contractual right. 72 In those circumstances it was incumbent on Rolle to cause the directors representing its interests on the board of CIDC, namely Ms Wong and Olivia Ngan and perhaps also Mr Chow, to clarify the status of Mr Lin as a director without delay, and if necessary, to assist Shum Yip to cause Mr Lin's removal from the board. They made no attempt to do so for well over a year, although under pressure they added Mr Tian to the board. If Mr Lin in fact participated in any CIDC board decisions after 12 August 1997 and before the later instrument of resignation took effect on 25 January 1999, the decisions of the board may well have been valid, but by allowing Mr Lin to participate in board decisions the other directors may well have caused Rolle to breach its contractual obligations under the joint venture agreement. Of course, if Mr Lin did not in fact participate in any board decisions during that period, these questions do not arise. Shum Yip's developing concern about management of the affairs of CIDC 73 Soon after he was appointed to Shum Yip in March 1997, Mr Xu telephoned Ms Wong to ask whether there were any profits that Shum Yip should have received from its investment in CIDC. Ms Wong told him that there were no profits, because there was "a lot of mortgage to be paid" and the company was losing money. 74 In about June 1997, Shum Yip reviewed its foreign investments, the review taking place at Shum Yip's offices in Hong Kong. Mr Tian was personally involved in the review, and he was assisted by Mr Xu and Ms Queenie Chee. Ms Chee was a director and the financial controller of Shum Yip. It seems that Mr Lin was also involved in the review, although no longer on Shum Yip's payroll. 75 The evidence does not clearly indicate just what information Shum Yip possessed at the time of the review. It appears likely, however, that the review included examination of CIDC's financial statements for the financial years from June 1993 to June 1996. Some of these had been signed by Mr Lin, and it appears that copies had been provided to him. On 25 July 1997, Shum Yip wrote to CIDC asking for further information about CIDC's financial statements for the year ended 30 June 1996. That implies that the financial statements to 30 June 1996 were available to Shum Yip. The request for information related to specific matters, and Mr Chow responded by facsimile on 31 July 1997, apparently answering the questions that had been asked. 76 The financial statements that are in evidence may not be complete, because some of them contain an income and expenditure statement in which expenses are listed by categories such as "Directors' Fees", "Legal Costs", "Repairs & Maintenance", "Telephone", and "Travelling Expenses", while in other cases that page is missing and the accounts give only total income and expenditure figures, or even only net income before tax. For the year ended 30 June 1993 there appear to be two versions of the financial statements. 77 However, if one assumes that there was a statement of income and expenditure, showing expenses by categories, for each financial year, and that this information was available to Shum Yip when it conducted its review, one can understand that Mr Tian would wish to have more information. I infer that the object of the review was to work out why there had been no return on the Australian investment, and whether something could be done to improve the situation. Since Shum Yip was not involved in the day-to-day management of CIDC and Ms Wong had authority to approve expenditure, it would have been natural for Shum Yip to seek particulars of the payment of rental income, and a breakdown of the categories of expenses, especially where the amount given for a category in the financial statements appeared high. It would also have been natural for him to seek information to establish whether Mr Ngan or Ms Wong had made the financial contributions to the joint venture that the Ngan interests were required by the joint venture agreement to make. 78 In the middle of December 1997 Mr Tian had a telephone conversation with Ms Wong during which he told her that Shum Yip should be involved in the management of CIDC, and said: "I also want you to give me details of all income and expenditure of the company." It is no answer to that request for Ms Wong to say that Shum Yip already had that information because it had been supplied with copies of CIDC's financial statements. What was sought was "details" of income and expenditure. That must have meant, and must have been understood by Ms Wong to mean, more specific information than disclosed in the financial statements, giving particulars of payment of rental income and full details of expenditure. 79 By April 1998 Mr Tian and Mr Xu had decided to visit Australia and meet with Miss Wong and Mr Chow. They enlisted the help of Mr Chow to obtain visas. On 2 April 1998 Mr Xu wrote to Miss Wong, to obtain information before the visit. He asked for a statement of rental income and related expenses from 1992 to the present, a list of leases for the property, and information about the "manpower" of the company and about its investments. 80 Shum Yip says that this information has never been supplied to it. Ms Wong says that Shum Yip already had information on the matters specified, because it had received copies of CIDC's financial statements, and she points out that the matters identified in the letter of 2 April were very broad. In my opinion, the letter was intended to seek more specific information than was contained in the financial statements, breaking down the rental income and related expenses. Given that a request for information had previously been made by Mr Tian in his telephone conversation with Miss Wong in December 1997, she must have known that this more detailed information was being sought. Her failure to respond to the letter can only be seen as a lack of co-operation with Shum Yip. 81 On 13 May 1998 Shum Yip sent a fax to Mr Chow, asking for copies of the audit reports relating to CIDC's 1996 and 1997 financial statements. There is no evidence of any response by Mr Chow or Ms Wong to that communication. There were in fact no audits of the financial statements for those years. Again, in the context, the absence of any reply implies lack of co-operation. A reasonable co-venturer in the shoes of Ms Wong/Rolle would have replied by pointing out that there were no audits and asking whether some audit process should be arranged. 82 In about May 1998 Shum Yip appointed Helen Tuen to represent its interests in Australia, and she became deputy general manager of Shum Yip. By facsimile dated 13 May 1998, Shum Yip requested the appointment of Ms Tuen as a director of CIDC. Ms Tuen met with Ms Wong in Sydney late in May 1998, and she met with Mr Chow a few days later. He provided her with a copy of the constitution of CIDC and, shortly afterwards, a copy of CIDC's 1997 financial statements. Although the versions of their conversation given in evidence by Ms Tuen and Ms Wong are inconsistent, it is likely that during the conversation, Ms Tuen asked Ms Wong for "information about the finance of the company and the rental situation of the property", and she also told Ms Wong that Shum Yip wanted her to approve leases and countersign cheques, and that Ms Wong responded by saying she wanted to meet Mr Tian to discuss these issues. Again, this suggests lack of cooperation on Ms Wong's part. 83 Mr Tian and Mr Xu arrived in Australia on 2 September 1998. They had a short meeting with Ms Wong and Mr Chow on 4 September 1998. Ms Tuen also attended. Some minutes of that meeting are in evidence. 84 According to the minutes, Mr Tian explained that he and his colleagues had visited Australia to clarify the position of the Chatswood project, to solve managerial problems, and to consider what needed to be done next. He proposed the appointment of an independent accountant to conduct a complete audit of the company, and listed the matters that needed to be investigated, including injection of funds by the two shareholders, and verification of the company's expenses. He insisted that Shum Yip be involved in management from that time onwards, and that Ms Tuen be appointed to CIDC's board. He proposed that an independent accountant be retained to deal with the company's financial affairs in future, and that all expenses be jointly authorised by a director representing each shareholder. He said a special management company should be appointed to manage the property and that rental income should be remitted to a designated account. He said that that the directors representing both shareholders should be permitted to draw directors' fees, but only for reasonable amounts approved by the board. He insisted that a number of specified documents be submitted prior to 9 September 1998, including minutes of all meetings of directors and shareholders of CIDC between 1992 and 1998, information about the company's bank accounts and bank loan, and specified legal documents. 85 According to the minutes, Ms Wong and Mr Chow expressed concern as to whether they would have time to prepare the information required, and suggested that the meeting be adjourned to 9 September, to give them time to provide the relevant documents and to discuss the problems that had been identified. They agreed to prepare the documents necessary to appoint Ms Tuen as a director instead of Mr Lin. 86 It appears that a Chinese version of the minutes was prepared on 4 September 1998. Ms Wong says she received the Chinese version late on that day. She disagrees with the account of the meeting contained in the minutes. However, her own account of the meeting (in paragraph 88 of her affidavit made on 14 August 2000) is not greatly different from the minutes, and in particular Ms Wong stated that Mr Tian wished to see all of the financial documents of CIDC - "in effect, he said that he wanted to see everything". She said she asked for time to prepare. To the extent that they differ, I prefer the account in the minutes, corroborated by the evidence of Mr Tian. 87 The adjourned meeting resumed on 9 September 1998. In addition to those who were present on 4 September, Mr Guthrie, property manager of Jones Lang Wootton, also attended. There is no evidence that any minutes were taken of this meeting. Ms Wong gave evidence that she told Mr Tian that the documents relating to purchase of the property should be in his company's file, and that Shum Yip had been given all of the company's financial statements except for the current year, which would be supplied. Her evidence was that she had brought the current leases with her but Mr Tian did not look at them. She said that Mr Guthrie was there to answer questions about the property and the leases, but Shum Yip did not put any questions to him. She said the she told Mr Tian that as the company had been running very well for a number of years, she could not see any reason to justify the appointment of a general manager and a paid director. Mr Tian said, according to Ms Wong, that there was no point in further discussions and that he would appoint a lawyer. She claimed that he became threatening and said: "If you don't co-operate with me then I will destroy your family and will bankrupt you". 88 Mr Tian's evidence about the meeting on 9 September was somewhat different. According to him, Ms Wong said that the company was properly managed, and there was no need for Shum Yip to be involved its management. He asked her for the documents she had promised to bring. According to Mr Tian, Ms Wong told him she only had the current lease, and that it was not necessary to provide the other documents. He said he replied by saying that if she had such an unco-operative attitude and refused to provide the documents, there was no point in continuing the meeting. He denied that he threatened to destroy her family and make her bankrupt. 89 The accounts of the meeting given by Ms Wong that Mr Tian are not entirely inconsistent with one another. It appears that Ms Wong brought with her some lease documentation but no other documents. She told Mr Tian that it was not necessary to produce the other documents that he had required, notwithstanding that she had said at the earlier meeting that she needed time to assemble the information. She resisted the appointment of a manager. It is probable that Mr Tian became angry, but I do not accept Ms Wong's evidence (in view of his evidence and the evidence of Mr Xu) that he threatened to destroy Ms Wong's family and to bankrupt her. I accept that he terminated the meeting, having become angry, and said that he would appoint a lawyer to act for Shum Yip. This is in fact what he did. 90 Shum Yip then instructed solicitors, Hunt and Hunt, to write to Ms Wong and Mr Chow formally demanding that specific information be made available within a limited time. Hunt and Hunt's letter, dated 17 September 1998, focused upon the joint venture agreement and the obligation of the Ngan interests to contribute funding for the purchase of the Chatswood property. However, the letter also referred to the other information requested on 4 September 1998 and set out in the minutes of the meeting on that day, asking that the information be supplied within seven days and that a meeting of the directors of CIDC be convened within 14 days, to consider an agenda that Hunt and Hunt would provide after they examined the information that had been requested. The letter said that if the matter could not be resolved, Shum Yip would make a formal demand for repayment of the sum of $1.68 million that it had lent to CIDC. Solicitors replied on behalf of Ms Wong, but the information sought by Shum Yip was not forthcoming. 91 On 10 May 1999 Shum Yip gave notice requisitioning a general meeting of the shareholders of CIDC, to be held at Mr Chow's offices on 19 May 1999. Mr Chow duly convened the meeting. The agenda proposed by Shum Yip raised 10 items of business, namely · removal of Mr Chow as the company's accountant and appointment of an independent firm of accountants; · preparation of audited financial statements for the year ended 30 June 1998; · appointment of an independent auditor to conduct a complete audit of the company's financial position, covering payment of the respective contributions to the company by the partners to the joint venture and the company's income and expenditure; · appointment of Ms Tuen as a director; · all company cheques to be signed by one representative of each shareholder; · directors' fees to be approved in writing by one representative of each shareholder; · appointment of an independent management company to manage the Chatswood property, with rental income to be remitted into a designated account; · the interests of Ms Wong to fulfil their obligation to contribute to the joint venture under the joint venture agreement; · CIDC to agree to pay interest on Shum Yip's loan to it; · CIDC to make available to the shareholders receipts or certificates confirming the contributions to the joint venture, documents verifying the acquisition of the Chatswood property, full details of the company's loan obligations, copies of all lease agreements, and details of all bank accounts and bank statements of the company. 92 The shareholders met on 19 May 1999, but the agenda was not dealt with. From that time until 29 September 1999, they met and held without prejudice discussions. On 29 September 1999 the shareholders met at Mr Chow's offices and voted on the resolutions proposed by Shum Yip in its notice of meeting dated 10 May 1999. Each of the proposed resolutions was defeated, in circumstances where Rolle demanded a poll. According to a minute of the meeting signed by Ms Wong, it was resolved that motions in terms of the 10 issues "were defeated by majority". 93 On 18 October 1999 Shum Yip demanded repayment of its loan account. On 29 October 1999, CIDC responded to the demand by asserting that the loan account was not repayable on demand. Shum Yip commenced the present proceeding on 8 December 1999. The witnesses Mr Tian 94 Mr Tian is clearly the most senior of the representatives of Shum Yip referred to in my outline of the facts. The defendants submit that he is the moving force behind the litigation, and that he is a person with a dominant personality who expects to get his own way. That accords with my assessment of him in the witness box. 95 Mr Tian's affidavit of 2 June 2000 is the principal affidavit evidence in the plaintiff's case. Mr Tian also gave oral evidence and was cross-examined at length. The defendants submit that Mr Tian's evidence gave a very misleading picture of the information possessed by Shum Yip concerning CIDC. However, say the defendants, it became evident in cross-examination that Shum Yip had in fact been given a good deal of information about CIDC, and that Mr Tian's evidence never made specifically clear just what additional information it required. 96 It appears to me that Shum Yip did have substantial information about CIDC before Mr Tian and its other representatives began to demand information in 1997, but the information possessed by Shum Yip was inadequate to enable it to make a proper assessment of the true financial state of affairs of CIDC and the adequacy and propriety of the management of that company. Shum Yip had historical financial statements for CIDC up to the 1996 financial year and the audit report by Cassim Calligeros Simos of October 1994, and separately received the financial statements for the 1997, 1998, 1999 and 2000 financial years. It had the joint venture agreement, a copy of the guarantee and indemnity given by Shum Yip to HongkongBank in September 1992, and some basic information about tenancies of the building. It had various other documents identified in paragraph 72 of the defendants' written submission dated 23 July 2001. 97 However, it did not have sufficiently detailed information about the expenses of CIDC to enable it to identify whether the directors' fees paid to Ms Wong and Olivia Ngan were appropriate; nor how much the company spent for travel, telephones, maintenance of the Killara house and other expenditure which would normally be regarded as private or domestic expenditure. Nor did it have any statement or other information with respect to the joint venture, showing whether and how the Ngan interests had made the contribution which, on the face of the joint venture agreement, they were required to make. These are matters of considerable significance to an overseas joint venturer wishing to ensure that its investment project in Australia is being satisfactorily conducted and that gross income is not being frittered away in a manner that prevents any dividends from being paid. 98 The defendants criticise Mr Tian for failing to make a reference in his affidavit to any of the information that Shum Yip in fact had, and for thereby giving the impression that CIDC had provided it with no information at all. In my opinion, however, while it would have been helpful to the Court if Mr Tian had identified the information in Shum Yip's possession and given comprehensive evidence as to the information that was missing, his failure to do so is not an impediment to my accepting his evidence as a whole. None of the information Shum Yip had gave any clear or realistic impression of why it was that no dividends had been paid, or any information about any of the specific matters which have become matters of complaint in this proceeding. As I have said, matters of these kinds (rather than the bare financial statements of the venture company) are matters of real concern to an overseas joint venturer. Mr Tian's omission to refer to information which did not provide any material guidance on the questions of concern to him was, in the circumstances, understandable. 99 I accept the defendants' submission that it became evident in cross-examination that a significant number of documents (listed at paragraph 72 of the defendants' written submission) had not personally been seen by Mr Tian on any previous occasion, although copies of those documents had been sent to Shum Yip. However, it was apparent from the plaintiff's evidence that, as a senior executive in the Shenzhen Properties group, Mr Tian relied on his subordinates to review relevant documents and to give him briefings on the contents of the documents and the information gaps that emerged. He gave evidence that he discussed the affairs of CIDC frequently with Queenie Chee and Mr Xu, and that Mr Xu, rather than Mr Tian personally, had files of relevant documents. It is therefore not surprising that Mr Tian had not personally considered each of the documents to which he was taken in cross-examination. 100 The defendants say that in respect of certain obviously important documents that had been sent to Shum Yip, Mr Tian's evidence that he had not seen the documents is not credible. I disagree. The cross-examiner's question, in respect of each document, was whether the witness had seen the document to which he was taken. It is plausible that Mr Tian did not see the documents, while being briefed about them. His evidence is plausible even in respect of Exhibit D8. Mr Tian's evidence was that either Ms Tuen or Mr Xu had translated for him, from English into Chinese, all the documents referred to in Ms Wong's affidavit. That evidence does not mean that Mr Tian was provided with a written transcript of a word for word transcription of each document, as opposed to a briefing in which the documents were orally translated. 101 Mr Tian said that Mr Lin worked in the Hong Kong offices of Shum Yip from 26 June 1996 until late August 1997. That evidence is inconsistent with documentary evidence indicating that Mr Lin ceased working for Shum Yip in February 1997. It seems to me that the documentary evidence is more reliable than Mr Tian's recollection, and therefore that Mr Lin ceased to be regularly present in Shum Yip's Hong Kong offices from February 1997 onwards. 102 Mr Tian gave evidence that he had attempted to contact Mr Lin many times. It emerged, however, that he had not personally attempted to make direct contact with Mr Lin. Instead, he gave instructions to Mr Xu on several occasions to locate Mr Lin. The defendants say that Mr Tian's evidence was unsatisfactory because he claimed to have attempted to locate Mr Lin and to have set out his attempts to do so in his affidavits, while then saying that his attempts amounted to giving instructions to Mr Xu, and that the description of attempts to contact Mr Lin was to be found in Mr Xu's affidavit rather than his own. 103 I agree that Mr Tian's evidence is not entirely satisfactorily because it is unclear, but I think the correct interpretation of it is that Mr Tian was claiming only to have issued instructions to Mr Xu to locate Mr Lin, and to have presented the results of those investigations in affidavits read on behalf of the plaintiff but not in his own affidavit. 104 Mr Tian agreed in cross-examination that he was very cross at the end of the meeting on 9 September 1998. He denied that he threatened to destroy Ms Wong's family and to bankrupt her. I see no reason for rejecting his denial, and while I accept that Mr Tian is a person with a strong personality, I do not think there is any basis for suggesting that the present proceeding is some kind of personal vendetta by him against Ms Wong. 105 The defendant submits that Mr Tian has contrived at a breakdown in the relationship between Shum Yip and the Wong interests, and that he has contrived the case of denial of information. It appears from his evidence, say the defendants, that he is not interested in the financial statements of CIDC and it simply does not matter what information he is given about CIDC, because his purpose is to extricate Shum Yip from CIDC (and damage Ms Wong along the way), and that he regards a winding up order on the ground of oppression as a means of doing so. 106 I disagree with this submission. As I have said, in my opinion there were real information deficiencies in the material Shum Yip had been given about CIDC. I have concluded from my observation of Mr Tian in the witness box, and from his written evidence, that he became genuinely concerned in 1997 and subsequently that Shum Yip had virtually no useful information about CIDC, that he endeavoured to obtain useful information, and that his attempts were thwarted, especially in the two meetings in September 1998. While he became angry at the end of the meeting of 9 September 1998, and decided to instruct lawyers and eventually to commence the present proceeding, he did not contrive a breakdown in the relationship between Shum Yip and Ms Wong or contrive Shum Yip's case of denial of information, in order to extricate Shum Yip from CIDC by way of a winding up order. All things considered, I regard Mr Tian as a reliable witness and I generally accept his evidence. Mr Xu 107 The defendants submit that Mr Xu presented his oral evidence as a witness who was endeavouring to do his best to assist the Court, and that he should be regarded as a truthful witness. I agree. Nevertheless, the defendants contend that some deficiencies in the evidence of Mr Xu should be taken to reflect adversely on Shum Yip. 108 They criticise Mr Xu for giving evidence confined to a narrow range of matters, notwithstanding that he is the managing director of Shum Yip and became a director of that company on 30 July 1997. In particular, they criticise Mr Xu's evidence for failing to give a picture of what information was in the possession of Shum Yip relating to CIDC. I do not accept this criticism. It seems to me that Mr Xu, like Mr Tian, was concerned about information that would adequately address the concerns of Shum Yip as an overseas joint venturer that had not received any dividend in respect of its Australian investment. As I have said, the information in the possession of Shum Yip did not tell it what it needed to know about financial contributions, directors' fees and expenses. In those circumstances, it was understandable for Mr Xu and Mr Tian not to give a full account of information that did not really address their joint concerns. 109 The defendants criticise Mr Xu for being "more than a little disingenuous" in presenting a picture of virtually complete absence of knowledge of the affairs of CIDC. They draw attention to his affidavit evidence that he had a conversation with Ms Wong at some time in the period from March to May 1997 in which he asked her why Shum Yip had not received a return on its investment in CIDC and why there were no profits. The defendants also refer to Mr Xu's written request made on 2 April 1998 for information about "the rental income and the related expenses from 92 to present". They say that Mr Xu in fact had CIDC's financial statements, from which most of the information relevant to answering his questions could have been readily ascertained. 110 I disagree with this claim. The defendants say that the financial statements for the year ended 30 June 1993, which are in evidence as Exhibit D6, are "detailed" financial statements, and the Court should infer that the other financial statements about which Mr Xu gave evidence were also detailed. I am prepared to make the inference that the other financial statements were as detailed as Exhibit D6, but I do not regard those financial statements as providing any detailed information of the kind that an overseas joint venturer would expect to find with respect to its Australian investment. 111 The figures in the balance sheet are expressed by reference to general categories such as "Sundry Debtors" and "Sundry Creditors" without any breakdown of the figures. The profit and loss statement gives only a total figure for "Rental received" without any breakdown of that figure. On the expenditure side, total expenditure is broken down into categories, but still the categories are very general, such as "Directors' Fees, "Legal Costs", "Repairs & Maintenance", "Telephone" and "Travelling Expenses". 112 It is not surprising that Mr Xu's oral evidence was that although CIDC's 1996 financial statements had been faxed to Shum Yip by Ms Wong they were "still not very clear" (Transcript page 64.35 to 64.55). In the circumstances it cannot be said that Mr Xu's evidence was disingenuous at all. 113 The defendants also attacked the "faint picture" which Mr Xu painted of the meetings held in Sydney on 4 and 9 September 1998. Their point is similar to the allegation that Mr Xu was disingenuous. They say that Mr Xu and Queenie Chee had already made a close analysis of financial statements in the possession of Shum Yip, including the 1996 financial statements. Mr Chow had replied to Shum Yip's fax of 25 July 1997, providing information that included an explanation of the balance sheet item "land and buildings", a dissection of unsecured loans and an explanation of how the term deposit of $200,000 had been used to reduce the loan from HongkongBank to $6 million. The defendants point out that this information was already with Shum Yip when Mr Xu sent his fax of 2 April 1998 to Ms Wong, asking for further information. 114 I do not see any ground to criticise Mr Xu's evidence along these lines. The information provided by Mr Chow in answer to Shum Yip's fax of 25 July 1997 appears to have answered Shum Yip's specific questions, but that exchange of correspondence does not bear on Shum Yip's fundamental concern that after five or more years there had been no return on its investment. It is information explaining that situation that was missing from the documents in Shum Yip's possession, and Shum Yip's letter of 2 April 1998 was directed towards obtaining information of that kind. 115 The defendants dispute Mr Xu's assertion in his affidavit that the information requested in his fax of 2 April 1998 had not been provided. In my opinion Mr Xu's assertion is supported by the evidence as a whole. The first category of information requested in the facsimile of 2 April 1998 was "the rental income and the related expenses from 92 to present". Ms Wong and Mr Chow did not provide, in any detailed way, information about the expenses said to be incurred by CIDC during that period. The second category in the letter was "the list of leasing for the property". The meaning of these words is not entirely clear. Mr Xu gave oral evidence that Ms Wong had provided him with a list of tenants, and during his cross-examination he recalled that Mr Guthrie of Jones Lang Wootton had been present at the meeting of 9 September 1998 and that Mr Guthrie had told those in attendance something about the leasing situation. What was missing, and what Mr Xu seemed to have in mind in his evidence, was a comprehensive list identifying tenants, the terms of their leases, rental, options to renew and to increase rent, and other relevant clauses. That would enable Shum Yip as a joint venturer to make projections about the future income stream. 116 The defendants criticise Mr Xu's evidence about the meeting of 4 September 1998, on the ground that the picture painted by Mr Xu was of a virtual complete denial by Ms Wong of information about CIDC to Shum Yip, whereas fairness required Mr Xu to disclose information already in his possession as at 9 September 1998. I agree that Mr Xu painted a picture of almost complete lack of information from Ms Wong about matters relevant to Shum Yip, the point being that the information in Shum Yip's possession did not really bear upon the matters it considered to be important. Therefore I disagree with the defendants that Mr Xu should have given an account of information in Shum Yip's possession, to ensure that his evidence on the subject was fair. 117 The defendants refer to Mr Xu's evidence that he did not discuss CIDC's 1996 and 1997 financial statements with Mr Tian to any great extent, and that he did not show Mr Tian the 1997 financial statements, nor Mr Chow's reply dated 31 July 1997 to Shum Yip's request for information dated 25 July 1997. They say this evidence is incredible. I disagree. As I have said, the financial statements and fax of 31 July 1997 did not bear upon the matters of concern to Mr Tian. 118 The defendants submit that the absence of Queenie Chee as a witness in Shum Yip's case is startling, and that the Court should infer that she would not, had she being called, have assisted Shum Yip's case. It is true that Ms Chee was the financial controller of Shum Yip in 1996 and at that time she was already well experienced in Shum Yip's financial affairs. Ms Chee was involved in the review of Shum Yip's foreign investments conducted in June 1997. Even so, I do not regard it as startling that she did not give evidence, and I do not infer that she would not have assisted Shum Yip's case had she being called. The matters upon which Mr Chee could have given evidence were matters upon which Mr Xu was also competent to give evidence, even though he valued her opinion of financial matters. Mr Xu was the more senior of the two of them within the Shum Yip organisation. None of the material matters was exclusively within the knowledge of Ms Chee. I regard it as a rational forensic decision for Shum Yip to decide not to call Ms Chee to give evidence. 119 The defendants refer to Mr Xu's evidence that Mr Lin was not working in Shum Yip's offices when he joined Shum Yip on 3 March 1997. They contrast that evidence with the evidence of Mr Tian, who said that Mr Lin continued with Shum Yip until about 8 August 1997. However, as I have said, there is documentary evidence that Mr Lin ceased to work for Shum Yip in February 1997, and I prefer that evidence to Mr Tian's recollection. Consequently my view is that Mr Xu's evidence on this point is correct. I accept that Mr Lin was involved in Shum Yip's review of its foreign investments conducted about June 1997, but his involvement cannot have been as an employee of Shum Yip. Ms Tuen 120 Ms Tuen appeared to me to be an honest witness and I generally accept her evidence. The defendants do not really invite me to do otherwise. They merely submit that Ms Tuen is not an accountant and her information about CIDC has been very limited. They say that affects the weight of her evidence. However, Ms Tuen's evidence is of significance principally as an account of conversations and is evidence identifying requests for information which were not satisfied. I do not regard her lack of accounting training as affecting the weight of that evidence. Mr Gilovitz 121 Mr Gilovitz produced two reports which are annexed to his affidavits of 2 June 2000 and 8 January 2001 respectively. 122 His report dated 2 June 2000 was made after he inspected books and records of CIDC produced by the defendants in response to Shum Yip's notice to produce. He identified the documents inspected and made some observations about missing documents and deficiencies in the documents he saw. He concluded that it was not possible to determine from the books and records provided to him whether each of the shareholders of CIDC had actually contributed the capital and loan funds that were required, although his reading of balance sheets and other documents suggested to him that the funds contributed as loan funds were wholly or substantially owing to Shum Yip. He reviewed various items of expenses and minutes and observed that the material inspected did not suggest that all shareholders were aware of the directors' fees paid from 1993 onwards. He said he had been given no details of travel expenses and telephone expenses, inter alia. Overall, he expressed the opinion that the documents he had inspected showed a lack of disclosure of information to Shum Yip, and that if the records he had inspected were complete, CIDC had not kept proper books and records as required by the Corporations Law. 123 His report dated 3 January 2001 purports to provide answers to a series of questions put to him by Shum Yip's solicitors about the affairs of CIDC, upon the basis of his inspection of documents listed in the schedule to the report. The most important part of that report, in my opinion, relates to financial contributions to the joint venture. He noted that the sum of $680,000 had been recorded as a debit to the buildings account of CIDC, and as a credit to Ms Wong's loan account. He explained that this accounting treatment would ordinarily mean that the amount of $680,000 had been paid either by or on behalf of CIDC in respect of land and buildings owned or being acquired by it, and that Ms Wong had incurred liability and/or made payments on behalf of CIDC in respect of a building owned by it, for which she had received a credit in the same amount. He noted, however, that there was no evidence in the records of CIDC that he had reviewed (including cash books and bank statements) to confirm that payment of $680,000 was actually made to the vendor, or that it was made as required by the joint venture agreement. 124 Referring to the affidavit of Mr Chow dated 14 August 2000, which records contributions by Rolle of $882,600, Mr Gilovitz recorded that the contributions attributed to Rolle in fact add up to $1,002,600, but out of that amount the sums of $159,600 and $680,000, which had been credited to Ms Wong's loan account, were not supported by any evidence that the amounts had actually been paid by Ms Wong to or on behalf of CIDC. He expressed the opinion that those amounts were unsubstantiated and should not have been brought into the books of CIDC. If those amounts were deducted from Ms Wong's contributions, the total contribution was only $163,000. Under the joint venture agreement she or her interests should have contributed $2.475 million, in his view. 125 He also identified a credit to Ms Wong's loan account in the sum of $26,234, which was not matched by any transaction identifiable in bank statements, the cash book, or any other documents such as minutes, contracts, correspondence, invoices for receipts. He expressed the opinion that this amount, too, was unsubstantiated and should not have been recorded in the books of CIDC. 126 The report added the total expenses of CIDC over the period 1993 to 1999, including directors' fees, the total being $408,944. He observed that nothing in the documents he reviewed gave any indication that the travel expenses which he identified specifically in his report, and telephone expenses, were related to the business of CIDC. 127 Finally, the report reviewed the financial statements of CIDC for the years from 1993 to 1999 to determine the amount of net profit that would have been available for distribution as dividends at the end of each financial year, to be distributed to Ms Wong and Shum Yip in the proportions 55% to 45% respectively. He found that on the figures presented in the financial statements, dividends of $134,000 to Ms Wong and $110,000 to Shum Yip could have been paid out of available profits. If, however, the financial statements were adjusted to take into account additional interest paid by the company to HongkongBank as a result of Ms Wong's under-contribution to the joint venture and her receipt of directors' benefits, Ms Wong could have received dividends of $649,000, and Shum Yip could have received dividends of $532,000. 128 Parts of the reports, including parts where Mr Gilovitz purported to express opinions as to whether payments were excessive, were excluded from the evidence. What remained of the reports was, in my opinion, generally plausible, useful expert opinion evidence. Ms Wong 129 Counsel for the defendants submits that Ms Wong should be regarded as an honest witness who was doing her best to assist the Court. He says that in assessing her demeanour, due allowance should be made for the fact that she elected to give her oral evidence in the Chinese language through an interpreter, even though she has a fair understanding of the English language. This meant that during her cross-examination, she heard each question twice, once in English and then once in Chinese, and this created a difficulty for her which the Court should take into account. 130 I accept that Ms Wong may have created difficulty for herself by electing to give evidence in Chinese when she had a reasonably good understanding of the English language. I have done my best to take this difficulty into account in assessing her credibility. 131 Counsel for the defendants says that in giving some of her evidence about items of expenditure and meetings, Ms Wong was protective of her position. She was being attacked over items of expenditure that had been made from CIDC's funds many years ago at a time when, according to her, Mr Lin was the person in Shum Yip with whom she dealt. She knew that Mr Lin had been provided with financial statements by Mr Chow during the period from 1992 to 1997, and that Shum Yip had made no complaint about the manner in which the affairs of CIDC had been conducted until Mr Tian arrived on the scene. She had signed various minutes and resolutions dealing with financial statements and the payment of directors' fees. 132 I agree that in giving her evidence, Ms Wong was at times protective of her position and concerned to justify, as proper payments, expenditure and the payment of fees which had been reflected in the financial records of CIDC. But that does not make her evidence acceptable or mean that she was a reliable witness. 133 I find Ms Wong's oral evidence, in which she endeavoured to recollect conversations between herself and Mr Lin in which he authorised items of expenditure, to be implausible and I reject it. Counsel for the defendants says Ms Wong should not be criticised for failing to recount these conversations in her affidavits. I disagree. It seems to me that any authority conferred upon her by Mr Lin was a highly material piece of evidence which should have been one of the first things put forward by her to defend the claims against her of oppression and unfair dealing. Counsel for the defendants says it would be unfair to rely on the fact that Ms Wong failed to recount these conversations in her affidavits, given that Mr Lin was not called as a witness by Shum Yip. I cannot see the unfairness of doing so. The point in issue is the inherent implausibility of Ms Wong's evidence. It is relevant to that issue to observe that she did not put forward her evidence that Shum Yip authorised expenditure that had been incurred on what otherwise would be regarded as private expenditure for her benefit, in her principal affidavits. 134 I have decided that Ms Wong was an unreliable witness, whose evidence on material matters should not be accepted unless externally corroborated. Apart from the points already made, her attempts to justify what were clearly private expenses as related to the business of CIDC were so implausible as to undermine her credibility generally. Mr Ngan 135 The evidence of Mr Ngan relates almost exclusively to contributions to the joint venture. I shall deal with it under that heading. My view is that he was an unsatisfactory witness, whose evidence should not be accepted except to the extent that it is externally corroborated. Mr Chow 136 Mr Chow made it plain during his oral evidence that he saw himself as the accountant of CIDC, and that he has never regarded it as his role to interfere with the arrangements between Shum Yip and Rolle. That being so, he did not regard it as his responsibility to vet the expenditure of the company. Within the constraints of his overall position, I regard him generally as a truthful witness. His problem, however, is that the approach he took to the affairs of CIDC tended to overlook the fact that since 1992 he has been a director of the company and its secretary, and therefore in a fiduciary position. Mr Sutherland 137 Mr Sutherland provided a report dated 2 February 2001, as to which he was not cross-examined. Mr Sutherland's report was prepared on instructions from the solicitors for Ms Wong and Rolle. It is generally similar in structure to the second report of Mr Gilovitz. As to joint venture contributions, Mr Sutherland relied upon the audit of the financial statements for the year ended 30 June 1993, conducted by Cassim Calligeros Simos. He concluded that, although there was no tangible evidence provided to him regarding the $680,000 and the $159,600 attributed as loans to the company by Ms Wong in the company's accounts, the transactions were verified by the preparation of independently audited accounts. Those accounts showed that Ms Wong had contributed $660,000 of capital and $342,600 of loans, totalling $1,002,600. Included in that amount were the two journal entries that had credited the amounts of $680,000 and $159,600 to Ms Wong's loan account. The oppression claims 138 Paragraph 14 of the plaintiff's Further Amended Statement of Claim pleads that Ms Wong and Rolle have conducted the affairs of CIDC in a manner that is oppressive, unfairly prejudicial to, and/or unfairly discriminatory against the plaintiff, contrary to s 246AA. The following particulars are given: (a) refusing and/or failing to furnish financial information in relation to CIDC including evidence of contributions towards the joint venture by Ngan Investment, Ms Wong and Rolle respectively; (b) refusing and/or failing to furnish documentation concerning the acquisition of the Chatswood property; (c) refusing and/or failing to furnish copies of the financial records of CIDC including bank statements, cheque deposit books, cheque-books, balance sheets, profit and loss statements and other records for the period 1992 to date; (d) refusing the plaintiff access to the records referred to in sub-paragraph (c); (e) refusing and/or failing to supply copies of lease agreements with tenants at the Chatswood property, as well as rental statements and details of outgoings relating to such tenants; (f) refusing and/or failing to furnish copies of minutes of meetings of directors and shareholders of CIDC for the period 1992 to date; (g) refusing and/or failing to furnish copies of correspondence between CIDC and the principal financier of the joint venture being HongkongBank of Australia Limited; (h) refusing and/or failure to furnish details of any director's fees paid to Ms Wong for the period commencing 1992 to date; (i) refusing and/or failing to furnish details of management fees paid to Ms Wong for the period commencing 1992 to date; (j) procuring the transfer of shares in CIDC from Ngan Investment (or Ms Wong) to Rolle without Shum Yip's prior knowledge or consent; (k) failing to procure the injection of capital and loan funds for the benefit of CIDC in accordance with the joint venture agreement; (l) failing to hold meetings of directors and/or members of CIDC in accordance with the constitution of CIDC and/or the Corporations Law or at all; (m) procuring the payment of management and other fees or expenses in favour of or for the benefit of Ms Wong in circumstances where such payments were unjustified; (n) refusing to implement resolutions of CIDC including a resolution passed on or about 26 July 1999 that the Chatswood property be sold and CIDC be wound up under a member's voluntary liquidation; (o) failing to inform Shum Yip as to the appointment of directors of CIDC; (p) failing to ensure the proper payment of dividends in accordance with the joint venture agreement; (q) failing to comply with Shum Yip's direction pursuant to s 293 of the Corporations Law. 139 By the time the case moved into final submissions, the evidence had affected the relative importance of these various particulars, and has led to the virtual abandonment of a few of them. At the end of the day, Shum Yip's oppression case is based primarily upon: · Ms Wong and Rolle causing unjustified and unauthorised expenses to be paid out of CIDC's funds (particular (m)); · Ms Wong and Rolle allowing unjustified and unauthorised directors' fees to be paid by CIDC (particular (m)); · Ms Wong's failure to provide information to Shum Yip about the financial affairs of CIDC (particulars (a) to (i) and (o)); · failure by Ms Wong and Rolle to hold meetings of directors and members of CIDC (particular (l)); · failure by Ms Wong and Rolle to procure contributions to the joint venture as required by the joint venture agreement (particular (k)). 140 In my opinion each of these issues has been properly raised by Shum Yip in paragraph 14 of the Further Amended Statement of Claim, having regard to the particulars that I have identified in respect of each issue. Counsel for the defendants contended in submissions that inadequate particulars had been given of the alleged unjustified and unauthorised expenses, with the result that Ms Wong was not given an adequate opportunity to defend herself from Shum Yip's claims on those matters. I reject that submission for two reasons. 141 First, the category of unauthorised expenses was sufficiently identified in the particulars, and must be seen together with Shum Yip's claims that insufficiently detailed information about expenses had been provided to it. For reasons I shall give, I have concluded that Shum Yip was not given access to detailed information of a kind that would enable it to identify specific, unauthorised expenses, except through the compulsory information gathering processes of this litigation. Consequently Shum Yip was able to raise many specific instances of unauthorised expenses only in the process of cross-examination of Ms Wong. It would be unfair to contend that Shum Yip should have given more detailed particulars at an earlier stage when, on the basis of my findings, it did not have access to the necessary information because Ms Wong would not provide that access. 142 Secondly, because of gross underestimates of hearing time by both parties, the hearing of the case was adjourned twice. The hearing of Ms Wong's evidence began in February 2001, and resumed in May 2001. The evidentiary case concluded in July, and the hearing finally came to an end in August with oral submissions. It was plain in May, and probably even in February, that Shum Yip would attack Ms Wong in relation to unauthorised expenses. In the circumstances there was, in my view, ample opportunity for the defendants to respond to Shum Yip's case with respect to unauthorised expenses, and therefore no unfairness to them in the way that the matter evolved. 143 In my opinion the evidence does not support particular (j). I have found that the contracting party to the joint venture agreement was Rolle, then called Ngan's Company Pty Ltd, rather than Ngan's Investment Pty Ltd. Shares in CIDC were issued to Ngan's Company rather than to Ngan's Investment. There was no transfer of shares from Ngan's Investment to Ngan's Company, and therefore no factual basis for particular (j). 144 Particular (n) contends that Ms Wong and Rolle refused to implement a resolution of CIDC passed on 26 July 1999 that the Chatswood property be sold and that CIDC be wound up. The minutes of the relevant meeting were tendered but rejected on the ground that it was a "without prejudice" communication between the parties. There is therefore no evidence to support this particular. 145 Particular (p) alleges failure by Ms Wong and Rolle to ensure proper payment of dividends in accordance with the joint venture agreement. The joint venture agreement provided that the parties would share all profits and bear all risks in accordance with the percentages of the shares they held. There is no express mention of dividends, but clearly the sharing of profits would naturally occur through dividends because the profits were to be derived by a corporate entity. 146 Mr Ngan gave evidence that he and Mr Lin reached an understanding at the time of the joint venture agreement that the investment in the Chatswood property would be treated as a long-term investment, and they would try to clear the bank loan as quickly as possible rather than paying dividends in the short term. The documentary evidence includes minutes of various directors' meetings and annual general meetings of CIDC, signed in many cases by Mr Lin, at which the directors did not recommend payment of a dividend. The situation changed, of course, when Mr Tian replaced Mr Lin as a director of CIDC. But even then, according to minutes, the directors did not recommended payment of the dividend. 147 In my opinion the evidence does not support particular (p). No doubt the object of Shum Yip's review of its investment in CIDC in June 1997, and the object of much of its activity with respect to CIDC since that time, has been to establish a return on its investment, likely to occur by way of dividend if at all. However, there is no evidence of any specific complaint by Shum Yip about the company's dividend policy, or of any attempt to argue in any particular year that a dividend should be paid. Shum Yip's difficulty was that it did not have sufficient information to work out what should be done about dividends. Its case is that it was prevented by oppression from getting to the stage at which it could make a coherent case for the payment of dividends to begin. 148 As counsel for the defendants pointed out, this is not case such as Re D G Brims and Sons Pty Ltd (1995) 16 ACSR 559, where a specific allegation had been made that the non-payment of a dividend in 1991 constituted unfairly prejudicial conduct. 149 Particular (q) alleges failure to comply with Shum Yip's direction under s 293 of the Corporations Law. Section 293 permitted a shareholder to give a company a direction to prepare a financial report and the directors' report for a financial year and send them to all shareholders. CIDC has purported to prepare financial statements and provide them to shareholders on an annual basis. Moreover, there is no evidence of Shum Yip having given CIDC a specific direction of a kind capable of falling within s 293. In my view particular (q) has not been made out. 150 This leaves me with the particulars that together comprise Shum Yip's principal case of oppression, as summarised above. I shall deal with each of the five categories in turn. Unjustified and unauthorised expenses 151 Shum Yip complains that Ms Wong incurred and charged to CIDC various private expenses unrelated to the business or affairs of the company. The evidence shows that, apart from payments made by CIDC's real estate agents, Ms Wong was the sole signatory on cheques written on behalf of CIDC. She caused CIDC to meet various expenses (discussed below) for travel, telephones and in relation to her house at Killara. She did so both before and after she became aware of the resignation of Mr Lin as a director of Shum Yip in February 1997 and of CIDC in August 1997. Some of these expenses were debited to Ms Wong's loan account with the company, but others were not, as I shall explain. Shum Yip says that Ms Wong's conduct amounted to conducting the affairs of CIDC oppressively, and also that she breached her fiduciary duty as a director of CIDC whenever she caused the company to meet these expenses, which were essentially her private expenses. Shum Yip contends that Mr Chow contributed to the oppressive conduct of the affairs of CIDC by allowing Ms Wong to charge these expenses to the company, and also that he thereby disregarded his fiduciary duties as a director of CIDC, although it makes no claim for relief against him. 152 I shall review the evidence about expenses separately from the question whether Shum Yip authorised those expenses through Mr Lin, and then I shall consider whether Mr Lin bound Shum Yip to accept the charging of the expenses to CIDC. However, it should be noted at this stage that in my view, Mr Lin did bind Shum Yip to the expenses incurred in the financial years ending 30 June 1993 to 30 June 1996 inclusive. Travel expenses 153 Shum Yip identifies three occasions in which travel expenses were charged to the company, where (in its submission) the travel was clearly private and entirely unrelated to the affairs of CIDC. They are: (i) a trip by Ms Wong, her father and her daughter Lucille (then very young) to Hong Kong in December 1994, costing $4,567; (ii) a trip by Lucille and Olivia Ngan (her other daughter) to Hong Kong in July 1996, costing $1,988; and (iii) a trip by Ms Wong, Lucille and the Tsang family to Cairns in July 1994, costing $3,222. 154 Ms Wong contended in cross-examination that all this travel was related to the affairs of CIDC. However, she said that she had no other business interests in Hong Kong or elsewhere outside Australia, at least after 1990. She also said that her regular travel to Hong Kong since 1990 had been private, but later she revised that evidence by saying that her trips to Hong Kong were mainly for business because she has visited Mr Lin. Her explanation for charging the company with the cost of her father's visit to Hong Kong was that he was needed to baby-sit Lucille so that Ms Wong would have the time to conduct CIDC's affairs, but she was not able to remember what she had done for CIDC during that trip. Her explanation for charging the company with the cost of the Tsang family's visit to Cairns was that they went there to see if there was any real estate worth purchasing in cooperation with Ms Wong and/or CIDC. 155 I reject the evidence of Ms Wong on these matters. In my view it is plain that the three trips to which I have referred were for private purposes unrelated to the business of CIDC. Even if it were appropriate to charge CIDC with the cost of the trips by Ms Wong (a proposition which I reject because her evidence fails to identify any legitimate business purpose for her trips on those occasions), it is impossible to justify charging the company with the cost of the trips by her daughters, her father and the Tsang family. Her attempt to do so reflects very poorly on her, and the fact that she was prepared, in her oral evidence in February and May 2001, to attempt to justify the expenditure in the way she did provides quite compelling evidence that the funds of CIDC will remain at risk of misappropriation if she is allowed to remain in charge of the company. 156 Ms Wong also charged the company with the cost of her travel to Hong Kong in March and May 1994. She said that on each occasion she went to see Mr Lin, and that she met with him in a restaurant, to discuss matters relating to the affairs of CIDC. But her evidence about the substance of her conversations was vague and it seemed to me that she was being evasive and that she was reconstructing rather than recollecting the conversations. She agreed that she had not mentioned these meetings in her affidavit evidence. I found her evidence implausible and I reject it. It is more likely, in my view, that her trips to Hong Kong in March and May 1994 were for private purposes unconnected with CIDC. 157 Mr Chow gave evidence that he did not see the invoices for the three trips that I have specifically identified, that he was not aware that travel by members of Ms Wong's family and the Tsang family had been charged to CIDC, and that to do so would be inappropriate. His evidence was that he simply took Ms Wong's word that the expenses were properly related to the affairs of CIDC. I accept that evidence. Telephone expenses 158 Ms Wong and her daughters Olivia and Lucille incurred telephone expenses which were charged to CIDC. The evidence shows that numerous and sometimes lengthy telephone calls to Hong Kong were made from Ms Wong's home telephone, which was in the name of CIDC. The mobile telephones used by Olivia and Lucille were also in the name of and paid for by CIDC. The full cost of these telephones was charged to CIDC, without any attempt to apportion the expenditure between business and private purposes. Shum Yip's evidence, Exhibit P4, contains entries in CIDC's bank accounts which show that telephone accounts (with Telstra, Vodafone, AAPT, Fonetel and Optus) were paid by CIDC over a lengthy period of time. 159 Ms Wong gave evidence in cross-examination that she had called her lawyer, attributing to him no fewer than six telephone numbers on the printout of telephone calls shown to her in the witness box. Some of the calls were for very long periods of time, in the middle of the night, well outside normal office hours. She gave very vague evidence (Transcript pp 186-188) as to the subject matter of the calls, saying that she was seeking advice "generally concerning business problems" and about "the legal aspect of the management of the block", but she had no convincing explanation for not seeking advice from Australian lawyers or from Mr Chow. 160 She said she had also made calls to her friend Mr Jimmy Liu, explaining that he had acted as a representative of Ms Wong for CIDC in 1995 and was paid for doing so. Apart from these two persons, she could not remember the people whose numbers she had called, but she was certain that all of the telephone calls shown on the printout were referable to the affairs of CIDC, including calls to both of her daughters. 161 Ms Wong's evidence was that she did not know who Olivia and Lucille called or how many calls they had made, but she maintained that their calls were referable to the affairs of CIDC. 162 In my opinion Ms Wong's evidence with respect to the telephone expenses is completely implausible and should not be accepted. She was unable to identify plausibly any business calls during the period identified by the printout put to her. In my view, the telephone calls were all made for private purposes unconnected with the business of CIDC. 163 Mr Chow gave evidence that he did not know who Ms Wong called in Hong Kong, or of any need for her to do so. He said that he was not aware of the telephone accounts for Olivia and Lucille's telephones and he agreed that further investigation of those accounts would be needed to determine whether their calls were referable to the affairs of CIDC. 164 It is significant that, when asked to identify the business calls that she had made, Ms Wong did not claim that any of them had been made to Mr Lin. Yet her evidence (discussed later) was that she spoke to Mr Lin to obtain authorization for various expenses. In my view her evidence with respect to telephone expenses undermines, to this extent, her evidence concerning authorizations allegedly given by Mr Lin. Other expenses 165 CIDC paid an invoice by painters, for painting the exterior of Ms Wong's house in Killara in November 1994, in the sum of $8,000. The company also paid an invoice for the cleaning of Ms Wong's tennis court in February 1998, in the sum of $850. Mr Chow agreed in evidence that it was inappropriate to charge these expenses to CIDC. 166 CIDC paid municipal council rates for Ms Wong's house at Killara for the year 1997-98 in the sum of $1,820. That amount was not apportioned between business and private purposes. Mr Chow gave evidence that if he had seen the rate notice, he would not have allowed it as a company expense. 167 CIDC paid for parking fines of $252 incurred in 1994 and 1997, furniture and furnishings in 1994 in the sum of $1,943, computer equipment in 1997 in the sum of $3,480, an Internet connection for one year in 1998 in the sum of $399, and monthly premium instalments for a life insurance policy on the life of Ms Wong in 1995. 168 Ms Wong gave evidence that the money spent on the tennis court and furniture was in the nature of entertainment expenses connected with the business of CIDC. That evidence is implausible and I reject it. In my opinion all of the expenses listed above were private expenses not connected with the company. 169 According to the evidence of Mr Gilovitz, CIDC purchased Ms Wong's BMW motor vehicle and another vehicle was sold to and later repurchased from CIDC. It may be that to a very limited degree, the use of the motor vehicle by Ms Wong was justified in connection with the business of CIDC. Since, however, there were managing agents for the property, it is likely that most of the motor vehicle use was for private purposes. Ms Wong's loan account 170 Mr Chow gave evidence that certain expenses were debited in the financial records of CIDC to the loan account of Ms Wong. The loan account showed a substantial amount owing to Ms Wong, apparently related to the contributions alleged to have been made by the Ngan interests at the commencement of the joint venture. According to Mr Chow, the effect of this accounting was as if Ms Wong was spending her own money, because an amount debited to Ms Wong's loan account would "reduce the money owing to her" (Transcript, p 337.10). He said that expenses debited to her loan account were indicated by his staff making annotations to CIDC's bank statements of the code number "88802". 171 The evidence indicates, however, that some of the private expenses referred to above were not debited to Ms Wong's loan account, and seem to have become current liabilities of CIDC by reason of the use of different codes or no code at all. This appears to be so for the expenditure on the tennis court, the parking fines, the travel to Cairns with the Tsang family, expenses for the AAPT telephone account using code 309, expenses for Olivia's mobile telephone using code 460, and the council rates. The meaning of these other accounting codes is unclear from the evidence, and in the circumstances it seems to me likely that expenses other than those linked with code 88802 were not debited to Ms Wong's loan account. 172 A director is not entitled to charge private expenses to the company's account simply because the director's loan account has been simultaneously debited with the same amount. Using the company's funds to pay a director's private expense is a misappropriation of company property even if the director undertakes an obligation to reimburse the company, unless the transaction is specifically and properly authorised by the company. Moreover, Ms Wong's evidence was that the expenses in the present case were properly incurred on the company's account and therefore properly charged to the company. She did not give evidence that the expenses were private expenses incurred against her loan account, by arrangement with the company. Therefore, to the extent that expenses were charged to the company but debited to her loan account, I find that this arrangement was not authorised by CIDC. Authority to incur expenses 173 Mr Chow gave evidence that he provided "detailed" financial statements to Shum Yip. However, the copies of financial statements in evidence do not disclose expenses beyond general categories such as "travel expenses". There is no breakdown in the expenditure for particular trips by particular people. (I express no view as to whether the accounts were sufficiently detailed to comply with the law.) There is no evidence to suggest that particulars of expenses at such a level of detail were ever supplied to Shum Yip. Instead, the evidence of Ms Wong is that Mr Lin authorised her to incur or charge these expenses to the company's account. 174 I have reached the conclusion that Ms Wong's evidence, that she received specific authorization from Mr Lin to charge private expenses to CIDC, should not be believed. It is self-serving evidence falling within the category of evidence by her which, for reasons I have given, the Court should not accept unless it is corroborated. The evidence that Mr Lin gave specific authority to her to incur the expenses is not corroborated. 175 However, it appears that the total amounts for travel and telephone expenses were included in the financial statements that were supplied by Ms Wong or Mr Chow to Shum Yip. It seems likely that the financial statements for the years ending 30 June 1993, 1994 and 1995 were received and reviewed by Mr Lin on behalf of Shum Yip. He signed the summary financial statements. There is no evidence to suggest that he questioned the total expenditure on these items. In my opinion, Mr Lin either accepted or acquiesced in the levels of expenditure that had been incurred. He was the managing director of Shum Yip and its representative on the board of directors of CIDC at the time when the financial statements for those years were prepared and made available to Shum Yip. In those circumstances, Shum Yip is either bound by Mr Lin's exercise of actual authority in accepting the levels of expenditure shown in the financial statements for those years, or is estopped by his acquiescence from complaining. 176 The same position applies to the year ended 30 June 1996, regardless of whether the financial statements for that year were received and reviewed by Mr Lin before he was stripped of his authority as managing director of Shum Yip. This is because Mr Lin's conduct in respect of the financial statements of previous years amounted to a representation made by him on behalf of Shum Yip to Ms Wong that she was authorised to continue in the same way during the 1995/1996 year. 177 As regards the years ending 30 June 1997 and subsequently, the position is different because Mr Lin's position with the company changed with the arrival of Mr Tian, in the manner that I have explained. He was in no position to bind Shum Yip or cause it to be estopped from complaining during the period from July 1996 to February 1997, when he ceased to be a director of Shum Yip, because Mr Tian had taken control, and his position as a director of CIDC did not give him any authority to bind Shum Yip in these ways. Ms Wong became aware of his actual or impending resignation when she received Shum Yip's fax of 14 May 1997. By that time he had resigned from Shum Yip and therefore he had no further actual authority on behalf of that company, and the knowledge she acquired through the fax meant that Ms Wong could not rely on any ostensible authority of Mr Lin. In my opinion, therefore, it is open to Shum Yip to complain about the use of CIDC's money to meet private expenses of Ms Wong in respect of the year ended 30 June 1997 and all subsequent years. 178 Some of the specific items of expenditure to which I have referred are for relatively small amounts. That does not mean, however, that the evidence that Ms Wong charged the expenses to the company is evidence of insignificant misdemeanours. When one puts together each of the specific instances of private expenditure being charged to the company, a general pattern emerges. It is a pattern of a director, having total control of the affairs of the company on a day-to-day basis because the director representing the other joint venturer is overseas and the accountant/director does not see it as his role to challenge her, using that control to gain personal benefits on a regular basis, without authority and in breach of duty. In effect, Ms Wong operated CIDC as though it were her own company with no other financially interested party, and to advance her own interests to the detriment of the company and the minority shareholder. Systematic conduct of that kind, over time, may constitute oppressive, unfairly discriminatory or unfairly prejudicial conduct: Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539, 552; Bagot Well Pastoral Co Pty Ltd v Reid (1993) 12 ACSR 197, 206-7. Directors' fees 179 During the period from 1992 to 1999, CIDC paid Ms Wong $270,000 in directors' fees. The company paid Olivia Ngan $17,550 for directors' fees in respect of that period. It paid superannuation $24,692. Thus the total amount paid was $312,242. The immediate question is whether all or any of these amounts were properly authorised to be paid, in accordance with the law and the constitution of CIDC. 180 Article 63 (1) of CIDC's constitution states that the directors shall be paid such remuneration as is from time to time determined by the company in general meeting. Ms Wong relies on the minutes of various meetings, and financial statements of CIDC, as evidence that the company authorised the directors' fees that were paid. 181 In my opinion Shum Yip is either bound to accept the total sums paid for directors' fees for the years ended 30 June 1993, 1994, 1995 and 1996, or is estopped from denying that the payment of those fees was properly authorised by the board of CIDC. This is because of the activities of Mr Lin as managing director of Shum Yip and as a director of CIDC during that period. Mr Lin received, and must be taken to have reviewed, the financial statements and he signed the summary accounts. The financial statements showed the total amount of directors' fees paid in respect of the year. 182 However, the position is different in respect of the year ended 30 June 1997 and subsequent years, as I have explained. For the reasons I have given, Mr Lin was no longer in a position to bind Shum Yip by his conduct in approving or acquiescing in the financial statements for those years. That being so, Shum Yip is entitled to complain about the payment of directors' fees unless they were properly authorised by board resolutions under article 63 (1). 183 The following minutes are included in the evidence: · Minute of a meeting of the directors of CIDC, purportedly held at Killara on 1 July 1996, attended by Olivia Ngan, Mr Lin and Mr Chow as well as Ms Wong. According to that minute, the directors resolved that for the year ended 30 June 1997, directors' fees of $50,000 be paid to Ms Wong and of $5,400 to Olivia Ngan. · Minute of a meeting of directors purportedly held at Killara on 31 December 1997, attended by Ms Wong and Mr Lin, according to which the directors approved payment of a fee of $50,000 to Ms Wong and a fee of $5,400 to Ms Ngan. The period in respect of which those fees were approved is not stated, but since the subject matter of the meeting was generally the financial statements for the year ended 30 June 1997, the fees were probably intended to be in respect of that year, so that the resolution of 31 December 1997 is probably only confirmatory of the resolution of 1 July 1996. · Minute of a meeting of directors purportedly held at Killara on 3 August 1998, attended by Ms Wong, Ms Ngan, Mr Lin and Mr Chow, recording that the directors resolved that for the year ended 30 June 1998, Olivia Ngan be paid a director's fee of $2,700. · Minute of a meeting of directors purportedly held at Killara on 5 November 1998, attended by Ms Wong, Ms Nan and Mr Chow but not Mr Lin, recording a resolution that for the year ended 30 June 1998 Ms Wong be paid a director's fee of $50,000. 184 There are also minutes of meetings of shareholders, alleged to have occurred on 24 February 1999, 1 April 1999 and 31 December 1999, at which the annual financial statements of CIDC (including expenses for directors' fees) were adopted. However, the constitution of CIDC required the approval of the board of directors, rather than a meeting of members. 185 Shum Yip contends that the meetings of 1 July 1996, 31 December 1997, 3 August 1998 and 5 November 1998 did not take place at all, or if they did, they did not take place in accordance with the constitution of CIDC. 186 The minute of the meeting of 5 November 1998 does not claim that any representative of Shum Yip was present, not even Mr Lin. Nor were the minutes of that meeting signed by anyone on behalf of Shum Yip, not even Mr Lin. In cross-examination Mr Chow was unable to provide any justification for his failure to notify Mr Tian of this meeting. Shum Yip invites the Court to infer that Mr Chow deliberately refrained from notifying Mr Tian or obtaining his approval because Mr Chow knew that such an approval would not be forthcoming. In my opinion the evidence does not justify that inference. The evidence is more consistent with the view that Mr Chow simply acted on the instructions of Ms Wong, who regarded him as her personal accountant, and simply failing to think about his duties as a director and the secretary of CIDC. 187 There is no evidence of any calculation or of the basis upon which the directors' fees were calculated. Ms Wong did not offer any such calculation in her evidence, merely asserting that this was the decision of the meeting (Transcript pp 142, 145-146). Mr Chow was not able to identify any discussion as to the basis of the directors' fees in his presence. 188 While the amounts paid in directors' fees are not large in an absolute sense, it must be remembered that the sole substantial asset of CIDC was the Chatswood property, and the company employed an agent to manage it, as well as an accountant. Ms Wong was asked what she did to earn the fee paid to her as a director, and she identified, rather vaguely, work of the kind normally undertaken by an accountant or managing agent (Transcript paid 143). There were some evidence that she renegotiated interest rates on CIDC's bank loan and the fees payable to CIDC's managing agent, but the evidence did not indicate that this occurred (if at all) in the year ended 30 June 1997 or a subsequent year. If anything, Ms Wong's evidence about the justification for Olivia's director's fee was even less convincing. She said that there was a large amount of work that Ms Wong herself could not do, but when pressed (Transcript paid 145-146), she only identified delivering some papers, doing errands and some clerical work. In my opinion the fees paid by CIDC to Ms Wong and Olivia Ngan were clearly excessive, having regard to the work they were required to do as directors. 189 In my opinion it is unlikely that meetings occurred on the four occasions identified by the minutes. I shall consider later Shum Yip's allegation that various meetings recorded in minutes were not in fact held, especially where the minute states that Mr Lin was involved. In the case of the four minutes dealing with directors' approval of fees, some additional considerations support Shum Yip's contention. The amounts allegedly authorised and paid were excessive, having regard to the business of CIDC and the engagement of a managing agent and accountant. That fact itself makes one suspicious about the reliability of the minutes. The suspicion is reinforced by considering Ms Wong's oral evidence, which offers no explanation or justification for the level of fees. Moreover, it had become clear by 31 December 1997, and certainly by 3 August and 5 November 1998, that Mr Tian was actively interested in the affairs of CIDC and would expect to be involved in the company's decisions on such matters as directors' fees, but he was not given the opportunity to participate in the meetings of those dates. I think it likely that the minutes of the four meetings to which I have referred were fabricated and no such meetings were held. In the absence of any other evidence, I conclude that there was no meeting of directors authorising the payment of the directors' fees, as required by CIDC's constitution. 190 The payment of fees to directors can itself be oppressive, unfairly discriminatory or unfairly prejudicial conduct, where the fees are paid in improper circumstances and are excessive, without any bona fide basis for their calculation: Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549; Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; Roberts v Walter Developments Pty Ltd (1992) 10 ACLC 804; Ford's Principles of Corporations Law (Butterworths, looseleaf) paragraph [11.460]. The fees paid in respect of the year ended 30 June 1997 and subsequent years were not validly authorised, and were also excessive. Failure to provide information 191 Shum Yip had an entitlement to receive information concerning the affairs of CIDC, in several capacities. First, as a shareholder of CIDC, Shum Yip had a statutory right to inspect the registers that CIDC was required to keep, including its register of members, without charge (s 173); and to inspect the company's minute books for meetings of members, without charge (s 251B), and to receive CIDC's financial reports each year (s 314). As a member, its rights to information were limited, and did not extend to detailed information about income and expenses beyond the information required to be contained in the company's financial statements and reports. However, Shum Yip had the right as a member to apply to the Court under s 247A for an order authorising it to inspect any "books" of the company, widely defined to include ledgers and documents of prime entry such as invoices and receipts, and the Court could make such an order if it were satisfied that Shum Yip was acting in good faith and that the inspection was to be for a proper purpose. 192 Shum Yip's representatives on the board of CIDC, including Mr Tian as from 2 December 1997, had a right of access under the general law to information concerning the business and affairs of CIDC, including its financial affairs, to enable them to discharge their fiduciary and statutory obligations to CIDC: see Ford, paragraph [10.390]. They also had statutory rights of access to information, especially their unqualified personal right of access to CIDC's "financial records" (broadly defined to include documents of prime entry) under s 290, and their right under s 198F (after the present legal proceeding came into contemplation) to inspect the books of the company (including minutes of directors' meetings) other than its financial records. 193 In its capacity as a joint venturer, Shum Yip had the right at general law to full disclosure of information concerning the business and affairs of CIDC, the joint venture vehicle, including access to minutes of directors' and shareholders' meetings, financial statements, and financial records including ledgers and documents of prime entry: Biala v Mallina (1993) 11 ACSR 785, 831-2. 194 My account of the facts shows that over a period of time beginning in December 1997, if not before, Shum Yip made insistent demands for more information than Ms Wong had provided, concerning the income and expenditure of CIDC, and the contributions of the venturers to the capital of the company. Although one of the requests for information about specific matters (Shum Yip's letter of 13 July 1997) was satisfactorily answered, and Shum Yip was supplied with annual financial statements for CIDC, its requests for information going beyond the financial statements were not satisfied, or even responded to, by Ms Wong or Mr Chow during the period from December 1997 to September 1998. Matters came to a head at the meetings on 4 and 9 September 1998. At the first of those meetings Mr Tian made a demand for various specific items of information. Ms Wong asked the meeting for further time to prepare the material, which was in her possession rather than in the possession of Mr Chow. The meeting was adjourned from 4 to 9 September to give her time to assemble the information, but on 9 September she did not produce it. Her attitude at that time, even if her own account is accepted, was that it was unnecessary to supply further information to Shum Yip, and that she had no obligation to do so. 195 Shum Yip's solicitors made a demand for information, initially in their letter of 17 September 1998, but although there has been substantial correspondence since that time, no satisfactory reason has been given for Ms Wong's failure to respond cooperatively to the informational demands made by Rolle's co-venturer and co-shareholder and by her co-director. Mr Chow, though a director, did not intervene to ensure that Shum Yip's rights were protected. Indeed, his evidence was that he "tried to get away from this thing" (Transcript page 316.30). At the meeting of 29 September 1999 a motion that would have required CIDC to provide Shum Yip with specific and detailed information was defeated by Ms Wong and Mr Chow without any reasons being given. 196 The defendants submit that Shum Yip received information to which it was entitled, namely CIDC's financial statements, and that its requests for further information were not capable of response because they did not identify any specific information beyond what was contained in the financial statements already supplied to Shum Yip. In my opinion that submission fails on the facts, because the facts show that Shum Yip was seeking information breaking down the global figures for income and expenses in the financial statements, and that Ms Wong must have been aware of what Shum Yip wanted even if Shum Yip's articulation of its demands was imprecise. Indeed, the fact that at the meeting of 4 September 1998 she asked for more time to prepare the information then requested confirms that she understood what was required. 197 Ms Wong persistently and systematically refused to give Shum Yip access to the information it required, denying Shum Yip its rights as a joint venturer and denying the rights of her co-director Mr Tian. To the extent that she failed to provide access to minutes of shareholders' meetings, she denied Shum Yip's statutory right as a member of CIDC. The fact that even at the final hearing, she contended that she had discharged her obligations with respect to supply of information to Shum Yip, indicates that Shum Yip's rights will not be vindicated unless the Court intervenes. 198 Failure to provide information to a minority is capable of constituting a case of oppression of the minority: Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452; Re Back 2 Bay 6 Pty Ltd (1994) 12 ACSR 614. Here there has been a persistent and serious failure to comply with reasonable requests for information to which Shum Yip was entitled. Failure to hold meetings of directors and members 199 Shum Yip submits that the vast majority of meetings of directors and members of CIDC recorded in minutes prepared by Mr Chow and signed by Ms Wong did not take place at all, or if they did, did not take place in accordance with the requirements of CIDC's constitution and the Corporations Law. Further, Shum Yip complains that its representatives, especially after the appointment of Mr Tian as a director in December 1997, were not given any or proper notice of or invited to participate in those meetings if they were held. 200 The evidence indicates that neither Ms Wong nor Mr Chow notified Shum Yip's office in advance of the alleged meetings of 1 July 1996, 31 December 1997, 3 August 1998, 5 November 1998, 24 February 1999, 1 April 1999 and 31 December 1999. According to the minutes, there was no representative from Shum Yip at the alleged meetings of 5 November 1998, 24 February 1999, 1 April 1999 and 31 December 1999, not even Mr Lin. The minutes of those meetings were not signed by anyone on behalf of Shum Yip. 201 Ms Wong gave evidence that the meetings took place as recorded in the minutes, although she said that they had taken place by "correspondence" or "telephone", with Mr Chow being physically present with her when the telephone calls were made (Transcript pages 132-135,138-139, 141). Ms Wong gave unconvincing evidence about her recollection of the meetings. She was unable to recall details of any of the meetings allegedly attended by Mr Lin (Transcript pp 149-150, 152). 202 Mr Chow's evidence was that although he was recorded as present in the minutes, he could not recall whether he was present or not (Transcript pages 295-296, 307-308). He was not sure whether any of those recorded as being present were in fact present at meetings, or whether any meetings took place at all, by telephone or otherwise. He said he could not recall anyone ever telephoning Mr Lin in his presence. 203 Mr Lin is stated to have been present at several meetings after his purported resignation from CIDC's board on 8 August 1997, and well after his resignation from Shum Yip in February 1997. In my view it is implausible that Mr Lin would have attended meetings of CIDC's board after August 1997, personally or by telephone. He signed the minutes of the meeting of 31 December 1997, but he did not sign minutes of meetings held on 2 December 1997 and 3 August 1998, the minutes of which recorded him as present. 204 Considering this evidence as a whole, but paying particular regard to the evidence of Mr Chow, my view is that Shum Yip's principal submission on this point is correct. The alleged meetings that I have identified by date did not, in my opinion, occur, by telephone or otherwise. It is unnecessary for me to decide whether, if meetings occurred in which one or more directors were contacted by telephone, the requirements of articles 70 and 77 of CIDC's constitution were complied with, although Shum Yip made a plausible submission that on the evidence, it is unlikely that a telephone was employed "whereby all persons participating in the meeting can hear each other" (article 77 (4)). 205 Upon his appointment as a director on 2 December 1997, Mr Tian became entitled to be given notice of and to attend meetings of the directors of CIDC. As a shareholder, Shum Yip was entitled to be given notice of, and to attend, meetings of shareholders of the company. It can be oppressive for a majority to conduct the affairs of the company in such a manner that a minority with board representation is not able fully to participate in meetings of the directors or shareholders. Repeated or persistent failure to hold meetings required to be held, or to give proper notices of meetings, or to allow proper time for discussion at meetings, can provide a ground for the oppression remedy: John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63, 71-2. Contributions to the joint venture 206 The joint venture agreement required that the capital of CIDC would be $4.5 million, including "registered" capital of $1.2 million and loan capital of $3.3 million. The contributions were to be in the proportions 55% from Rolle and 45% from Shum Yip, that is: (a) Rolle - $660,000 of share capital and $1.815 million of loans for a total of $2.475 million; (b) Shum Yip - $540,000 of share capital and $1.485 million of loans for a total of $2.025 million. 207 The evidence shows that Shum Yip made contributions of $2.225 million, comprising $540,000 of share capital and $1.684 million of loans, $200,000 more than required of it under the agreement, as Mr Gilovitz pointed out. Mr Gilovitz calculated that Rolle contributed only $163,000, which is $2.312 million less than required by the joint venture agreement. He gave evidence that Rolle's under-contribution resulted in Shum Yip incurring additional costs. 208 On the other hand, Rolle contends that its under-contribution was substantially reduced by payments of $680,000 and $159,600 allegedly paid by or for the benefit of Ms Wong, who was credited with payment in her loan account. Rolle also contends that the joint venture agreement was varied, as I shall explain. One of the critical differences between the parties at the hearing was whether the payments of $680,000 and $159,600 were genuine. The alleged payment of $680,000: the Heywood transaction 209 As I have said, there is in evidence a letter described in submissions as an "invoice" for $680,000 dated 10 July 1992 from Heywood Ltd, and a receipt for the same amount dated 15 July 1992, both addressed to CIDC. The invoice states that the fee of $680,000 was for Heywood successfully introducing CIDC to its Australian investment. It was, in effect, a commission. This characterisation of the invoice was supported by the evidence of Mr Ngan. 210 Mr Ngan's evidence is that he paid the fee on behalf of CIDC, on the basis that the payment would be treated as a capital contribution under the joint venture agreement. In fact the payment was credited to Ms Wong's loan account, rather than to the joint venture party Rolle, in the books of CIDC. 211 It is striking that the amount of the invoice is the same as the sum of $680,000 referred to in the joint venture agreement as part of the purchase money for the Chatswood property, to be remitted into an account designated by the vendor. It does not appear that Heywood had any connection with the vendor of the Chatswood property, and Mr Ngan does not claim that he made the payment to an account operated by the vendor. The settlement sheet for the sale, which is in evidence, makes no reference to the sum of $680,000. 212 Shum Yip contends that the amount of $680,000 was never paid by Mr Ngan, Rolle or Ms Wong to Heywood or any other party. It claims that the transaction demonstrates a lack of probity and good faith, as well as a lack of credibility, on the part of Mr Ngan and Ms Wong. 213 I find this matter very difficult to assess, because of the paucity of evidence on the subject. Apart from the invoice and the receipt, the only direct evidence is provided by Ms Wong and Mr Ngan. However, there is indirect evidence in that the sum of $680,000 was credited to Ms Wong's loan account, and the loan account balance appeared in the financial statements of CIDC for the year ended 30 June 1993, which were audited, and the loan account balance was carried forward to the financial statements for later years. 214 There are many grounds for suspicion about the payment. Thus: · one would have expected some evidence of the agreement to which the invoice relates, especially given the large amount involved, and some evidence of a meeting of directors of CIDC in which it was agreed that Rolle's contribution would be made, in part, by its payment of the invoice; · there is no evidence of any feasibility studies of the kind referred to in the invoice; · Ms Wong said she never saw any feasibility studies or market research prepared by Heywood, and could not find them in response to Shum Yip's notice to produce (Transcript pp 213-214); · there is no evidence about the identity of the principals or the activities of Heywood, both Ms Wong and Mr Ngan saying that they knew nothing about these matters; · in Ms Wong's first affidavit she says that Mr Ngan found the Chatswood property with the assistance of a Sydney real estate agent, Richard Ellis, and she makes no mention of any involvement by a consultant. In cross-examination Mr Ngan also admitted that it was Richard Ellis who introduced the Chatswood property; · the invoice bears a facsimile header "From Interform Int Ltd", Interform being Mr Ngan's Hong Kong company in which Ms Wong had an interest at that time. The receipt has a similar facsimile header; · the receipt was not annexed to either Mr Ngan's or Ms Wong's first affidavits, but was annexed to their respective second affidavits, both dated 4 February 2001, without any plausible explanation for the oversight (Transcript page 267-268); · there is no proof of payment by Mr Ngan, by bank statement or otherwise; · there is no explanation for the fact that it was Ms Wong's loan account rather than an account of Rolle that was credited in the books of CIDC; · there is no record of the amounts in the bank statements of CIDC for the relevant period, although that would not be surprising if the payment was made directly by a venturer to the creditor, so long as some acknowledgement of the transaction was made by the board (and there is none); · Mr Chow created the credit to the loan account of Ms Wong simply by relying on the receipt; · the defendants appear to have been especially reluctant to provide information about this matter. 215 Moreover, the evidence of Mr Ngan was highly unsatisfactory. At one stage he said in cross-examination that he personally made the payment between July and September or October 1992, or "within one or two months" of receiving the invoice. Then he said he could not remember when the first instalment had been paid. After having his attention directed to the date of the receipt, Mr Ngan changed his evidence (Transcript pp 266-267). He could not recall any significant detail relating to the payment to Heywood, notwithstanding his claim that the payment of the whole amount was made from his personal funds. He could not recall the names of the people from Heywood with whom he claimed to have negotiated the transaction, and to have visited the Chatswood property, how he made the payment, which account was debited with the payment, when the first instalment was paid, the identity of the person who signed the invoice, and how he came to be introduced to Heywood. He could not remember any correspondence with Heywood. 216 As on other contentious issues, the evidence of Ms Wong on this matter was also unsatisfactory. She insisted that CIDC rather than Mr Ngan had paid the money. She said she knew the money had been paid, but when pressed as to the source of her knowledge she could only refer to the company's records and the claim that Mr Lin had told her (Transcript page 242). 217 But for two matters, these considerations would be sufficient to warrant the conclusion that the Heywood transaction was a sham invented by Mr Ngan, with collaboration from Ms Wong, to resist a demand by Shum Yip that they provide their agreed proportion of funding for the joint venture. On this approach it would be difficult to explain the terms of the joint venture agreement, but one might conclude that its author on behalf of Shum Yip was Mr Lin, and its treatment of the $680,000 might relate to some collateral arrangement of Mr Lin about which one can only speculate. The two matters that require consideration are the effect of the Cassim Calligeros Simos' audit and the issue of Mr Lin's authority to bind Shum Yip at the time when the relevant events occurred. 218 The defendants say that Shum Yip, and its witness Mr Gilovitz, should not be allowed to go behind the auditors' qualified audit opinion. Mr Gilovitz did not perform an audit and Shum Yip has no basis for questioning the propriety and conclusions of the audit process. I do not agree with this contention. It seems to me that if the Court, having considered all the evidence, forms the view that a particular transaction is so suspicious that it should be regarded as a sham, the fact that the transaction has passed muster in an audit should not dissuade the Court from reaching its conclusion. 219 The second matter is, however, a more serious obstacle for the plaintiffs. The audit report by Cassim Calligeros Simos was made available to Mr Lin, according to the evidence, and the relevant balances in the audited 1993 financial statements were brought forward to the 1994 financial statements. On 31 December 1994 both Ms Wong and Mr Lin signed a statement in their capacity as directors in which they certified that in their opinion the balance sheet gave a true and fair view of the financial position of the company at the end of the financial year. As I have said, Mr Lin occupied the position of managing director of Shum Yip at that time. His acceptance and adoption of financial statements which included the loan account balances reflecting the Heywood transaction, and his representation to Shum Yip's co-venturer that the accounts presented a true and fair view, had the effect of estopping Shum Yip from departing from the opinion that those financial statements were relevantly accurate. In my opinion, therefore, Shum Yip cannot now complain that the financial statements are incorrect to the extent that they reflect the credit of $680,000 to Ms Wong's loan account, and therefore Shum Yip cannot assert in this proceeding that the $680,000 was not paid as a joint venture contribution. The payment of $159,600 220 The payment of this amount represents 2% of the purchase price of the Chatswood property. The evidence indicates that 8% of the purchase price was provided to CIDC by Shum Yip, and CIDC drew a cheque for that amount on its account on 26 June 1992. I proceed on the basis that the remaining 2% must have been paid on exchange of contracts, as required by the contract, but there is no evidence of payment from CIDC's bank account. 221 Mr Ngan claims that he advanced the remaining 2% direct to the selling agent or vendor, on behalf of CIDC, as a contribution of loan capital to the joint venture. As with the payment of $680,000, this was accounted for by Mr Chow by crediting that sum to Ms Wong's loan account. Mr Chow made a handwritten notation to the bank statement showing payment of the 8% deposit, stating "Matthew paid 2% from HGK". He said he made this note because of what Mr Ngan had told him. 222 In my opinion the defendants' account of this payment is somewhat more plausible than their account of the payment of $680,000. This is not because the quality of the evidence of Mr Ngan or Ms Wong was better on this payment than on the payment of $680,000. It is simply that the external evidence shows that the payment of this amount must have been made on exchange of contracts and evidently was not made by CIBC or by Shum Yip. It is plausible to say that the payment was made by Mr Ngan, although he is unable to give satisfactory evidence of having done so. 223 I am inclined, therefore, to accept the defendant's account with respect to the payment of $159,600. Had I not done so, the plaintiffs would still have faced the obstacle that the payment was reflected in the loan account which was part of the financial statements that were audited and then certified by Mr Lin as well as Ms Wong, in their directors' statement annexed to the financial statements of the company for the year ended 30 June 1994. Credit of $26,234 to Ms Wong's loan account 224 Mr Gilovitz also claimed that the sum of $26,234 was not properly and correctly recorded in CIDC's accounts. While there is no satisfactory external explanation for the crediting of this amount to Ms Wong's loan account, neither is there any specific ground for suspicion with respect to the transaction. On balance, my view is that there is no proper ground for treating the crediting of this amount to Ms Wong's loan account as improper or ineffective. 225 My conclusion with respect to contributions to the joint venture is that, although there is unsatisfactory evidence and ground for suspicion with respect to the payment of $680,000, I am unable to conclude that the financial statements of CIDC with respect to Ms Wong's loan account are incorrect with respect to that sum, or with respect to the sums of $159,600 and $26,234. Alleged variation of joint venture agreement 226 Paragraph 3A of the defence to the amended statement of claim states as follows: "In further answer to the allegations contained in paragraphs 4 and 6 of the amended statement of claim, the defendants say that between 22 May 1992 and 18 September 1992 the plaintiff and the third defendant varied the Agreement in the following manner: (a) the third defendant was relieved of its obligation to contribute to CIDC its full share of capital over and above the contributions which it had made prior to 18 September 1992; (b) CIDC would borrow from HongkongBank the sum of $6.2 million to permit it to complete the purchase of the Chatswood property; (c) the second defendant and her then husband [Mr Ngan] would give security to HongkongBank for repayment of the facility including unlimited guarantees by each of them and a first registered mortgage by the second defendant over her home in Killara; (d) CIDC would be responsible for and would pay all interest on the HongkongBank facility; (e) the second defendant would be appointed managing director of CIDC and would manage its affairs; (f) the second defendant would receive directors' fees, the use of a company car and be reimbursed expenses she incurred on behalf of CIDC; (g) no dividends would be paid by CIDC to shareholders until the HongkongBank facility was repaid in full; (h) no interest would be payable by CIDC to the plaintiff and the third defendant on their respective capital contributions; and (i) the investment by the plaintiff and the third defendant in CIDC would be a "long-term investment". Particulars The variation of the Agreement was oral and is constituted by and contained in conversations between [Mr Lin] on behalf of the plaintiffs and [Mr Ngan] on behalf of the third defendant which took place between 22 May 1992 and 18 September 1992." 227 It will be seen that paragraph 3A alleges a variation of contract by oral agreement. I have found that by his conduct in approving financial statements during the period 1993 to 1996, Mr Lin bound Shum Yip in a manner that prevents it from complaining now about certain matters. The allegation in paragraph 3A is quite a different matter, based upon conversations between Mr Lin and Mr Ngan. 228 As I have said, I have found Mr Ngan to be an unsatisfactory witness, whose evidence should be accepted only if it is externally corroborated. The principal evidence relied upon by the defendants for the oral variation of the joint venture agreement is the evidence of Mr Ngan, which I shall therefore not accept unless there is external corroboration. In effect, the defendants rely on three forms of corroboration. 229 First, the defendants refer to the negotiation by CIDC of a loan facility with HongkongBank, arranged to finance the purchase of the Chatswood property. On 18 September 1992 Shum Yip gave a guarantee and indemnity to HongkongBank to support this facility to a limit of $6.2 million. The defendants submit that the Court should draw the inference from the document of 18 September 1992 that Shum Yip knew that CIDC borrowed $6.2 million from HongkongBank for the purpose of purchase of the Chatswood property, and that it agreed to guarantee CIDC's obligations under the loan facility limited to that sum. I think that is an appropriate inference to draw. 230 Then the defendants say that further inferences should be made. They say that the participation by Shum Yip in the loan arrangements necessarily implies departure from the joint venture agreement, which had envisaged a capital injection of a large amount from each party. The borrowing from HongkongBank made the full amount of those capital injections unnecessary. Shum Yip had made its contribution, when it entered into the agreement of 18 September 1992, and therefore (say the defendants) the only possible inference is that the parties agreed to vary the joint venture agreement by exonerating Rolle from its obligation to make a further contribution. 231 I find that chain of inferences implausible and I reject them. The facts are equally consistent with the inference that the borrowing was intended to increase the capital available to CIDC beyond what had been arranged in the joint venture. I accept that the borrowing implies a supplementary agreement to the main joint venture agreement, but I reject the contention that it demonstrates exoneration of Rolle from its obligation to contribute. 232 Secondly, the defendants refer to a letter dated 16 August 1993, which they allege was written by Shum Yip to Mr Ngan. There is some dispute about the authenticity of the letter, but I am prepared to assume that it is an authentic letter from Shum Yip. 233 The letter states that since the acquisition of the Chatswood property the parties have been in "satisfactory co-operation". The contents of the second paragraph of the letter make it clear that a number of matters had been "left over" from the time of the purchase, which had to be settled. The author of the letter then says that amongst the things to be done, there is "signing a make-up agreement regarding the $6,200,000 that the company borrowed" from HongkongBank, including the $1,200,000 that Mr Ngan's company borrowed, "making clear the liabilities and risks, expenses and interests of the loan and assisting the accountant to reflect this agreement in the account of the company". The letter goes on to refer to a deposit by the company of an amount with the HongkongBank. It concludes with an expression of hope that Mr Ngan's company will contact the solicitor and accountant in Sydney as soon as possible to prepare relevant documents. 234 The meaning of this letter is quite unclear. At best, it contemplates the making of an agreement which, according to Mr Ngan's own evidence, was never made. It may indicate an intention to renegotiate some aspect of the joint venture agreement, but no more than that. I doubt that it even goes so far. It seems to envisage, as far as I can see, some supplement to the joint venture agreement, but in my view it is impossible to extract from it any indication that Rolle's commitment to make a capital contribution would be waived. 235 Thirdly, the defendants refer to the financial statements of CIDC as evidence that the joint venture agreement was varied. They refer to the loan account balances, especially for the year ended 30 June 1993, which were audited. They say that the audited 1993 accounts reflect a state of affairs between the parties inconsistent with what was required to have been done by Rolle under the agreement of 22 May 1992. It seems to me that the 1993 financial statements show that Rolle had not at that time carried out fully its obligation to make a financial contribution under the joint venture agreement. I cannot see how the accounts, even upon their acceptance by the directors, constitute evidence of a variation of the agreement under which Rolle was to contribute more than it had contributed as at 30 June 1993. Nor can I see how the continuation of that state of affairs in later financial statements provides any further evidence of a variation. 236 My conclusion is that there is insufficient evidence to support any of the allegations of variation in paragraph 3A of the defence to the amended statement of claim. In my view the provisions of the original joint venture agreement stand, supplemented by ancillary arrangements with respect to such matters as external borrowing. Conclusions as to joint venture agreement 237 Given that the joint venture agreement has not been varied, my view is that Rolle is in breach of the agreement by failing to make its full contribution, although the contribution it has made must be taken to include the three sums that the plaintiffs have unsuccessfully challenged. I do not see any basis for holding that the agreement has been terminated by any automatic process to date. In my view Shum Yip is entitled to relief by way of damages in respect of this breach of agreement. 238 In my view the evidence does not show that Rolle, as venturer and shareholder, failed to supply the information that Shum Yip demanded from Ms Wong and Mr Chow. Therefore my conclusion is that there is no breach of fiduciary duty by Rolle, and no breach of any implied contractual obligation to supply information. Conclusions as to oppression and breach of duty 239 I have reached the conclusion that the conduct of Ms Wong, supported by Mr Chow and Olivia Ngan, as directors of CIDC, in · causing the company to meet certain private expenses; · causing the company to pay excessive directors' fees; · failing to convene directors' and shareholders' meetings as required by the constitution of the company and the Corporations Law; and · persistently failing to respond to Shum Yip's reasonable demands for information; together constitute an overwhelming case of oppression, unfair prejudice, unfair discrimination, and action contrary to the interests of members, for the purposes of s 246AA. 240 As I have already said, while parts of this chain of events, when considered in isolation, might appear minor, when all my findings are considered together the case for Shum Yip to have relief is very strong. The fact that I have not found, on the evidence, that the contributions to the joint venture by Rolle were not made does not detract from my findings under s 246AA. 241 Shum Yip's primary claim for relief is an order for the winding up of CIDC. Given the persistent nature of Ms Wong's unreasonable and improper conduct, and the failure of Rolle and Ms Wong to comply with the basic obligations arising under their overall relationship with Shum Yip, my view is that remedies short of winding up would not be appropriate. If an order were made for Shum Yip's interest to be bought, problems would arise as to the appropriate purchaser and the funds available for the purpose, and as to the valuation of the interest. Those problems would necessitate delay and during the period of the delay, the unsatisfactory relationship between the parties would remain. Winding up, on the other hand, takes the company out of the control of Ms Wong and ensures, one hopes, an orderly realisation and distribution of assets. 242 In causing her private expenses and excessive directors' fees to be met by the company, and in failing to provide information demanded by Shum Yip, Ms Wong breached her fiduciary and statutory duties as a director of CIDC. CIDC is entitled to recover compensation from her, as I shall explain below. I make no finding with respect to Mr Chow. In my view the evidence does not support accessory liability on the part of Rolle for Ms Wong's breaches. Compensation payable by Ms Wong 243 Shum Yip seeks relief against Ms Wong for breach of her fiduciary and statutory duties as a director. Other directors, Mr Chow and Ms Ngan, had at least a measure of involvement in the wrongful use of CIDC's funds to meet the private expenses of Ms Wong, but they are not parties to the present proceeding and I make no finding with respect to their liability. Each director is liable jointly and severally for breach of duty, and Shum Yip seeks recovery against Ms Wong alone. 244 Relief is sought by way of damages or "equitable damages", plus interest. The remedy is sought derivatively, on behalf of CIDC. Equitable compensation, to be distinguished from common law damages, is available as a remedy for breach of the fiduciary duty of a director: Norton v Lord Ashburton [1914] AC 932, 956; Warman International Ltd v Dwyer (1995) 182 CLR 544, 556-7. An order for the payment of equitable compensation is designed to make good a loss in fact suffered by the person to whom the duty is owed (CIDC, rather than Shum Yip, in this case) and which, using hindsight and common sense, can be seen to have been caused by the breach: Target Holdings Ltd v Redferns [1996] 1 AC 421, 439; Aequitas Ltd v Sparad No 100 Ltd [2001] NSWSC 14 (9 April 2001), paragraph 442. The measure of compensation in equity is generally based on the tort measure of damages, designed to restore the plaintiff to the position that it would have been in but for the defendant's equitable wrongdoing: Target Holdings, at 432. 245 There are some differences between the measure of recovery at common law and in equity, with respect to such matters as foreseeability and remoteness, the doctrine of novus actus interveniens, contributory fault and other matters. However, those differences are not relevant in the present case. Here, Ms Wong breached her fiduciary duty as a director holding an executive position that gave her control over company funds, by causing the company to pay her private expenses, and to pay directors' fees to herself and her daughter that were not properly authorised by board resolution. The company's loss is measured by the depletion of its funds by such payments, together with interest. 246 On the facts of this case it may have been open to CIDC to seek an order for an account of profits against Ms Wong: see Glazier Holdings Pty Ltd v Australian Means Health Pty Ltd (No 2) [2000] NSWSC 6 (22 January 2001). A plaintiff suing for breach of equitable duty is generally entitled to elect between the remedies of account of profits and equitable compensation: see Warman International at 559. In this case, by seeking "equitable damages" rather than an account of profits against Ms Wong, Shum Yip has purported to elect the remedy of equitable compensation. In a derivative action brought under the general law, as I have held the present claim to be, any discontinuation or compromise of the proceeding must occur by court order rather than the unilateral act of the plaintiff, having regard to the plaintiff's representative position. By analogy, the plaintiff in a derivative action probably cannot unilaterally elect between an account of profits and equitable compensation. In the present case, however, I am satisfied that equitable compensation is an appropriate remedy, since the company's funds were expended to pay private debts, rather than used by the wrongdoer to acquire an asset. I shall therefore make appropriate orders for equitable compensation to be paid to CIDC by Ms Wong for breach of her duty. 247 The amount of compensation is not possible for me to ascertain finally at this stage. There are three components to it, namely private expenses, directors' fees and interest. 248 As to the first component, compensation should be paid for the sum of all the private expenses improperly charged by Ms Wong to CIDC. The evidence contains many individual instances, which I have summarised in these reasons for judgment. It is desirable, if possible, to avoid any further inquiry, either before a Master or myself, to ascertain the amount of compensation. I shall therefore make some observations and findings, in order to permit Shum Yip to calculate the precise amount of compensation recoverable in light of this judgment. 249 In the case of travel expenses, each of the specific expenditures that have been identified in this judgment is in my view, wholly an expenditure for private purposes and recoverable against Ms Wong. In the case of telephone expenses, I am satisfied that the vast bulk of the expenditure was for private purposes, although the evidence shows that there were occasionally telephone calls by Ms Wong for a business purpose. However, the evidence does not classify the cost of every single telephone call as a private or business expenditure. Rather than directing an inquiry to establish the correct classification of each telephone call, I have done my best to apply the oral evidence to the printouts of telephone accounts that have been tendered, and have concluded that it would be fair and reasonable to treat as private expenditure 80% of the total amount of the invoices proved by the evidence to have been paid by CIDC to Ms Wong, leaving the remaining 20% of the total properly charged to CIDC for business-related telephone calls. 250 Each of the items identified in this judgment under the heading "Other expenses" apart from the motor vehicles is, in my opinion, a private expenditure wholly recoverable from Ms Wong. As to the motor vehicles, since the evidence indicates that some limited use was made of them for business purposes, recovery will be limited to 80% of the total cost. 251 As to directors' fees, for the reasons I have given recovery is to be limited to fees paid during the period from 8 August 1997 to the date of my orders. Since it would have been necessary for CIDC to procure the services of directors during that period and to pay reasonable directors' fees for their work CIDC's loss should be measured by deducting reasonable directors' fees from the fees actually paid. As I have said, no attempt has been made to justify the amount of fees actually paid, and on the face of it they appear to be excessive having regard to the fact that the company employed managing agents for the Chatswood property, and an accountant, and its only significant asset was that property. Doing the best I can to assess the evidence, it seems to me a reasonable fee for Ms Wong would be 20% of the fees actually paid to her. In my opinion there was, on the evidence, no justification for paying any fee to Olivia Ngan, and so the whole of the fees actually paid to Ms Ngan are recoverable as compensation from Ms Wong for breach of her duty. 252 As to interest, it is appropriate that each item of expenditure recoverable from Ms Wong should bear interest from the date of payment by CIDC to the date of my orders. It is convenient in such cases to use the interest rates set out in Schedule J to the Supreme Court Rules. While compound interest may be ordered against a defaulting fiduciary (Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285, 316-7), Shum Yip has not sought compound interest in this case, and I am not persuaded that it is necessary to order compound interest to protect CIDC, given that Ms Wong's company is a substantial shareholder. Therefore the interest to be calculated should be simple interest. 253 I shall direct Shum Yip to prepare and serve on the defendants a schedule identifying the date of payment by CIDC of each expenditure recoverable from Ms Wong (and where the evidence does not disclose the actual date of payment, the latest date by which the account must have been paid by CIDC, according to the evidence). The schedule should then calculate interest on each item of expenditure, setting up the calculations with sufficient detail that they can be checked by the defendants. 254 As I have said, a claim for compensation is also made under s 1317HD. As far as I can see, the scope and measure of recovery under that provision is the same as under the general law. Conclusions 255 I shall make orders reflecting and vindicating Shum Yip's personal and derivative rights under s 246AA by ordering the winding up of CIDC. I shall make the orders I have just described with a view to assessing damages recoverable by CIDC from Ms Wong. I shall also make orders with respect to damages recoverable by Shum Yip for Rolle's breach of the joint venture agreement. 256 The drafting of these orders will be a matter of some intricacy. I shall stand the manner over and direct Shum Yip to bring in short minutes of orders to reflect these reasons for judgment. ********** Last Modified: 03/04/2002 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.