Patrick Wong and Anor v Willem Van Vlymen and Others

These proceedings concern an application by the First Defendant (Applicant) (Van Vlymen) for orders and directions for the working out of specific performance orders made by Stevenson J in the NSW Supreme Court dated 9 March 2016 (9 March 2016 Orders). These orders were pursuant to the judgment of Stevenson J in Wong v Van Vlymen [2016] NSWSC 161 (Wong v Van Vlymen). In this judgment, Stevenson J was satisfied that Van Vlymen should be ordered to specifically perform a contract entered into by him on or about 25 November 2014 with the First Plaintiff (Respondent) (Wong).

The contract the subject of the 9 March 2016 Orders concerns a joint venture between Wong and Van Vlymen established since 1994 (the Joint Venture). Van Vlymen and Wong each owned 50% respectively of the Joint Venture through their respective companies. The Contract agreed that Van Vlymen would buy the entirety of Wong’s shareholding in the Joint Venture. Van Vlymen has been unable to pay the entirety of the consideration for Wong’s shareholding under the Contract or fully satisfy subsequent settlement agreements.

Relevantly for the Court in the circumstances of this case the Joint Venture, specifically Lever Solomons Limited, owns two properties at Edson (Bloody) Ridge (Bloody Ridge) and Hells Point (Hells Point) respectively in the Solomon Islands.

The Applicant’s Notice of Motion filed 27 October 2017 sets out the following orders sought:

The Applicant’s Points of Claim (POC) filed 15 November 2017 clarified the above Notice of Motion.

During the course of argument, the Applicant pointed specifically to Prayer 3 of the above Notice of Motion as being the most relevant to the claim.

In 1994, Van Vlymen and Wong entered into the Joint Venture, which involved a number of corporate entities, the structure of which is set out below at Annexure 1 (POC [3]).

Van Vlymen claims he is the sole shareholder and director of Orbis Commodities Pty Ltd (Orbis), Pacific Investment Holdings Pty Ltd (PIH) and Pacific Investments Ltd (PIL) (POC [2]). This is not disputed by Wong, except to claim in the Points of Defence (POD) that Van Vlymen’s wife Margriet Van Vlymen is also a director and shareholder of Orbis (POD [2]).

Wong is the sole shareholder and director of OSTI (POC [1]).

Wong and Van Vlymen each owned 50% of the Joint Venture through these companies, with the Joint Venture in turn controlling four companies identified in Annexure 1, being:

Wong denies that the business arrangement between Wong and Van Vlymen as of now can still properly be described as a Joint Venture (Points of Defence [4]). For the sake of clarity, the business arrangement will nevertheless be called the Joint Venture for the chronology.

The relevant chronology that follows is in part summarised by Stevenson J in Wong v Van Vlymen at [1]-[10].

The Joint Venture owns various parcels of land in the Solomon Islands and Cook Islands and involves generally the trading and transporting of goods within the Pacific Island nations (Wong v Van Vlymen [1]).

From 21 November 2014 to 25 November 2014, by an exchange of emails between their solicitors, Wong and Van Vlymen reached a legally binding agreement at that time (as determined by Stevenson J) (the Contract). The Contract stipulated that the ‘Wong entities’ would sell the entirety of the Respondent’s interest in the Joint Venture to the Applicant’s ‘Van Vlymen entities’ (Wong v Van Vlymen [2]).

The relevant terms of the Contract relating to this agreement are as follows (Wong v Van Vlymen [3]):

Between 5 and 19 December 2014, Wong and Van Vlymen negotiated the terms of the comprehensively drafted settlement agreement contemplated by clause 2 of the Contract above (First Settlement Agreement) (Wong v Van Vlymen [6]).

On 22 December 2014, the First Settlement Agreement was executed by Wong and OSTI and sent to Van Vlymen’s solicitors on 22 December 2014 (Wong v Van Vlymen [7]).

It is clear that Van Vlymen was subsequently unable to pay the non-refundable deposit on time, and was in continual default of his obligations under the Contract and First Settlement Agreement.

On 1 March 2016, Stevenson J delivered his decision in Wong v Van Vlymen, wherein His Honour was satisfied that it would be difficult for Wong to prove the value of his shares in the Joint Venture and thus what damages he had suffered as a result of Van Vlymen’s failure to perform (Wong v Van Vlymen [34]). Stevenson J was persuaded that the Contract should be specifically performed (Wong v Van Vlymen [72]).

On 9 March 2016, Stevenson J made the orders for specific performance of the Contract decided upon in His Honour’s 1 March 2016 judgment, including the initial USD $250,000.00 deposit and latter settlement sums.

On 11 March 2016, Wong and Van Vlymen entered into a further settlement agreement (Second Settlement Agreement) (SK1 2-16). Relevantly it provided as follows:

On 17 June 2016 (17 June 2016 Orders), Stevenson J made further orders temporarily staying the previous orders for specific performance until 29 July 2016. This stay was contingent upon Van Vlymen’s undertaking to the Court to take all such steps as reasonably able to raise the funds necessary for the deposit and settlement sums, including the sale of his properties and pursuing judgment for the sale of Hells Point. Further orders were made by Stevenson J on 5 August 2016 and 2 September 2016.

In the period following the 9 March 2016 Orders and 17 June 2016 Orders, Van Vlymen was unable to perform the contract or satisfy the settlement agreements (Applicant’s Submissions [6]).

Van Vlymen did pay the USD $250,000.00 deposit under the Second Settlement Agreement, although Van Vlymen claims this was paid on 2 September 2016 (POC [17]) and Wong claims this was paid on 26 August 2016 (POD [16]).

On 5 October 2016, receivers Christopher Darin and Craig Malanos (the Receivers) acted as trustees for sale in respect of real property held personally by Van Vlymen and his wife (POC [19]). It is agreed by parties that these receivers were privately appointed (T3/25-31).

On 4 November 2016, Van Vlymen and Wong entered into a Settlement Deed (Settlement Deed) (SK1 17-40). This Settlement Deed provided that the Van Vlymen entities would pay the consideration still owing under the Second Settlement Agreement as well as a further payment of AUD $1,400,000.00 by 28 February 2017.

On or about 4 November 2016, Van Vlymen paid the AUD $100,000.00 owed under the Settlement Deed (POC [21]).

On or about 20 November 2016, Van Vlymen paid the $20,000.00 owed under the Settlement Deed (POC [22]).

In about July 2017, the Receivers sold real property owned by Van Vlymen and his wife and realised in the order of AUD $1,600,000.00 (POC [23]).

On 20 February 2017, Van Vlymen caused Lever Solomons Limited (LSL), as one of the companies owned by ICSL in the Joint Venture, to enter into a memorandum of agreement with the Solomon Island Government (Land Sale Memorandum of Agreement). In this agreement with the Solomon Island Government, LSL and the Joint Venture entities agreed to sell the land owned by LSL at Hells Point and Bloody Ridge to the Solomon Island Government (POC [24]).

Wong denies that Van Vlymen had any lawful power to cause such a sale of land or transfer of interest, although LSL subsequently adopted Van Vlymen’s conduct (POD [20]-[21]).

The purchase price under the Land Sale Memorandum of Understanding was SBD $50,000,000.00 (POC [26]).

On 6 March 2017, as a result of continued default on the Contract and Settlement Deed, the Receivers were appointed for the Van Vlymen entities that held Van Vlymen’s 50% share in the Joint Venture (POC [27]; POD [23]). During argument, it was agreed between the parties that the receivers were privately appointed.

Between 12 June 2017 and 4 July 2017, the Land Sale Memorandum of Agreement was varied to provide for the sale of Bloody Ridge separately for AUD $1,400,000.00, although the precise details of this variance are disputed by the parties (POC [28]; POD [24]).

On 10 July 2017, the shareholders of ICSL voted to remove Van Vlymen as director and appointed Augustine Rose as director in his place (POC [29]).

On 14 July 2016, ICSL voted as shareholder of LSL to remove Kay Littlejohn as director of LSL and to appoint Augustine Rose, Maurice Mae and Xuguo Zhang as directors of LSL (POC [30]).

On or about 8 August 2017, the separate sale of Bloody Ridge was completed and the Solomon Islands Government deposited AUD $1,399,975.00 to the trust account of Eakin McCaffery Cox Solicitors on trust for LSL (POC [31]-[32]).

On 18 September 2017, the directors of LSL resolved, inter alia, to declare two dividends out of the proceeds of the sale of Bloody Ridge. The precise nature of these dividends is, however, disputed between the parties (POC [33]; POD [26]).

On 31 October 2017, the Solomon Islands Government failed to pay the remaining purchase monies for Hells Point and it appears this remains outstanding (POC [35]). LSL is entitled to file consent orders in relation to the outstanding amount and judgment has been issued in favour of LSL, however the money remains unpaid (POC [36]-[37]).

On 27 October 2017, the Applicant filed his Notice of Motion pursuant to consent orders of 3 November 2017, which were clarified by Points of Claim filed 15 November 2017, seeking the working out of the orders.

On 18 December 2017, the Respondent filed the Points of Defence.

In addition to this chronology, the following affidavits were read in the parties’ submissions to the Court:

Having reviewed these affidavits, much of the material in these affidavits comprises matters of argument and act as vehicles for putting forward contemporaneous documentation, rather than as facilitating the contestation of facts between the parties.

The application brought by Van Vlymen is brought pursuant to the reservation of liberty to apply granted by Stevenson J on 9 March 2016.

In Australian Hardboards Ltd v Hudson Investment Group Ltd [2007] NSWCA 104 (Australian Hardboards), Campbell JA observed at [50]-[54]:

Australian Hardboards has been cited with approval and applied in Katter v Melhem [2015] NSWCA 213 at [81]; Deborah Raulfs v Fishy Bite Pty Limited (No 3) [2013] NSWSC 1732 at [18]; Boutros v Nationwide Capital Pty Ltd [2013] NSWCA 246 at [50]-[51]; Kelly v The Public Trustee [2007] NSWSC 1485 at [6].

The decision of UK Court of Appeal in J Sainsbury PLC v O’Connor [1991] 1 WLR 963 is authority for the following principle:

Because of the domicile of the two relevant groups of companies here involved, two legislative schemes are apposite.

With respect to the issue of financial assistance relevant to this case, section 35 of the Companies Act 2009 (Solomon Islands) provides:

Also of relevance for those companies domiciled in the Cooks Islands is section 2 of the Companies Act 1970-1971 (Cook Islands) (provided in Exhibit R2) which applies New Zealand company law:

The Companies Act 1955 (New Zealand) relevantly provides:

The Companies Act 1993 (New Zealand) reiterates this position in sections 76 to 78:

In Glover v Willert [1996] QCA 132, McPherson J (with Fitzgerald P and Bryne J agreeing as to outcome) observed:

The crux of the Applicant’s submissions is an application for orders and directions for the ‘working out’ of the 9 March 2016 Orders for specific performance made by Stevenson J in relation to Wong v Van Vlymen. Van Vlymen submits that the ‘working out’ orders sought before this Court are aimed at giving full effect to the agreement between the parties, identified in Van Vlymen’s submissions as at SK1 2-16 (which I have described as the Second Settlement Agreement) and the 9 March 2016 Orders (Applicant’s Submissions [3],[19]). See Australian Hardboards per Campbell JA.

The parties in their respective submissions did not precisely describe the relationship between the Contract, the two Settlement Agreements and the latter Settlement Deed. Nevertheless, it appears uncontroversial that the parties focused their attention to the two Settlement Agreements and the Settlement Deed.

The application is purported to be made pursuant to the reservation of liberty to apply granted by Stevenson J on 9 March 2016 (Applicant’s Submissions [14]).

The Applicant (Van Vlymen) submits that Wong has taken actions subsequent to the 9 March 2016 Orders, facilitated in part by the actions of the Receivers, that has subverted the basis upon which the orders were made. Van Vlymen submits unless the 9 March 2016 Orders are worked out, Wong will receive a windfall and Van Vlymen a burden, inconsistent with the Second Settlement Agreement and the 9 March 2016 Orders (Applicant’s Submissions [2]).

Van Vlymen further submits this will mean he will continue to be unable to comply with the 9 March 2016 Orders (Applicant’s Submissions [2]).

Van Vlymen submits that such orders for ‘working out’ are necessary, and more generally, that orders for the working out of specific performance orders are not confined to machinery but can involve complex questions, questions not raised at the time the order was made, and can decide upon rights of the parties (Applicant’s Submissions [14]-[18]).

Van Vlymen submits that the position contemplated and required by the agreement between the parties was that Wong was selling, and Van Vlymen was buying Wong’s 50% of the Joint Venture assets as they then existed (Applicant’s Submissions [4]).

Van Vlymen further submits that the agreement provided that:

Van Vlymen submits he was indeed in control of the Joint Venture as at the time Stevenson J made the 9 March 2016 Orders (Applicant’s Submissions [5]).

However, in July 2017, Van Vlymen asserts he was removed from the board of directors of the Joint Venture entities (with the assistance of the Receivers) and is now unable to utilise the assets of the Joint Venture to facilitate him to fund the purchase price of the agreement (Applicant’s Submissions [7]).

Van Vlymen further submits that Wong should be prevented from taking, by way of dividend, his share of the proceeds of the sale of Hells Point and Bloody Ridge whilst still holding Van Vlymen to pay the full price under the agreement (Applicant’s Submissions [11]). Van Vlymen asserts that this would mean Wong would receive a windfall and would be a subversion of the Second Settlement Agreement and 9 March 2016 Orders (Applicant’s Submissions [12]-[13]).

Instead, Van Vlymen wishes Wong’s share of the proceeds of the sale of Hells Point and Bloody Ridge to act as part satisfaction or pro tanto reduction of the amount owed by Van Vlymen to Wong under the Contract and subsequent settlement agreements.

In the course of argument, it was submitted by Wong that the reference to the Solomon Islands laws by the Respondent ignores the fact that the settlement agreements should be dealt with by Australian law (T8/5-25) and that otherwise the New Zealand company law should apply with respect to the companies incorporated in the Cook Islands (T11/40-50).

Firstly, Wong submits that Van Vlymen’s application with respect to the 9 March 2016 Orders, in the form of applying for a pro tanto reduction of the amount owed to Wong for the sale price of Hells Point and Bloody Ridge, is inappropriate on the grounds of the ‘liberty to apply’ for the working out of the specific performance orders granted by Stevenson J (Respondent’s Submissions [11]).

Wong submits that it is no part of the ‘liberty to apply’ for the working out of the specific performance orders for the Court to require Wong to exercise his powers as a director in a particular manner. He argues the orders sought by Van Vlymen under the aegis of the ‘liberty to apply’ for working out would in fact create a new substantive right in variation of the settlement agreements and would amount to improper interference in the rights and obligations of Wong. He submits it involves litigation of a substantive issue that goes beyond the scope of that contemplated by the ‘liberty to apply’ granted by Stevenson J (Respondent’s Submissions [11]; T18/5-35).

Secondly, Wong points to the subsequent Settlement Deed between the parties, which was signed after Stevenson J made the 9 March 2016 Orders, as fundamentally changing the landscape of the relationship between Wong and Van Vlymen (Respondent’s Submissions [47]; T28/10-40).

Contrary to Van Vlymen’s construction of the Contract and settlement agreements, Wong focuses particularly on the Settlement Deed as providing the most immediate and unconditional obligations relevant for consideration of the Court (Respondent’s Submissions [47]).

Wong characterises the proceeds of the sale of Hells Point and Bloody Ridge as similar to rent or dividends accrued by a Vendor of land prior to the completion of a contract for the sale of that land, wherein the rent or dividends enure to the vendor (not the purchaser) until payment of the purchase money in full: Haque v Haque (No 2) (1965) 114 CLR 98 at 124-5 per Kitto J (Respondent’s Submissions [41]).

Wong therefore concludes that Van Vlymen was not entitled to any benefit of Wong’s shares or to prevent him exercising or enjoying their benefit, unless and until Van Vlymen settles his obligation to complete the Second Settlement Agreement (Respondent’s Submissions [46]).

On the contrary, Wong submits that the dividends declared by LSL to its shareholders on 18 September 2018 reflect simply the profits of the continued regular business activities of the Joint Venture of which Wong is fully entitled to enjoy his share without any pro tanto reduction of the amount owing to him by Van Vlymen (Respondent’s Submissions [52]-[54]).

Fourthly, Wong submits that Van Vlymen sought relief that would be forbidden under section 35 of the Companies Act 2009 (Solomon Islands) (legislation which is relevant to a number of companies in the Joint Venture including LSL).

Section 35 forbids a company providing financial assistance to a person for the purpose of the purchase of shares in certain circumstances. These circumstances include where the assistance does not occur in the normal course of its business and on usual terms and conditions, or where the company would become insolvent afterwards (Respondent’s Submission [12]).

Wong submits that the pro tanto reduction of the dividend could not be characterised as occurring in the normal course of business of any of the companies and is hence prohibited by section 35 (Respondent’s Submissions [13]).

Wong further submits that a company may give such financial assistance only if it remains solvent afterwards and is approved by all shareholders (Companies Act 2009 (Solomon Islands) s 35 and Sch 2 cl 40). Wong therefore argues a court could never make the order sought by Van Vlymen. This is because it would amount to ordering LSL to financially assist for the purpose of acquiring its own shares outside the course of normal business, and where it would be impossible to know whether the Joint Venture or any of the companies within it were solvent or otherwise at the time of order (Respondent’s Submissions [18]). This is contrary, as Wong suggests, to settled principles of company law and the company law of the Solomon Islands.

Wong also characterises the proceeds of the sale of Hells Point and Bloody Ridge as dividends accruing to the Joint Venture. He therefore argues the company law of the Solomon Islands concerning the distribution of dividends would mean it is inappropriate for the Court to be asked to supplant the discretion of shareholders and directors in determining whether and how to pay dividends (Respondent’s Submissions [26]-[35]).

Finally, Wong also asserts that Van Vlymen has breached his fiduciary duty to Wong and to the Joint Venture by misrepresentation of financial position and non-disclosure of the agreement with the Solomon Islands Government for the sale of the Hells Point land (Respondent’s Submissions [5]).

Wong also makes allegations of Van Vlymen’s contempt of court since 3 March 2017. Wong also alleges breach of duty to Wong and the Joint Venture to the extent that Van Vlymen is alleged to have made changes prejudicial to the interests of the business (Respondent’s Submissions [5]).

The orders sought by the first defendant are in the nature of mandatory injunctions. Leaving aside orders 1 and 2, order 3 is regarded by the first defendant as sufficient for his purposes.

It is clear from the above a number of arguments have been advanced in opposition to the motion and in particular to the relief sought. Detailed points of claim and defence in my view starkly highlight some of the complexities of the argument sought to be advanced by the first defendant. To a large extent in my view that exposes the inappropriateness of seeking to bring this motion into the reservation of liberty to apply category.

Upon analysis in my view this is no mere “working out the order” as envisaged by the authorities. On that basis alone I would dismiss the application. However, there are further and equally substantive arguments advanced in opposition to the nature of the relief sought to be claimed and which go to discretion.

In many of the cases where liberty to apply is invoked it is clear that questions only of machinery arise. One of course has to analyse whether what is being sought pursuant to liberty to apply is necessary for the purpose of implementing and giving effect to the principal relief already pronounced.

The desirability of avoiding a further suit if possible is obvious enough. However the application pursuant to liberty to apply cannot have the effect of altering the substance of an order already made. Equally the Court’s jurisdiction in such circumstances is wide.

In theory for example, if an order is one the working out of which its nature involves deciding complex questions or questions that were not specifically raised at the time that the order was made, those questions can be raised and decided pursuant to liberty to apply. There is no embargo upon relying upon changed circumstances after an order has been made. In other words, there is no need for applications under liberty to apply to be confined to pure matters of machinery and either party to the contract is able to raise questions under liberty to apply. An unsuccessful defendant for example is entitled to ensure he receives the benefit of his contractual rights.

In the proceedings before Stevenson J, Van Vlymen opposed the application by Wong of specific performance of the agreement. It was contended by him that the agreement should be construed as subject to a condition precedent to the effect that neither he nor his entities were obliged to execute the settlement agreements until they obtained finance. Indeed it was submitted by Van Vlymen’s counsel (as noted by Stevenson J at [19] in Wong v Van Vlymen) that the objective evidence demonstrated that the plaintiffs were well aware that Van Vlymen required finance before he could execute the settlement agreement. His Honour then set out extracts from parts of the evidence in which Van Vlymen’s solicitor indicated that there may be future potential funding problems. His Honour of course rejected the notion of any implied term, but otherwise made no comments about the effect of the contract. No argument was advanced to suggest as a matter of contract, Van Vlymen was entitled to sell joint venture assets.

The balance of his Honour’s judgment dealt with whether damages was an adequate remedy.

Stevenson J consistently recorded at [53] that Van Vlymen had indicated that he was working on utilising the assets of the joint venture vehicle to raise money to pay Mr Wong. However the joint venture was otherwise a “basket case” (Wong v Van Vlymen [55]). There is no doubt that evidence was adduced before Stevenson J which indicated that one of Mr Van Vlymen’s difficulties in obtaining finance was his inability to comply with certain settlement conditions which in part involved the potential sale of land in the Solomon Islands owned by one of the joint venture entities.

I should add here, although much was made during the course of the application about the conduct of Mr Wong and/or his entities acquiescing and/or proceeding upon an understanding or misunderstanding that joint venture assets were actively being used by Van Vlymen, no case in rectification waiver, estoppel or misrepresentation (as examples) were said to arise on the part of Wong and/or one of his entities in support of the current application. Nothing is pleaded in the points of claim in particular in support of prayers 2 to 4 to the effect that there is any contractual or other basis for those claims. That again highlights the novelty of what in substance is sought to be agitated.

Counsel for Van Vlymen submitted that certain clauses of the Second Settlement Agreement did indeed provide support for the proposition that his client could access his assets of the joint venture to pay the purchase price. I do not accept that that is an appropriate construction. What emerges in my view from the Second Settlement Agreement, when viewed in context with the Settlement Deed, is something quite to the contrary.

It is plain of course from clause 12.1(ii) of the Settlement Deed that nothing in the Deed is intended to vary or derogate from the Settlement Agreements. Upon exchange of the Settlement Agreements the Van Vlymen entities had certain obligations in relation to payment which of course these have not met.

Clause 4.2 of the Second Settlement Agreement amongst other things obliged the Van Vlymen entities not to exercise any vote as directors of or otherwise operate certain designated corporate entities in which the Wong entities had an interest which would amongst other things impede successful completion, or which would cause the Wong entities to be left in a materially detrimental position as against their position at the time of Exchange. Clause 4.2(b) provided that the disposal of any major assets in the Solomon Islands would contravene paragraph 4.2(a), however small regular land sales to cover relevant “Business Relationship expenses” relevantly notified would not. Clause 4.3 provided that subject to the Van Vlymen entities full performance of their obligations under clauses 4.1 and 4.2 the Wong entities undertook on Exchange to Completion to abstain from exercising any vote as directors of LSL and RIPEL.

In my view, the Second Settlement Agreement gives no entitlement to Van Vlymen to dispose of major assets (which would arguably include here, the relevant parcels of land) and retain or use the proceeds in satisfaction of his obligation to complete. His activities as “caretaker” were expressly and for good commercial reasons severely restricted pursuant to the Second Settlement Agreement.

The applicant has not pleaded any of these clauses in his points of claim and it must be accepted that clauses 4.2 and 4.3 arguably would not apply once the Receiver took control of the Van Vlymen entities.

On the other hand and again no doubt for good commercial reason, the Second Settlement Agreement noticeably provides no restriction on Wong’s exercise of power as a director of ICSL or as a representative of a shareholder of ICSL, LSL or RIPEL. Further the Second Settlement Agreement says nothing about giving Van Vlymen control over ICSL. Currently the Van Vlymen entities have not done what was required of them pursuant to clauses 4.4 and 4.5. Importantly, clause 4.5 provided for the transfer of shares in OSTI and resignations of directorships by the Wong entities was not to occur until the completion of the transaction meaning payment in full.

It seems to me therefore that not just the complexity of the allegations made or hinted at but submissions made in oral argument persuades me that a better view is that the applicant really is seeking to agitate new and substantive rights or alternatively some form of rectification waiver or estoppel (unpleaded) so as to seek to restrict Mr Wong and other directors of the relevant companies from doing what they are currently entitled to do. These arguments in my view have the effect of enlarging or altering Van Vlymen’s rights and substantially so. As I have already said on that basis alone I would dismiss the current application by reason of it being an inappropriate vehicle.

The respondents however raise a series of further substantive points upon which I should express my views for the sake of completeness.

The law which governs the conduct of the Solomon Islands entities (Pacific Management, International Com Trade, Lavukal Investment, Russell Island Plantation and Lever Solomons) namely the Companies Act 2009 (Solomon Islands), in particular section 35 forbids a company from giving financial assistance to a person for the purpose of or in connection with the purchase of its own shares unless it is in the normal course of its business and on usual terms and conditions, authorised by the Rules and its directors or shareholders and it remains solvent afterwards. Clause 40 of the Solomon Islands Model Rules (Schedule 2, Companies Act 2009 (Solomon Islands)) provides that a company may give such financial assistance “only if it remains solvent” afterwards and all shareholders have proof. Of course the assistance can be direct or indirect. Similar restrictions apply in the Cook Islands.

In these circumstances I am unable to accept that it was envisaged by the Court that the applicant could draw on the assets of the joint venture companies to pay the purchase price of the shares (other than by properly declared dividend). Van Vlymen’s evidence to one side, the contract prohibited anything being done which would prejudice Wong. It may also be observed that neither the Court nor any director nor any shareholder of a relevant company could know at the date of trial what the financial position of any such company would be at the date of any proposed assistance to Van Vlymen in order to determine the propriety of such future assistance. The relevant moment at which to view the propriety (or not) of such assistance is when the assistance is given, which would include not only when dividends are declared but when they are paid.

Mr Wong has accepted he would have no objection to the Defendants utilising their 50% share of any dividends declared and received to satisfy their obligations to him under the November 2016 Deed and then under the Second Settlement Agreement. Although not a party to these proceedings that is obviously the intention and indeed the duty of the receiver to ensure that this occurs. The receiver is obviously obliged pursuant to the consent order of 17 March 2017 to ensure that the joint venture assets are managed and liquidated for the benefit of both shareholders.

It is further submitted by the respondents correctly in my view that Van Vlymen has no current entitlement to any benefit of Mr Wong’s shareholding in OSTI (or its rights in ICSL and hence LSL), which he contracted through PIL, PIH and Orbis to purchase, including the benefit of any dividend paid. In support of the argument a submission is made to the effect that either under Cook Islands law (Companies Act 1970-1971 (Cook Islands) (as amended)) or the equivalent provision under the Companies Act 2009 (Solomon Islands) has the effect that a company must not recognise equities in its shares. In relation to dividends it is submitted that under section 29 of the Companies Act 2009 (Solomon Islands) they may be paid by LSl and ICSL if and only if that dividend is authorised by all shareholders and if provided by the company rules, by the directors, but subject to those rules. It is submitted therefore that it is wholly within the hands of the shareholders of the Solomon Islands and in turn Cook Islands companies who must declare a dividend and it would be inappropriate for the Court to interfere as it were in such activity. This submission has much force in my view.

In relation to the payment of dividends it is submitted that the payment must be approved in the case of LSL by ICSL as maintained by Mr Wong and the current boards of the relevant companies by Lavukal Investment Company Limited and in the case of ICSL by OSTI and PIL. In the case of OSTI by Mr Wong. In the case of PIL by PIH and in the case of Orbis by the receiver Mr Darin of the shares of Mr and Mrs Van Vlymen.

On 18 September 2018 the directors of LSL resolved to pay two dividends to its shareholders with LICL’s portion being retained in trust pending determination of the issue of its shareholding. One of the dividends was for A$1,000,000.00 of which ICSL’s share is A$751,000.00 and the second subject to the settlement of the sale of Hells Point, SBD$40,000,000.00 of which ICSL’s share would be SBD$30,040,000.00. This was also subject to shareholders approval.

It is submitted that it remains for ICSL by its directors and shareholders to consider passing any part of the A$751,000.00 on to its shareholders OSTI and PIL. Through OSTI Mr Wong’s share would be a maximum of A$375,000.00 and through PIL, PIH and Orbis should they receive and pass on the whole the maximum share of the receiver for the credit of Mr and Mrs Van Vlymen under receivership would be A$375,500.00 before costs. So much cannot in my view be gainsaid.

So far as the settlement for the purchase of Hells Point is concerned it appears the current position is that the Solomon Islands Government has defaulted completing the purchase and has not paid any portion of the SBD$40 million price, although a consent judgment against the Attorney-General of the Solomon Islands Government for SBD$50 million was entered in favour of LSL in the High Court of the Solomon Islands on 2 November 2017, it has not been satisfied and it is problematical whether the judgment will or can be enforced. It is therefore submitted rightly in my view that at the moment and on the current state of the evidence the possibility of SBD$30,040,000.00 dividend to ICSL being paid at all is likewise problematical.

When and if the reality of the recovery of this amount becomes more than a theoretical exercise, it may be a further application can be made, but at the moment because of its theoretical nature the notice of motion is premature and in my discretion relief should also relevantly be refused on that basis.

It is accepted that some at least of the A$751,000.00 dividend to ICSL is likely to be the subject of $375,500.00 dividends to OSTI and PIL.

In any event I do not think on the state of the evidence it is appropriate that at this stage I make any orders which would interfere with the roles and discretions of the directors and shareholders which I will assume for the moment will be exercised according to the law of the relevant place.

The respondents also rely upon the decision of the Court of Appeal in the United Kingdom in J Sainsbury PLC v O’Connor [1991] 1 WLR 963. In particular the passage in the judgment of Lord Justice Nourse at [978] in which his Lordship made the following comment:

This authority was relied upon to support the proposition that until completion when Van Vlymen’s interests crystallise, the declaration of dividends in the meantime is not only entirely appropriate, but it is submitted that the validity of the dividends declared or likely to be declared cannot be challenged. They should be seen it is submitted as profits of the joint venture business and income from shares to his allocation of which Mr Wong is ultimately entitled unless and until Van Vlymen completes the purchase of those shares. Again I consider that to be the better view which provides an additional reason in refusing the relief sought.

I should say something separately about this Deed.

In an attempt to further resolve issues the parties of course entered the Settlement Deed of November 2016. Clause 2 sets out the background of the Deed and makes plainly apparent from, for example (m) in clause 2 BACKGROUND, that the Deed was to provide a mechanism by which, if complied with by Mr and Mrs Van Vlymen and their respective entities, the 2014 Settlement Agreement was to be satisfied and the 2015 Proceedings and 2016 Proceedings would be regarded as settled.

Amongst other things it was equally made plain that if the Deed was not complied with the intention of the parties objectively was to provide a more efficient way of proceeding with the enforcement of the 2014 Settlement Agreement, the rights arising from the 2015 proceedings and this Deed.

Under clause 6 the Van Vlymen entities and Mrs Van Vlymen were to make certain payments in addition to what was defined as the 2016 Total Van Vlymen Considerations on or before 4pm on 28 February 2017.

The payment of those amounts was required by clauses 7.2(d), (e) and 7.3(a) to be secured by mortgage of all the Van Vlymen’s property including shares in Orbis and charges by Orbis, PIH and PIL of all their property including shares consecutively in each of PIH, PIL and ICSL.

Performance of that obligation was secured by a mortgage including the provision for the appointment of a receiver on default and a charge over all of the relevant property again with the option to appoint a receiver in the event of default.

As under the Deed the mortgage of the Van Vlymen shares in Orbis and the charges by it and successive subsidiaries that the receiver was appointed to, those shares and his obligations arise to obtain payment of their obligations, including amounts equivalent to the purchase price. This receivership is quite distinct from the appointments of receivers for Mr and/or Mrs Van Vlymen’s interests in the various properties at Kulnura and Bayview.

To date monies received by the receiver of the shares (and the receivers of the Van Vlymen’s real estate) have gone to pay their costs and part of the debt owed under the November 2016 Deed defined as the “2016 Settlement Payment” without giving rise to any credit for the purchase price of Mr Wong’s shares. Van Vlymen’s current calculation of his indebtedness in relation to the purchase of Mr Wong’s shares result in a calculation of $439,207 outstanding to 31 January 2018. It appears that no part of any dividend of the $375,500 to PIL and hence the receiver will give Van Vlymen a credit against the purchase price of Mr Wong’s shares.

It is submitted that this is entirely appropriate given conduct outlined in written submissions undertaken by Van Vlymen by way of secret profits and/or breaches of duty by him or misrepresentation. I do not propose on the state of the evidence and the way in which the matter was conducted, to make any findings in that regard or on those issues.

In conclusion it seems to me that by the nature of the allegations alone which the applicant seeks to make which in my view are not borne out by reason of construction of the relevant agreement and for the other reasons articulated above it is simply not appropriate to grant the relief that is sought and I would dismiss the motion.

I will of course hear the parties on the question of costs if that is necessary.