In the matter of Seabay Kitchen Pty Ltd [2019] NSWSC 790

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Seabay Kitchen Pty Ltd [2019] NSWSC 790 Hearing dates: 21 June 2019 Decision date: 21 June 2019 Jurisdiction: Equity - Corporations List Before: Black J Decision: Order that specified Forms 484 be withdrawn from registers kept by ASIC. The Second Defendant be restrained from undertaking the specified acts. Catchwords: CORPORATIONS – application for rectification of records maintained by ASIC – where registers maintained by ASIC evidences change to shareholders and officeholders – where no corporate step undertaken to effect such changes – whether court should order rectification of registers maintained by ASIC. Legislation Cited: - Corporations Act 2001 (Cth) Pt 7.11, ss 201G, 1071B, 1308, 1322(4)(b), 1324 Cases Cited: - Chidiac v Bhatt [2014] NSWSC 1253 - Re Centura Global Holdings Pty Ltd [2016] NSWSC 62; (2016) 111 ACSR 185 - Re DJG Equities Pty Ltd [2014] NSWSC 194 Category: Principal judgment Parties: Jing Zhang (Plaintiff) Seabay Kitchen Pty Ltd (First Defendant) Kaifeng Shu (Second Defendant) Australian Securities and Investments Commission (Third Defendant) Representation: Counsel: E T Finnane (Plaintiff)

Solicitors: McCabe Curwood (Plaintiff) K Shu (Second Defendant) (self-represented) (via AVL) File Number(s): 2019/178440

Judgment – ex tempore (revised 22 june 2019)

The matters in issue 1. These proceedings ultimately involve a narrow issue. I should first recognise that there may well be wider disputes between the Plaintiff, Ms Zhang and the Second Defendant, Mr Shu. These may involve, among other things, questions as to the appropriate allocation of assets on the divorce or the breakdown of their marriage, which may be matters for the Family Court of Australia. They may also involve claims of Ms Zhang or Mr Shu against the other, or claims of Mr Shu's trustee in bankruptcy against both Ms Zhang and Mr Shu, so far as Mr Shu's closing submissions indicated that Ms Zhang held assets in her name in order to, in effect, protect them from claims by his trustee in bankruptcy. I will, at the conclusion of this judgment, direct the Plaintiff to make a copy of this judgment available both to Mr Shu's trustee in bankruptcy and to the Australian Securities and Investments Commission ("ASIC"), to allow such further investigation of that matter as is appropriate to occur. I am not asked to decide, and I am not deciding, the wider issues that may be in dispute between Ms Zhang, Mr Shu, Mr Shu's trustee in bankruptcy and his creditors. 2. The question in this case involves a narrower issue. The company in issue, Seabay Kitchen Pty Ltd ("Seabay Kitchen" or "Company") was incorporated on 7 April 2017 (Ex P1, 38) with its registered office in Granville, New South Wales and with Ms Zhang as its initial director and Ms Zhang originally holding all 1,000 of its shares (Ex P1, 39-40). The allocation of 1,000 shares in Seabay Kitchen to Ms Zhang was recorded in a lodgement with ASIC at the time of the Company's incorporation on 7 April 2017 (Ex P1, 74-76). At the time that Seabay Kitchen was incorporated, Mr Shu was, and he remains, an undischarged bankrupt so that, had he held shares in Seabay Kitchen, they would have vested in his trustee in bankruptcy, and he was not eligible to be a director of Seabay Kitchen (Ex P1, 68-69). 3. After the breakdown of the marriage of Ms Zhang and Mr Shu, on 8 May 2019 Ms Zhang notified a change in the Company's registered office address to ASIC, away from the address that had been occupied by Mr Shu (Ex P1, 90-91). Presumably prompted by that act, Mr Shu on 9 May 2019 then notified ASIC of a change to the Company's directors and secretaries, appointing him as a director and secretary of the Company, and also notifying a change to the register, such that Ms Zhang's shareholding was reduced to 200 shares and Mr Shu's shareholding was increased to 800 shares, from nil. Had that transaction been genuine, the shares transferred to Mr Shu would also then have vested in Mr Shu's trustee in bankruptcy. As will emerge, there is no evidence of any underlying corporate step which warranted that notification to ASIC. On 10 May 2019, Mr Shu notified a further change to ASIC, such that Ms Zhang ceased to be a director of the Company. Each of those notifications was certified to be true and complete by Mr Shu as a director of the Company, including the notification given before he had purportedly become a director of the Company. The effect of these notifications is recorded in a current company extract of Seabay Kitchen as having the result that Mr Shu is now the sole director and the secretary of the Company and that Ms Zhang holds 200 shares and Mr Shu holds 800 shares in the Company. 4. Ms Zhang relies on her affidavit where she indicates, consistent with ASIC's records, that she was initially the sole director and shareholder of Seabay Kitchen and contends that she continues to remain the sole director and shareholder of Seabay Kitchen. She refers to the circumstances of the change of address, change of director and change of shareholding in the Company; and denies that she had taken steps to transfer any of her shares in the Company to Mr Shu; or had resigned as a director or secretary of the Company; or had passed a resolution or taken any step to appoint Mr Shu as director or secretary of the Company; or to approve a change of its registered office and principal place of business. 5. Mr Shu, who was self-represented, and appeared in circumstances of some difficulty since he is on remand in respect of another matter, led narrative evidence. In that evidence, he indicated that the Company was structured such that there was at least one other shareholder who had invested almost $400,000 to acquire 40 per cent of the Company's shares and possibly, that there were also other persons with interests in the relevant restaurants. No register of members was tendered and there is no evidence of such a shareholding in that form and there is also no indication of such a shareholding in the notifications given to ASIC, including the most recent notifications certified by Mr Shu and given on his instructions. That is, of course, not inconsistent with such an interest existing as an equitable interest in the shares or by way of some arrangement that was intended to conceal the interests for other reasons. It is sufficient to note, for present purposes, that any such interest of any third party is not reflected in legal ownership of shares in the Company. As I noted above I reach no findings as to any wider disputes, including any equitable rights of third parties in such shares. 6. As I noted above, Mr Shu went somewhat further in closing submissions, to emphasise his role in the management of the restaurants and to ask rhetorically how his ex-wife had funded the establishment of the restaurants when, he contends, she had not worked full time in either China or Australia. Mr Shu contended, in effect, that he was the true owner of the shares in the Company and, as I noted above, he characterised the arrangement with his ex-wife as necessary because of his bankruptcy, implicitly to conceal his ownership of shares in the Company from his trustee in bankruptcy. Again, I reach no findings as to that matter, beyond noting that it seems to me to warrant further inquiry by the appropriate regulators. Mr Shu did not, in evidence or submissions, point to any corporate act undertaken immediately before 9 or 10 May 2019 which provided a basis for the notifications given to ASIC on that date. He emphasised the need to inquire into events between 2017 and 2019 but did not suggest, for example, that his ex-wife had decided to resign as a director or transfer her shares to him immediately before he notified those transactions to ASIC.