In the matter of Pacific Springs Pty Limited

1. [1]

   HER HONOUR: The plaintiffs, Gani and Jorida Mualim, are the parents of Dean Mualim, who died in 2018 aged 53. The first defendant, Ricards Dzelme, was Dean’s de facto husband. Without intending any disrespect, I will refer to the parties by their first names.

2. [2]

   In 2000, the plaintiffs and their son incorporated Pacific Springs Pty Limited, the second defendant, for the purpose of acquiring an ice cream manufacturing business in Paddington called “Nice Cream”. The parents were the shareholders of the company and their son was the director. The parents provided $800,000 to assist in the purchase. In 2004, Dean resolved to issue 1,800 shares in Pacific Springs. He had power to do so under the constitution of the company. The shares were allotted to Dean and made him the majority shareholder of the company. The parents contend that the shares were issued for an improper purpose – to gain control of the company – and seek an order that the register of members be corrected under section 175 of the Corporations Act 2001 (Cth). The defendants say that Dean issued and allotted the shares with the knowledge and consent of his parents, but if that was not the case, then equitable defences of laches and estoppel are relied upon.

3. [3]

   When Dean died – after what appears to have been many years of declining health – Ricards was appointed as a director of Pacific Springs and inherited Dean’s shares in the company. This case also concerns whether Ricards’ appointment as director was valid or whether any order should be made under section 1322(4) of the Corporations Act to regularise his appointment. If the 1,800 shares were not properly issued and allotted to Dean, then Ricards does not wish to remain a director and this issue will fall away.

4. [4]

   Gani and Jorida are from Indonesia and reside in both Indonesia and Singapore. They are in their late 70s. Gani and Jorida have three children being, in order, Dean (or his Chinese name, Ping Kheng), then daughter Yohanna (also known as Josephine) who lives in the United States and son Irwan, who lives in Indonesia. Irwan is married to Ellis Thamrin. It is also relevant to note that Jorida’s brother-in-law is John Tjandra, the Mualim family company in Indonesia is called PT Gadjah Ruku, and there is another Indonesian entity called “CV Megah Chandra Insani” of which Gani and Jorida say they have no knowledge.

5. [5]

   Gani and Jorida gave evidence through a Mandarin interpreter. Jorida speaks and understands English to a limited extent and Gani does not speak or understand English at a relevant skill level to enable him to converse in English. Now and then, Ms Thamrin has also helped Gani as he cannot read English well. Although the parents are the plaintiffs, their solicitor Michael Horton communicated with the plaintiffs through Yohanna and Irwan and has not “corresponded or discussed issues directly with the first and second plaintiff at any time”.

EVIDENTIARY MATTERS

1. [6]

   The critical events occurred from 2000 to 2004, that is, 16 to 20 years ago. As such, the passage of time may have exacerbated the general problem that recollections given in the course of legal proceedings may be distorted, albeit innocently, by a desire to succeed. As McLelland CJ in Equity noted in Watson v Foxman (1995) 49 NSWLR 315 at 319:

2. [7]

   Both sides relied on what Dean had said to them, in respect of which I have borne in mind that, in a claim based on communications with a deceased person, the Court will treat uncorroborated evidence of such communications with considerable caution and will regard as of particular significance any failure of a party to bring forward corroborative evidence which was, or ought to have been, available: Plunkett v Bull (1915) 19 CLR 544; [1915] HCA 14.

3. [8]

   A number of serious allegations were made in these proceedings, including that the parents’ signatures on various documents had been forged and that Dean had fabricated invoices rendered by CV Megah Chandra Insani. Some of these allegations were pleaded and others arose during the hearing and closing oral submissions. The standard of proof remains, of course, the civil standard being proof on the balance of probabilities but qualified having regard to the gravity of the questions to be determined: section 140(2), Evidence Act 1995 (NSW); Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362. As the High Court explained in Neat Holdings Pty Limited v Karajan Holdings Pty Limited [1992] HCA 66; (1992) 110 ALR 449; (1992) 67 ALJR 170 at 170-171 (citations omitted):

4. [9]

   The onus is on the party alleging a forgery to show that a signature was a forgery and not on the other party to show that the signature was genuine: Damjanovic v York Agencies Pty Limited [2003] NSWCA 222 at [25]; Re Sutherland and Arnautovic [2014] NSWSC 821 at [65] per Kunc J.

Witnesses

1. [10]

   The plaintiffs relied on the evidence of Gani and Jorida as well as their solicitor, Mr Horton. Gani and Jorida were cross-examined. The defendants relied on evidence of Ricards; Pacific Springs’ accountants, Saba Salameh and Douglas Trood of Trood Pratt & Co; Pacific Springs’ former solicitors, Timothy L’Orange of Mills Oakley Lawyers and Tom Suttie of HWL Ebsworth Lawyers; Pacific Springs’ office manager, Bradley Teuma; and, an electrician and refrigeration mechanic who worked for Pacific Springs, Brian Summerfield. Ricards and Mr Summerfield were cross-examined.

2. [11]

   The cross-examination of witnesses was undertaken by different means. At the plaintiffs’ request and over the defendants’ objection, Gani and Jorida’s evidence was taken over a videolink from Singapore pursuant to section 22C(4) of the Evidence (Audio and Audio Visual Links) Act 1998 (NSW). The process was assisted by an independent Singaporean solicitor. To ensure that neither party gained a forensic advantage by having their witnesses cross examined by video, I initially directed that the defendants’ witnesses also be cross-examined by the same method but, by consent, Ricards and Mr Summerfield gave evidence in person.

3. [12]

   Gani was a very pleasant older gentleman. Gani appeared to be the family patriarch who has now left financial matters and matters of detail to his children. In re-examination on day three, Gani did not remember being asked about a matter on the first day of the hearing. Gani may have poor short term memory. Although Gani gave evidence through a translator, I observed him appear to read documents in the English language while giving evidence, and note Mr Horton says Gani cannot read English well.

4. [13]

   As cross-examination progressed, Gani was, on occasion, non-responsive and argumentative. Gani took opportunities to give unsolicited answers to advance his case, for example, see [23]. Gani made unreasonable denials, for example at [89]. When Gani got into difficulty, he was very charming and suggested that events had happened too long ago for him to now recall. But, whilst Gani disclaimed any ability to recall something which happened more than 10 years ago, he nonetheless asserted an accurate recollection of events some 20 years ago and disclaimed the defendants’ version of events as “impossible”.

5. [14]

   It will be seen from what follows that Gani lied more than once: see [16], [83], [89] to [96] and [100]. On occasion, Gani said that he did not understand and I accept that was sometimes the case. Overall, I am reluctant to rely on Gani’s evidence in the absence of corroboration from a contemporaneous document, another reliable witness or if his evidence is adverse to his own interests.

6. [15]

   Jorida was an elegant lady who was initially emotional when speaking of her son. But her evidence encountered similar difficulties to that of her husband. Jorida volunteered comments which she thought would assist, for example, at [106]. She repeatedly stated, whether in answer to a question or not, that she and Gani were “100 per cent owner” of Pacific Springs and that money paid to them from the company were profits (and thus, presumably, not in repayment of their loan): for example, see [24] and [73]. Jorida took opportunities to say something unkind about Ricards. Some of her answers were non-responsive or inexplicable, for example, see [31], [60]. Jorida also lied: see [16], [91] to [96]. Jorida had little direct knowledge of the transactions in question but I am reluctant to accept her uncorroborated evidence unless it is against her own interest.

7. [16]

   A troubling piece of both Gani and Jorida’s evidence was their denial that their son was in a long term homosexual relationship with Ricards. Although Gani knew that Dean and Ricards slept in the same bed, he repeatedly denied knowing that they were in a long term relationship. Jorida went so far as to say that the reason they slept in the same bed was, “Because we came to visit them, they had to stay in the same bed.” Whether their evidence was referable to cultural, generational, religious or personal attitudes towards homosexuality, their insistence on repeatedly denying the undeniable under oath was troubling.

8. [17]

   Ricards appeared a decent, straightforward fellow. Ricards hails from Latvia and English was not his first language. It was clear that Ricards had little background in financial or legal matters. His evidence was nonetheless precisely given as to what he did and did not know at particular points in time. Ricards did not overstate the extent of his knowledge or involvement in Pacific Springs or Dean’s financial affairs. I accept his evidence without hesitation. Mr Summerfield appeared to me to be an honest witness. Mr Summerfield was clearly close to Dean and Ricards and remembered Dean fondly.

9. [18]

   Some time was spent by both senior counsel cross-examining witnesses on pleaded facts and admissions as indicating the state of knowledge of the witness at the time the pleaded events occurred. It was reasonably apparent that the pleaded facts and admissions were how the parties understood matters to be when they verified the pleading but not necessarily at an earlier point in time. I made no adverse finding against Gani or Ricards in this regard.

10. [19]

    The missing witness in this case was, obviously, Dean. This case was mostly about what Dean said, thought and did. Dean appears to have surrounded himself and his partner with professional lawyers, accountants and loyal staff who had not a bad word to say about him. Both Gani and Jorida agreed that they had a good relationship with Dean, spoke to him regularly and regarded him as honest and reliable and of good character.

Documentary evidence

1. [20]

   The issue of shares followed upon conversations between Gani, Jorida and Dean to which Ricards was not a party and, indeed, conducted in a language which he did not speak. Gani and Jorida’s recollections of these conversations so long ago may not be reliable, particularly as both said they could not remember things which happened much more recently due to their age. Thus, much turns on the contemporaneous documents. The only documents of any note were produced by Ricards from Dean’s papers. Dean was the record keeper for Pacific Springs and, it appears, a good record keeper. For example, minutes of meeting survive for each financial year, when Dean resolved to pass the accounts. It is relevant to note that, each year, Dean did not recommend the payment of any dividend.

2. [21]

   The parents produced one contemporaneous document from the critical period, being the share certificates issued in 2000. This was produced by Gani during cross-examination rather than in answer to a notice to produce earlier served. Mr Horton forwarded the notice to produce to Yohanna and Irwan and had numerous conversations with them concerning the notice. Yohanna and Irwan told Mr Horton that they had asked their parents to provide any documents that fell within the notice. Mr Horton then advised the defendants’ solicitors that, beyond the documents which were already attached to affidavits filed in the proceedings, the plaintiffs had no other documents in their possession.

3. [22]

   Whilst I do not doubt Mr Horton’s evidence, it appears that, notwithstanding the advice conveyed to Gani and Jorida by Yohanna and Irwan, neither made a proper search for documents answering the notice to produce or, according to their evidence, any search. Gani gave evidence as follows:

4. [23]

   Gani’s explanation as to why he had not made a search for documents did not make sense:

5. [24]

   Jorida gave evidence as follows:

6. [25]

   A submission frequently made by the plaintiffs’ senior counsel was that the absence of contemporaneous documents proved the plaintiffs’ case or disproved the defendants’ case. However, I am not satisfied that the plaintiffs have disclosed all documents within their possession relevant to these proceedings as the plaintiffs have not made a proper search.

FACTS

1. [26]

   More than 40 years ago, the Mualim family established a manufacturing business in Indonesia, apparently a rubber plantation and factory. Gani later established a family hotel business. Over the years, Dean told Ricards a number of times that his parents were wealthy and operated a multi-million dollar business.

2. [27]

   Dean did not live in Indonesia nor work in the family’s manufacturing business. He worked in Sydney as a bond or securities trader for Yamaichi Securities. On 9 June 1995, when on his way to Europe for a holiday, Dean met Ricards in Bangkok and they started a relationship. Dean and Ricards travelled widely and then moved to Australia and began living together. In about February 1996, Ricards first met Gani and Jorida and spent time with them in Palembang, where the family business was based.

Finding a business to buy

1. [28]

   Sometime between 1997 and 1999, Dean told Ricards and Gani that he did not want to work as a securities trader anymore. He wanted to buy a country hotel or motel. Dean told Ricards that Dean was the beneficiary of a Singaporean-based trust which had about $2 million in assets and it would be much easier to get his parents to agree to pay money from the trust if there was real estate involved. Dean and Ricards visited a number of hotels and motels in country Australia but, after inspecting a few, Dean changed his mind and said, “I don’t think I’m suited to country life”. In 2000, a business broker suggested purchasing a business called “Nice Cream”. According to Jorida, it was her idea. She suggested to Dean, “Why don’t we set up a business in Australia. You can work for us and run that business for us?”, to which Dean expressed enthusiastic agreement.

2. [29]

   As the parents describe it, they made the decision to purchase the business and Gani negotiated the price. Gani says that he and his wife met with Dean and the vendors of the Nice Cream business in Paddington, together with the business broker. They walked around the factory and tried the ice cream. Gani was concerned as to why the business was being sold and the vendor showed Gani a tax return, which showed that the business was making a profit. As Ricards recalls it, Gani and Jorida visited Australia when negotiations were well advanced and Dean and Ricards took them to Paddington to show them around the business premises.

3. [30]

   The parents say that they agreed with Dean that the business was purchased for the Mualim family and on the basis that Dean worked in the family business. Gani says he asked Dean, “Dean are you willing to work in this business for me over a long term? … Unless you are willing to go into this for the long term and to look after my interests I am not prepared to invest in this business.” Dean assured his father that he would work hard for Gani.

4. [31]

   According to Ricards, Dean never mentioned having such conversations which his parents. Dean never said that he was working for Gani in a family business. Dean did tell Ricards that he had had an argument with his mother about the money from his trust in Singapore. Dean said,

5. [32]

   The parents say there is no Singaporean-trust. Ricards agreed that Dean never showed him any document establishing the existence of a Singapore trust, nor had he found any documents concerning such a trust in Dean’s papers. In cross-examination, it was suggested that Ricards knew at the time that Dean had no money to contribute to the purchase price.

Pacific Springs

1. [33]

   On 20 July 2000, Pacific Springs was incorporated. Dean was appointed sole director and secretary. Gani and Jorida were allotted 100 ordinary shares each. Gani says that when the company was incorporated, Gani, Jorida and Dean met with the solicitor acting on the purchase of the business. Gani asked the solicitor, “Our family is buying the business … because Dean thinks it will make money. … how can we be sure that our investment will be protected?” The solicitor advised that the business was being purchased by the company and, as Gani and Jorida were the only shareholders of the company, no one could take the company away from them. Tom Suttie and Timothy L’Orange, then both employed by Hunt & Hunt Lawyers, acted for Pacific Springs on the purchase of Nice Cream. Neither recalled speaking to Dean’s parents, which may suggest that the meeting did not happen. Given how long ago the meeting is said to have taken place, it is also possible that Mr Suttie and Mr L’Orange simply no longer recall such a meeting.

2. [34]

   Dean told Ricards that he was going to purchase the business for himself through a company he had just set up. Dean did not tell Ricards how Pacific Springs was structured. Ricards assumed that Dean was the only shareholder and director of the company. During the course of their relationship, Dean never told Ricards that his parents held shares in Pacific Springs. Nor did Gani and Jorida ever say they were shareholders.

3. [35]

   In November 2000, Pacific Springs exchanged contracts to buy “Nice Cream” for $910,000, with a deposit of $95,000 and the balance due on completion. The purchase settled on 19 February 2001. According to Gani, he and his wife travelled to Sydney to sign the paperwork for the purchase of the business and the incorporation of the company. Given the dates on which Pacific Springs was incorporated and the date when the contract was exchanged, more than one trip to Sydney may have been necessary.

4. [36]

   The parties agreed that, notwithstanding the lack of any documentary evidence, the parents advanced $800,000 to acquire the business and the balance of the purchase price, being $110,000, was thus most likely paid by Dean. The parents said that the $800,000 was provided from their own funds or funds under their control. In his fourth affidavit, Gani said, “All of that money was in fact lent to Pacific Springs Pty Limited by me from my own funds. I anticipated this loan to be repaid to me.” Gani agreed that he understood at all times that the money advanced to Pacific Springs was a loan. Ricards did not know that Dean’s parents had lent $800,000 to Pacific Springs to fund the purchase.

Running the business

1. [37]

   From the time that Nice Cream was purchased until Dean died, Dean dealt with the administrative and financial side of the business whilst Ricards looked after the operational side. Dean dealt with the company’s accountants, paid Pacific Springs’ bills and reconciled the company’s accounts. Ricards dispatched ice cream, dealt with suppliers and customers and managed staff and contractors. This delineation of roles is confirmed by Mr Trood, Mr Salameh, Mr Summerfield and Mr Teuma, each of whom has worked for or with the company since 2001 or 2002.

2. [38]

   Ricards often observed Dean introduce himself to new employees, customers and suppliers of Pacific Springs as the director and owner of the business. Ricards says that when Dean and his parents spoke in his presence, he sometimes heard Jorida refer to the business as “Dean’s business” or “Dean’s factory”. Jorida denies this.

3. [39]

   The parents’ role in the business is also reasonably clear. Gani and Jorida were not involved in the running of the business. Gani and Jorida visited Dean and Ricards two to four times a year, staying with them for about a week on each visit. According to Ricards, Dean occasionally took them to visit Nice Cream’s factory on their way to the airport on their flight back to Indonesia if they wanted to take some ice cream with them. On these occasions, Dean introduced Gani and Jorida to the staff as his parents and showed them around the factory and gave them ice cream to sample. Ricards never saw Dean introduce his parents as the shareholders or owners of Pacific Springs or Nice Cream. Gani and Jorida would spend about 15 minutes at the factory and Ricards would pack a few boxes of ice cream with dry ice for them. Mr Teuma gave similar evidence. According to Gani, he and Jorida visited Dean at the company’s premises about twice a year, during which time they carried out a quick visual check on the progress of the business, with visits usually lasting about 30 minutes. Gani and Jorida agreed that when they came to Australia to visit Dean, he told them what was happening with the company but they never asked him for financial documents.

4. [40]

   According to Gani, he spoke to Dean about once a week and, during these conversations, always discussed the progress of the business. Dean assured Gani that the business was doing well and he was making a lot of money for Gani. Gani said he had never obtained or sought financial records in relation to the company. However, Gani denied that this was consistent with him regarding Pacific Springs as owned by his son and explained, “I believe my son will be able to manage the company well”.

5. [41]

   According to Jorida, she spoke to Dean by telephone about once a week from 2000 until he became seriously ill, after which she spoke to him almost every day. On occasion, they discussed issues concerning the company’s business. According to Jorida, she counselled Dean against employing illegal immigrants as he would get the company and his parents in trouble. Once, Jorida asked what happened if a fridge failed and Dean told her they had backup systems in place. On another occasion, they talked about whether the company should sell products outside Sydney and Jorida thought this was a good idea. Dean suggested expanding the business into China and Jorida was not in favour as she did not want to live in China. This evidence was improbable as on no view did Jorida have such a level of involvement in the business as to necessitate her moving to China to support the export of products to that country.

6. [42]

   According to Jorida, Dean discussed with her opening other outlets and putting fridges in shops to sell their product. In about 2009, Dean asked whether Jorida thought they should get advice to create a company to avoid tax as they were paying so much tax, and Jorida said, “No we should not do anything illegal”. According to Jorida, they discussed selling lower quality products at a lower price and Jorida was in favour of this. They discussed whether to continue selling ice cream to Qantas, and Jorida agreed as long as they were making a profit. She did not think they should sell to Singapore Airlines at a much lower price as, if Qantas found out, they would want the same price. They discussed replacing the business van and getting a car for Mr Teuma and Jorida said, “Sure go ahead because he has been working for us for years”.

7. [43]

   Dean never told Ricards of regular telephone conversations with his parents about the progress of the business.

8. [44]

   Mr Trood and Mr Salameh have never met or dealt with Dean’s parents in relation to Pacific Springs or otherwise. So far as they were aware, Dean’s parents were not involved in managing the affairs of Pacific Springs and did not make any decisions for the company. Mr Trood does recall having a conversation with Dean in which Dean told him that his parents had lent Pacific Springs some money around the time that it was incorporated. Dean said the loan was not subject to a loan agreement and was otherwise unsecured. Mr Trood suggested to Dean that his parents could ask Pacific Springs to grant them a charge over its assets to secure the loan, but Dean said they would not be interested in doing that as it would cost too much.

9. [45]

   Mr Summerfield understood that the business was owned by Dean through Pacific Springs. At some time, and Mr Summerfield cannot recall exactly when, Dean told Mr Summerfield, “A large portion of the purchase price of the Nice Cream business was contributed by [Ricards] and me. My parents provided some of the funds too, but this is basically coming out of my inheritance”. Dean also said, “My parents are shareholders of the company because they gave me some money to help me with the purchase of Nice Cream”.

10. [46]

    In 2002, Mr Teuma began working for Nice Cream as the office manager. Dean introduced himself to Mr Teuma as the owner of the business. Mr Teuma worked closely with Dean in Nice Cream’s office, assisting with paperwork and managing the business’ customer base. Mr Teuma always assumed that Dean was the shareholder and director of Pacific Springs. Dean never mentioned that his parents provided him with funds to pay the purchase price of the business or otherwise helped fund its operations. Over the next 18 years, Mr Teuma did observe Dean’s parents visiting the ice cream factory about once or twice a year and they never identified themselves as the owners of the business.

11. [47]

    Gani and Jorida both agreed that they never spoke to Ricards about the business but only spoke to Dean. Nor, according to Mr Teuma, did they ask him anything about the business nor, according to Mr Summerfield, did the parents ever ask them anything about fit out of the premises, a matter with which Mr Summerfield became involved, particularly when the business moved to premises in Wolli Creek and Marrickville.

CV Megah Chandra Insani

1. [48]

   Amongst Dean’s books and records, Ricards found a bundle of invoices issued by CV Megah Chandra Insani to Pacific Springs for management services. Ricards had never heard of CV Megah Chandra Insani and was not aware of any management services provided by CV Megah Chandra Insani to Pacific Springs. The first invoice is dated 31 July 2001 for $8,000 for “Services for the month of July in relation to The management of Pacific Springs Pty Limited”. The letterhead included an address and telephone number in Jakarta. The invoice bore a stamp for CV Megah Chandra Insani of Jakarta and a signature. The invoice also had two stamps, “ENTERED” and “PAID”. It was the first of 105 invoices rendered by CV Megah Chandra Insani to Pacific Springs on a monthly basis from July 2001 to February 2010 totalling $1,068,000. A review of the invoices suggests that the invoices, although said to have been issued monthly, appear to have been issued and paid in batches. I say this because of the differing font and format used in the invoices over time, the payment details recorded in handwriting on the invoices, and having regard to available bank records.

2. [49]

   It was suggested to Ricards in cross-examination that he had produced no evidence that these invoices had been paid by Pacific Springs, to which Ricards replied:

3. [50]

   In his fourth affidavit, Gani said he had no knowledge of CV Megah Chandra Insani or any commercial dealings between Pacific Springs and that company, nor the reason for the rendering of these invoices. “No, I don’t know this company at all”. Jorida said she had never heard of CV Megah Chandra Insani. When asked why she had not stated this in her affidavits, Jorida said,

Payments to Mr Tjandra

1. [51]

   CV Megah Chandra Insani issued a letter dated 23 August 2001 to Pacific Springs requesting, “Please remit amounts payable to …” and providing the details of a Jakarta bank account in the name of Mr Tjandra. The letter bore the company stamp and a signature. By February 2003, twenty invoices had been rendered by CV Megah Chandra Insani totalling $160,000. On 19 February 2003, Pacific Springs paid US$80,000 and US$13,721.74 to Mr Tjandra. This amounted to AUD$160,056. The invoices rendered from July 2001 to February 2003 had the same format, type font, stamps and signature whilst the invoices rendered from March 2003 had a different font. This suggests that the first 20 invoices were rendered in one batch and at about the time that Pacific Springs transferred funds to Mr Tjandra.

2. [52]

   In his fourth affidavit, Gani said he was not aware of any commercial dealings which took place between Pacific Springs and Mr Tjandra, nor the reason for these payments. In cross-examination, Gani agreed that Mr Tjandra was Jorida’s brother in law, although he had not mentioned this detail in his affidavit. Gani’s evidence was broadly that he did not request that these payments be made.

3. [53]

   Gani was cross-examined as to why he had not made any inquiries of Mr Tjandra since becoming aware of the payments made by Pacific Springs to him. Gani said that Pacific Springs was operated by Dean and all monies were handled by Dean, “I've never been involved in operation of the company and every year my son would report to me about the profit and loss and that's good enough to me.” Further, Gani did not now want to question the payments as Dean had died. The fact that Gani did not think it necessary to enquire of his relative as to what the payments were for is also consistent with an acceptance by him that the payments were in order.

4. [54]

   Jorida was not involved in these payments but left it to her husband:

Payments to Ms Thamrin

1. [55]

   On 29 December 2003, CV Megah Chandra Insani sent a letter to Pacific Springs requesting, “Please remit amounts payable to …” an account of Ms Thamrin with a bank in Indonesia, for which an account number was provided. The letter bore the stamp and signature of CV Megah Chandra Insani, as had the monthly invoices. Gani said that he directed that these monies be paid to Ms Thamrin.

2. [56]

   On 31 January 2004, CV Megah Chandra Insani issued an additional invoice to Pacific Springs for, “Consultacy [sic] and works performed for 2000 to 2004” for $100,000. In addition to the usual company stamp, signature, “ENTERED” and “PAID” stamps, this invoice bears a handwritten note “EFT 4/2/04”. Ricards recognises the handwriting as Dean’s. In evidence is a National Australia Bank telegraphic transfer application dated 5 February 2004, arranging the transmission of US$80,000 to Ms Thamrin at the specified account in Indonesia.

3. [57]

   Before the contentious share issue, Pacific Springs had paid $356,000 in respect of the CV Megah Chandra Insani invoices, almost half of the $800,000 advanced by Gani and Jorida to buy the business.

Allotment of shares to Dean

1. [58]

   Article 97 of Pacific Springs’ constitution provided:

2. [59]

   Ricards says that in about late 2003, Dean told him that he had sent some paperwork relating to Pacific Springs to his parents by facsimile. Dean said this was to give effect to what he had agreed with his mother during a telephone call earlier that day. Dean said,

3. [60]

   Jorida denied such a conversation with Dean.

4. [61]

   Gani agreed that it was possible that around 2004, Dean said to him "I want to be the owner of the company. That is because I'm running it and making all the decisions".

5. [62]

   In about 2004, Mr Salameh recalls Dean mentioning to him that his parents had given him control of Pacific Springs. Dean said to Mr Salameh words to the effect,

6. [63]

   Mr Summerfield recalls that, in about 2004 when he was with Dean in the office, he saw Dean preparing some paperwork. “Dean was very fixed on what he was doing.” Dean told Mr Summerfield:

7. [64]

   Mr Summerfield’s work diary recorded that he was at Nice Cream that day doing a specific job. He was in the office looking up an equipment manual on the computer. The equipment manuals were kept in a file on the computer server and Mr Summerfield referred to the file often to research the problems being experienced with the machines. He was in Dean’s office for about an hour and they talked on and off while he looked up the relevant manual. Mr Summerfield was firm that Dean had used the work “allotment” saying,

8. [65]

   On 16 March 2004, Dean resolved to allot 1,800 ordinary shares to himself. A share certificate was issued. On 7 April 2004, a Form 484 Change to Company Details form was lodged with the Australian Securities and Investments Commission (ASIC) by Trood Pratt & Co. The register of members of Pacific Springs as at 7 April 2004 recorded that Gani and Jorida each held 100 ordinary shares and Dean held 1,800 shares.

9. [66]

   After this, Mr Summerfield said that he used to talk to Dean “quite a bit” about “what had transpired with the company”.

10. [67]

    To a large extent, events after this date are irrelevant to whether or not the issue of 1,800 ordinary shares by Dean and the allotment to himself was done with the knowledge and consent of his parents. Subsequent events remain peripherally relevant to the extent that they may indicate Gani and Jorida’s knowledge, and also to the defences of laches and estoppel.

Payments continue to Ms Thamrin

1. [68]

   In July 2004, the typeface of the monthly invoices changed again and the monthly fee increased to $10,000. On 8 October 2004, Pacific Springs transferred $80,000 to Ms Thamrin at her nominated account in Indonesia. The monthly invoice for October 2004 bore a handwritten note, said by Ricards to be in Dean’s handwriting, “Paid $2,000 … $80,000, 8/10/04”. The monthly invoices continued.

2. [69]

   On 7 April 2005, Dean resolved to adopt the accounts for the year ended 30 June 2004 and did not recommend the payment of any dividend. Unlike the financial years ended 30 June 2002 and 30 June 2003, there are no minutes of an annual general meeting of members of Pacific Springs recording that Gani and Jorida attended the meeting. The defendants point to the fact that no shareholders meetings with Gani and Jorida were documented after the issue of 1,800 shares to Dean as consistent with Dean effectively becoming the owner of the company. Gani and Jorida say that they did not in fact attend any meeting of shareholders.

3. [70]

   On 1 June 2005, Pacific Springs transferred $88,000 to Ms Thamrin at a bank account in Singapore. The National Australia Bank telegraphic transfer application contained a message, “Ref: C.V. Megah Chandra Insani”. The monthly invoices continued. The invoice for 30 December 2005 bore a handwritten note that $60,000 had been paid on 6 March 2006. Ricards recognises the handwriting to be that of Dean.

4. [71]

   On 2 February 2006, Gani sent a handwritten facsimile to Dean (Ricards recognises it to be Gani’s handwriting) in Bahasa Indonesian saying “money send to”. The details of a Singapore bank account in the name of Ms Thamrin were provided. The facsimile transmission details on the top of the document indicate that the facsimile was sent from “PT. Gadjah Ruku”, being the plaintiffs’ family company. On 6 March 2006, Pacific Springs transferred $60,000 to Ms Thamrin at the nominated Singapore account. The National Australia Bank telegraphic transfer application bore the same message, “Ref: C.V. Megah Chandra Insani”. The telegraphic transfer accords with the handwritten note appearing on the invoice dated 30 December 2005 already mentioned at [70].

5. [72]

   Approximately $570,000 of CV Megah Chandra Insani’s invoices had been paid by the end of 2006. These payments roughly accord with Gani's third affidavit, a paragraph of which was tendered by the defendants:

6. [73]

   Jorida was also asked about this:

7. [74]

   As to whether the payments made by Pacific Springs were loan repayments or dividends, Dean resolved each financial year, when adopting the accounts, not to declare a dividend. Gani agreed that he had no documents to corroborate that the money which he received from Pacific Springs was a share of profit, and nothing to show that the company was making a profit at the time beyond Dean’s verbal reports to his father.

8. [75]

   On 17 January 2007, Pacific Springs transferred $60,000 to Ms Thamrin in Singapore with the same message, “Ref: C.V. Megah Chandra Insani”. The fact that three National Australia Bank telegraphic transfers – being transfers which Gani directed Dean to make – referred to CV Megah Chandra Insani suggests there was a connection between Gani and CV Megah Chandra Insani.

9. [76]

   When asked about the monies paid to Ms Thamrin, Jorida did not know why $368,000 had been paid to her daughter in law, nor could she even remember when she last spoke to Ms Thamrin, “I’m over 70 years old, close to 80 years old, I couldn’t remember”.

Payments to Gani

1. [77]

   On 31 January 2007, CV Megah Chandra Insani rendered a monthly invoice which differed from the previous invoices. The invoice concluded, “Please remit payment to …” and gave details of the National Australia Bank account which corresponds with an account in Gani’s name, being an NAB Retirement Account. Gani said that the bank accounts were operated by Dean for Dean’s benefit and, although the bank statements contained numerous transactions referring to Gani and Jorida, he did not know anything about these transactions.

2. [78]

   Gani and Jorida had some 29 bank accounts in Australia. In evidence are two bank forms: one in which Gani nominated Dean as an additional cardholder on an account and another in which Gani authorised Dean and Ricards as signatories on the bank account. It would thus appear that Gani trusted his son and Ricards to operate at least some of his bank accounts. I think the more likely explanation is that Dean was authorised to operate at least some of his parents’ Australian bank accounts and, from time to time, his parents deposited funds to those accounts and Dean made payments from those accounts to his parents but, given the passage of time and that Gani appeared to now leave financial matters to his children, Gani no longer recalls specific transactions.

3. [79]

   Further, Gani could not remember whether he had received money from Pacific Springs after 2007.

4. [80]

   The CV Megah Chandra Insani invoices from 2007 on bear a handwritten note providing the date on which the invoice was paid by electronic funds transfer (EFT). Ricards recognises the handwriting on one of these invoices as being Dean’s handwriting. A scattering of National Australia Bank bank statements from this period are in evidence but it is not easy to reconcile the monthly invoices with deposits to the bank accounts. Payment of six invoices on 2 April 2008 $60,000 is likely linked to a deposit made to another NAB bank account of Gani’s on the same day but for half of the amount, being $30,000, with the description, “CV Megah Chandra”. These monies were then transferred from the account with a description in the bank statement, “Gani”. The fact that a deposit was recorded as made by “CV Megah Chandra” and a transfer was made to “Gani” suggests there was a connection between Gani and CV Megah Chandra Insani.

A “C” class share to Gani

1. [81]

   According to the constitution of Pacific Springs, the capital of the company could be divided into share classes including ordinary shares and “C” class shares. Ordinary shares entitled the holder to vote whilst “C” class shares did not. Where there was more than one class of shares on issue, the company could declare a dividend or distribution of profits in respect of particular classes of shares. On 31 August 2007, Dean resolved to allot one “C” class share to Gani. In evidence is a letter from Gani applying for the allotment of the share. The letter was found by Mr Salameh amongst the books and records of Pacific Springs held by Trood Pratt & Co. On 21 September 2007, a Form 484 was lodged with ASIC in respect of the share issue. Gani said he never applied for a “C” class share. Gani said the signature on the letter was not his.

2. [82]

   Whether or not a signature is genuine is a question of fact to be determined having regard to the evidence, both oral and documentary, lay and expert. The Court can make its own comparison of handwriting, albeit that particular attention should be paid to any expert evidence on this issue: Jeans v Cleary [2006] NSWSC 647 at [157] per Johnson J citing R v Doney (2001) 126 A Crim R 271 at 280; [2001] NSWCCA 463 at [61] per the court); Tasoulas v Tasoulas [2018] NSWSC 861 at [30] per Rein J; Lazarus v Director of Public Prosecutions (NSW) [2015] NSWSC 426 at [70]-[71] per Garling J; Re Application of Sutherland and Arnautovic at [67] per Kunc J.

3. [83]

   The signature on the letter applying for the allotment of the “C” class share appears exactly like the signature on Gani’s passport. As a consequence of the letter, Gani was bestowed with a valuable right, being a C Class share. There is no reason to forge Gani’s signature on the letter. I find that the signature was Gani’s and, further, that Gani would have immediately recognised the signature on the letter to be his, and lied when he said it was not.

A loan agreement and charge

1. [84]

   In December 2009, Pacific Springs Investments Pty Limited was incorporated. Dean and Ricards each held one share. Pacific Springs Investments was appointed as trustee of the Pacific Springs Trust. Dean and Ricards were beneficiaries of the trust. The company and trust were established on the advice of Mr Salameh. At the time, Pacific Springs was in dispute with the landlord of the Paddington premises, who claimed that the property had been damaged by water leaking from Pacific Springs’ fridges. Dean told Ricards that he had spoken to Mr Salameh and was going to transfer the equipment and trademarks out of Pacific Springs and into the trust “just in case we get sued by the landlord”.

2. [85]

   On 6 February 2010, three documents were executed:

3. [86]

   The documents were prepared by Mr L’Orange of DLA Philips Fox. Under the Loan Agreement, Gani and Jorida agreed to make a cash advance facility available to Pacific Springs and, in clause 1.2, acknowledged that, at the date of the agreement an Advance of $800,000 had been provided and received by Pacific Springs. Apart from the Loan Agreement, there is no documentary evidence that Gani and Jorida had in fact advanced $800,000 to Pacific Springs. By the Fixed and Floating Charge, Pacific Springs granted Gani and Jorida a charge over Pacific Springs’ rights, assets and undertaking to secure the payment of any monies owed by Pacific Springs to Gani and Jorida.

4. [87]

   Under the Asset Sale and Purchase Agreement, Pacific Springs sold its equipment and intellectual property to Pacific Springs Investments. The purchase price was to be specified in clause 3.1 but the ‘blanks’ were not completed on the executed agreement in evidence. In addition, Pacific Springs Investments and Pacific Springs entered into a trademark licence and an equipment lease agreement in respect of the trademarks and equipment transferred to the Pacific Springs Trust.

5. [88]

   The documents only came to light shortly before the hearing, when Ricards was searching through Dean’s papers in the course of finalising his reply affidavit and in circumstances where Ricards had recently moved house and had stored Dean’s papers in boxes which had yet to be unpacked. The defendants submitted that it stood to Ricards’ credit that, having found the documents – and being under no obligation to disclose the documents in the absence of any order for discovery – he brought the documents to the plaintiffs’ attention where the documents apparently regularised a time-barred debt of $800,000 and gave the parents a charge over the assets of Pacific Springs. I agree. Ricards’ evidence was, in every respect, accurate and fairly given.

6. [89]

   The original documents were in evidence. Each bears the original signatures of Dean on behalf of Pacific Springs and Gani and Jorida, the latter signatures being witnessed by Ricards. However, Gani and Jorida were not in Australia on 6 February 2010. According to their passports, they were in Singapore. Gani and Jorida denied that they signed the documents.

7. [90]

   According to their passports, Gani and Jorida were in Sydney from 18 to 22 February 2010, when both agreed that they met with Dean and Ricards. Gani agreed that the signature on the documents belonged to Dean but denied that he had signed the documents or that it was even possible that they were provided with the documents to sign during their visit. As to why it was said to be impossible, Gani said “Since the time we’ve acquired ice cream business I’ve never signed any other documents”. Gani also denied requesting his children in Indonesia to send his old passport to Singapore to see whether he was in Australia when the documents were signed.

8. [91]

   Jorida emphatically denied that she signed the documents:

9. [92]

   Of course, ten years later, it is entirely possible that Jorida signed these documents but does not now recall having done so. In circumstances where her signature was, as far as I could see, identical to that appearing on her passport, her willingness to disclaim her signature was consistent with her general approach to giving evidence, which was to say whatever she thought she needed to say to advance her case, whether it was true or not.

10. [93]

    Ricards does not recall witnessing Gani and Jorida’s signatures but recognises his signature. Ricards does not recall or know the circumstances in which the documents were signed. Ricards said that he would never sign documents purporting to witness the signature of another person if he did not actually witness their signature. It was put to Ricards strongly in cross-examination that he had not in fact witnessed Gani and Jorida’s signatures. His evidence was firm and convincing:

11. [94]

    There is no doubt that Gani and Jorida did not sign the documents on 6 February 2010. It is perfectly conceivable that they signed the documents whilst they were in Australia soon afterwards, between 18 and 22 February 2010. The Fixed and Floating Charge was stamped for duty on 26 March 2010, that is, after Gani and Jorida had visited Sydney. The charge was registered with ASIC on 30 June 2011.

12. [95]

    There was no expert handwriting evidence although, as the authorities referred to at [82] make plain, I can compare the signatures myself. Gani's signature was the same – as far I could see – with his signature on his passport, bank documents and his affidavits filed in these proceedings. Jorida's signature was also the same – as far as I could see – with the signature on her passport and affidavit. The signature is not the same as her signature on the document referred to at [112], and Jorida was not sure about that signature herself.

13. [96]

    I do not accept the plaintiffs' denials as to their signatures and find their signatures to be genuine. There is no rational explanation why Dean, or anyone else, would have forged their signatures on the documents. By these documents, the plaintiffs were bestowed with valuable rights, being an acknowledgement of an advance of $800,000 and a charge over the assets of Pacific Springs. The most likely explanation is that the plaintiffs have simply forgotten about these documents with the passage of time. However, both refused to concede this possibility and alleged that their signatures had been forged. This reflected poorly on their credit. They may not recall signing the documents a decade ago – that would not be surprising – but their readiness to disclaim signatures which were so clearly their own was concerning.

14. [97]

    The last monthly invoice was rendered by CV Megah Chandra Insani on 26 February 2010. The fact that in February 2010 – after nine years and 105 invoices – both the last invoice by CV Megah Chandra Insani was issued and the Loan Agreement and Fixed and Floating Charge were executed is unlikely to be a coincidence. It may be that Gani and Jorida – having been more than repaid – were content to receive no further payments from Pacific Springs on recognition of rights as recorded in the Loan Agreement and Fixed and Floating Charge.

15. [98]

    Gani says that at no time did Dean or Pacific Springs repay any money that had been advanced to either of them by Gani and Jorida. But it became apparent that Gani had never checked.

16. [99]

    In respect of the CV Megah Chandra Insani invoices, the plaintiffs submitted in oral reply submissions that it was “palpably obvious” that Dean “created all these invoices, and apparently did so for the purpose of giving rise to false or [fictitious] liabilities for supposed management services”. When asked the basis for this submission, the plaintiffs submitted “because they [came] from his records, and there’s no evidence at all that CV Megah had anything whatever to do with the plaintiffs”. The plaintiffs submitted that the invoices demonstrated “a disposition on the part of Mr Dean Mualim to create false or [fictitious] transactions of no commercial reality whatsoever, and it’s entirely consistent with our contention that he effected this allotment in his own interests, with no disclosure whatsoever to his parents”.

17. [100]

    There are several pieces of evidence which strongly point to a connection between CV Megah Chandra Insani and Gani. First, Gani told Dean to make the transfers to Ms Thamrin totalling $368,000, and the transfers post-date a letter from CV Megah Chandra Insani requesting that payments be made to Ms Thamrin. Three of the telegraphic transfer documents issued by the National Australia Bank in respect of payments to Ms Thamrin contain the message "REF: CV MEGAH CHANDRA INSANI". Payments of $160,000 to Mr Tjandra post-date a letter from CV Megah Chandra Insani requesting that the payments be made to him, and Gani made no effort to contact Mr Tjandra and inquire as to the reason for the transfers in circumstances where, if the transactions were untoward, one might expect Gani to enquire of his relative. From January 2007 to February 2010, the invoices issued by CV Megah Chandra Insani, totalling $380,000, contained the bank details for an account with the National Australia Bank in Gani's name. One of Gani’s National Australia Bank bank accounts records a deposit recorded as made by “CV Megah Chandra” and a transfer as made to “Gani”. I conclude that Gani lied about having no knowledge of, or connection with, CV Megah Chandra Insani.

18. [101]

    Given the connection between Gani and CV Megah Chandra Insani, the payments by Pacific Springs of these invoices were in truth payments to the plaintiffs or at their direction, such direction being given by Gani. The more likely explanation as to why the invoices came from Dean’s records is that the invoices were issued to him and he thought the invoices were sufficiently important to keep for many years afterwards, in particular, to confirm that he had repaid his parents’ loan. Given the plaintiffs’ failure to comply with the notice to produce, the fact that copies of these invoices or related accounting or taxation records were not produced by the plaintiffs does not detract from this finding.

19. [102]

    Thus, it appears on the evidence – and in the absence of any reliable evidence from Gani and Jorida to the contrary – that the $800,000 which they advanced to Dean to buy “Nice Cream” was more than repaid. Further, notwithstanding repayment, a Loan Agreement and Fixed and Floating Charge were executed to recognise the loan and grant a charge over the assets of Pacific Springs in respect of it.

Pacific Springs moves premises

1. [103]

   In November 2010, Pacific Springs Investments purchased a property in Wolli Creek. The business moved to these premises. On about 17 April 2015, Pacific Springs Investments exchanged contracts to purchase an industrial unit in Marrickville and, on 23 April 2015, exchanged contracts to sell the Wolli Creek property. From July 2015, Nice Cream traded from the Marrickville property and still does. Whilst Gani and Jorida say that they made, or were involved in making, the decision to buy and sell the Wolli Creek property and to buy the Marrickville property, their evidence is inconsistent with that of Ricards and the solicitor acting on the transactions, Mr L’Orange, and also Mr Summerfield, who did the fit out. Two examples suffice.

2. [104]

   First, Jorida says that she spied the Marrickville property while having coffee with her son and suggested that Pacific Springs buy the property, including because the lot number was her lucky number 13. Gani agrees with Jorida’s evidence. In contrast, Ricards says he found a listing for the Marrickville property on a website and went to inspect it by himself as Dean was in hospital or at home resting after being discharged from hospital. Ricards negotiated the purchase of the property on behalf of Pacific Springs Investments and dealt almost exclusively with the agent. Emails between Ricards and the agent are in evidence, which corroborate his involvement in the negotiation of the purchase. Ricards dealt with DLA Piper Australia, the solicitors for Pacific Springs Investments, in respect of the purchase. Correspondence between that firm and Ricards is also in evidence. Mr Summerfield recalls that he went with Ricards to inspect the Marrickville property and, after it had been purchased, Mr Summerfield fitted out the property to make it suitable for the production of ice cream. Mr Summerfield says that Dean’s parents were not involved in the purchase of the Marrickville property and were not around at the time.

3. [105]

   Second, on 25 November 2016, Gani and Jorida transferred $500,000 to Dean. Gani says that Dean had asked for money to fit out the new factory and Gani agreed to transfer the money to him for that purpose. However, Ricards says that the fit out of the Marrickville property was done between June 2015 and the end of 2015 before Nice Cream moved into the property in early 2016. The costs of fit out were about $300,000 and the majority of the work was done by Mr Summerfield. Some $400,000 had been received by Pacific Springs Investments from an insurer for damage caused to the Wolli Creek property by severe storms and damage from a neighbouring development. The fit out was paid for with the insurance monies or the proceeds of sale of the Wolli Creek property.

Dean dies

1. [106]

   In January or February 2018, Dean was admitted to a hospital in Bangkok for about a month. Dean had been attending this hospital for treatment for several years. Ricards and Jorida had an argument in Dean’s hospital room. According to Ricards, he said he could not stay in Bangkok and needed to go back to Sydney for four to five days to take care of the business and Jorida said, “Do what you want. It is your business. I don’t care what you do, I only care about my son”. According to Jorida, Ricards said he needed to go back to Sydney and she said that she did not care what he did as she was just interested in her son. Jorida supplemented her evidence in cross-examination as follows:

2. [107]

   On one occasion when Mr Summerfield was visiting Dean in hospital, he saw Jorida shouting loudly at Dean something about money and Dean asked the hospital staff to remove Jorida because she was shouting. Jorida was removed from Dean’s hospital room by security officers. Dean told Mr Summerfield,

3. [108]

   On 25 June 2018, Dean made his last Will appointing Ricards as his executor and trustee and bequeathing his estate to Ricards. On 9 September 2018, Dean passed away. On 14 September 2018, on Mr Salameh’s suggestion, Ricards was appointed as director and secretary of Pacific Springs. Mr Salameh prepared the necessary documents, which were lodged with ASIC. As mentioned, the validity of Ricard’s appointment is in issue.

Financial position

1. [109]

   According to financial statements for Pacific Springs for the year ended 30 June 2016, the company incurred a loss of $166,649 and carried forward tax losses totalling $431,239. Issued capital was reported in a note to the accounts as comprising 2,000 ordinary shares fully paid and one “C” class share fully paid. In addition, the balance sheet records non-current liabilities of $844,275, being unsecured shareholder loans. Ricards does not know about these loans. Mr Salameh says Pacific Springs does not retain separate accounts for shareholder loans so he cannot say how much money each shareholder has lent to the company but does remember Dean telling him on occasion that he often paid the company’s expenses using monies belonging to Ricards and Dean and, if the company could not reimburse them in the short term, Dean wanted these amounts recorded as a liability of the company to Ricards and Dean. To the best of Mr Salameh’s knowledge, these amounts were recorded in the financial statements as liabilities.

2. [110]

   Mr Salameh says he has not been able to prepare the tax returns or financial statements for Pacific Springs for the 2017 and 2018 financial years as Dean had not finished completing the necessary accounting entries before he passed away. Based on Business Activity Statements (BAS) lodged to 30 June 2018, it appears that the company did not make a profit in the 2017 or 2018 financial years. Pacific Springs has a current debt to the Australian Taxation Office in the amount of $10,271.99 (which Ricard has since paid) and, on lodging further BAS statements, this debt will likely increase by another $15,000 to $20,000. Mr Salameh estimates that the value of Pacific Springs’ assets is considerably less than its potential liabilities. In cross-examination, Ricards said Pacific Springs supplied restaurants and the company was not really trading given the COVID-19 pandemic.

These proceedings

1. [111]

   In Gani’s third affidavit, he deposed that, since 2017, Gani, Jorida and other members of their family and Gani’s company, Star Horizon Global Limited, have lent Dean $938,000. Gani agreed that these loans were to Dean and not Pacific Springs and that, when Dean died, Gani became concerned about getting any of the money back. Gani agreed that he was very disappointed that he had not got this money back from Dean. Gani agreed that he was bringing these proceedings as he wanted to try and get back assets owned by Dean, “Yes, I would need to get back what I deserve to get back”.

2. [112]

   On 23 October 2018, the plaintiffs’ solicitors wrote to Ricards’ solicitor, copied to the Irwan, enclosing details of their interest in Dean’s estate. The solicitor advised that there were a number of debts owed to the parents “but perhaps a more pressing issue is the management of Pacific Springs Pty Limited which owns a business called Nice Cream, which is wholly owned by the deceased[’s] parents but was operated by the deceased as director”. Attached to the email was a document bearing the signature of Gani and Jorida, although Jorida’s signature did not resemble that in her passport. Jorida said that it was her signature but then was not sure. Nor am I. Either way, the enclosure stated:

3. [113]

   On 19 February 2019, these proceedings commenced. On 1 April 2019, a grant of probate was made in respect of Dean’s Will and Ricards became the executor.

ISSUE OF SHARES

1. [114]

   Whilst the plaintiffs originally sought to wind up Pacific Springs, that relief was not pressed. The plaintiffs sought a declaration that the allotment of 1,800 ordinary shares in Pacific Springs to Dean was made for an improper purpose and was void and of no effect. As the defendants correctly submitted, a declaration that the issuance is void is bad at law as the allotment was voidable, not void: Manthey Redmond (Aust) Pty Ltd (In Liq) v Manthey (2017) 121 ACSR 389; [2017] QSC 145 at [31] per Jackson J, citing Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 294–295 and 315.

Principles

1. [115]

   There was no dispute as to the relevant principles. The power of the director to allot shares is a fiduciary power: Ngurli Ltd v McCann (1953) 27 ALJR 349; (1953) 90 CLR 425 at 439 per the court; Howard Smith Ltd v Ampol Ltd [1974] 1 NSWLR 68 at 76; [1974] AC 821 at 834B per Lord Wilberforce (PC); Whitehouse v Carlton Hotel at 289-290 per the plurality. Of course, it is open to the terms of a company's constitution to permit the exercise of a fiduciary power in a manner that would otherwise constitute a vitiating purpose: Whitehouse v Carlton Hotel at 291-292. The burden of proof falls on those who allege a fraud on the power, being the plaintiffs in this case: Ascot Investments Pty Ltd v Harper [1981] HCA 1; (1981) 148 CLR 337 at 348-349 per Gibbs J; TC Newman (Qld) Pty Ltd v DHA Rural (Qld) Pty Ltd (1987) 12 ACLR 257 at 268; [1988] 1 Qd R 308 at 320 per Williams J; Hancock v Rinehart [2015] NSWSC 646; (2015) 106 ACSR 207 at [61] per Brereton J.

2. [116]

   In determining whether a fiduciary has exercised a power for an improper, extraneous or ulterior purpose, the court adopts a two-stage process: ascertaining, as a matter of law, the purposes for which the power may, and may not be, exercised; and determining as a matter of fact the purpose for which the power was exercised and whether that purpose was within the category of permissible purposes: Kokotovich Constructions Pty Ltd v Wallington [1995] NSWSC 54; (1995) 17 ACSR 478 at 490; Hancock v Rinehart at [60] per Brereton J.

3. [117]

   Turning to the first of these inquiries, it is impossible to define in advance the exact limits beyond which the directors of a company must not ordinarily pass in exercising a fiduciary power to allot shares: Howard Smith Ltd v Ampol Petroleum Ltd at 77 (NSWLR); at 835D (PC); Whitehouse v Carlton Hotel at 289. However, in Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 42 ALJR 123; (1968) 121 CLR 483 at 493, the court (comprising Barwick CJ, McTiernan and Kitto JJ) stated the position as such (citations omitted):

4. [118]

   Where what was done was authorised by the constitution of the company, there must be clear evidence of over-reaching or injustice in some manner such as deceit or oppression before a court will interfere to prevent what has been done having its effect according to the articles: Grant v John Grant & Sons Pty Ltd (1950) 24 ALJR 374; (1950) 82 CLR 1 at 20 per Latham CJ.

5. [119]

   Directors of a company cannot ordinarily exercise a fiduciary power to allot shares for the purpose of defeating the voting power of existing shareholders by creating a new majority: see Ngurli Ltd v McCann at 440 per the court; Ashburton Oil NL v Alpha Minerals NL (1971) 45 ALJR 162; (1971) 123 CLR 614 at 640 per Gibbs J; Howard Smith Ltd v Ampol Petroleum Ltd at 70 (NSWLR); at 837D (PC); Whitehouse v Carlton Hotel at 289 per the plurality; HNA Irish Nominees Ltd v Kinghorn (No 2) (2012) 290 ALR 372; [2012] FCA 228 at [639] per Emmett J. As the plurality stated in Whitehouse v Carlton Hotel at 290 per Mason, Deane and Dawson JJ:

6. [120]

   As Dixon J stated in Mills v Mills (1938) 11 ALJR 527; (1938) 60 CLR 150 at 185:

7. [121]

   Equally, directors of a company cannot ordinarily allot shares with the intention of solely diluting the shareholding of an existing shareholder: Darvall v North Sydney Brick & Tile Co Ltd (1989) 15 ACLR 230; (1989) 16 NSWLR 260 at 336 per Clarke JA; Kokotovich Constructions Pty Ltd v Wallington at 491-492 per Kirby ACJ (Priestley and Handley JJA agreeing).

8. [122]

   Whilst the power to allot new shares is conferred primarily to enable capital to be raised when required, it is too narrow an approach to say that the only valid purpose for which shares may be issued is to raise capital for the company: Howard Smith Ltd v Ampol Petroleum Ltd at 77 (NSWLR) at 835C (PC). As the Barwick CJ, McTiernan and Kitto JJ (comprising the court) observed in Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL at 493:

9. [123]

   Turning to the second step of the inquiry, in ascertaining the purpose for which the power was in fact exercised, the court is concerned with the state of mind of the director and is informed by the surrounding circumstances. As the Privy Council explained in Howard Smith Ltd v Ampol Petroleum at 77 (NSWLR); at 835A (PC) (citing what Viscount Finlay had said in Hindle v John Cotton Ltd (1919) 56 Sc LR 625 at 630-631):

10. [124]

    Of course, there can be no complaint about the exercise of power to allot shares if what was done was with the consent of the existing shareholders of the company. In such circumstances, it cannot be said that there has been a breach of fiduciary duty, as what has transpired has occurred with the consent of the fiduciary's principal.

11. [125]

    Finally, as Young CJ in Eq noted in Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21; [2002] NSWCA 395 at [335] (Meagher JA agreeing with Young CJ in Eq on this issue):

12. [126]

    Thus, for instance, in Ansett v Butler Air Transport Ltd (No 1) (1957) 75 WN (NSW) 299 at 303, Myers J held that resolutions passed by a board of directors issuing certain shares were invalid, being motivated by a desire to ensure there was always a majority of shareholders to carry out the policy which the directors thought best. Notwithstanding, a claim for rectification of the share register made after a delay of some eleven months in commencing the proceedings was refused, although the facts are somewhat different from the case at hand as the company was a public one and there was a real likelihood that persons might have dealt with the shares in the belief that the allotment would not be challenged: at 304-305. See further on this point: J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) at [38-030].

Submissions

1. [127]

   The plaintiffs submitted that the share issue was in breach of Dean’s fiduciary duties as a director. A party to whom fiduciary duties are owed may provide informed consent to a breach of that duty, but only if provided with full and frank disclosure of all material facts: Keech v Sandford (1726) Sel Cas Ch 61; Boardman v Phipps [1967] 2 AC 46; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; Winthrop Investments Pty Ltd v Winns Ltd [1975] 2 NSWLR 666. It was submitted that there was no evidence that Dean provided the plaintiffs with a full account of his purpose in making the allotment, nor that he paid for the shares (the last matter not being pleaded by the plaintiffs and contrary to the financial statements of Pacific Springs, referred to at [109]).

2. [128]

   The plaintiffs submitted that the absence of any documentary evidence that some formal notice of the share issue had been provided to the plaintiffs led to an inference that the allotment was made for an improper purpose. The evidence of Ricards, Mr Summerfield and Mr Salameh as to what Dean told them about his parents agreeing to the allotment, or that he had sent paperwork to his parents in relation to the allotment, was said not to advance the defendants’ case. Their accounts were said to be inconsistent and, the absence of the defendants producing the paperwork, the Court could not conclude that there was any. In oral reply submissions, the plaintiffs submitted that the statements made by Dean to third parties about the allotment “were false statements, designed to give the impression of objectivity and, in truth, designed to obscure the truth”. Further, whatever Jorida might have said on the subject was said not to bind Gani. Further, if the parents had agreed to relinquish their ownership of the company in Dean’s favour, they would simply have transferred their shares to him. It was submitted that Dean chose to allot the shares behind their backs.

3. [129]

   The plaintiffs rejected the suggestion that, given that these events occurred 16 years ago, they simply no longer recalled their conversations with Dean in respect of the allotment. Such a finding was said to be inconsistent with the plaintiffs’ conduct after the allotment of shares as, if they had appreciated that they were no longer controlling shareholders, they would not have continued to take an interest in the business in the years which followed. The fact that neither of the parents asked for any financial records in respect of the company was said not to detract from this submission as it was said to be consistent with Gani’s evidence that he trusted his son and believed that Dean was managing the business profitably.

4. [130]

   The defendants submitted that the notion of Dean obtaining fully informed consent was a distraction. All that Dean needed to tell his parents was that he was going to be the owner of the shares. The defendants submitted that the allotment was properly and formally effected: a written resolution was executed by Dean as the sole director; a formal share certificate was issued in Dean's name; Dean executed a formal application for shares (section 231(b), Corporations Act), pursuant to which he agreed to be bound by the constitution of Pacific Springs. His name was recorded in the register of members. ASIC was notified by lodgement of a Form 484 within the 28 days required by sections 178A, 178D and 254X of the Corporations Act. This indicated the regularity and propriety of the share issue, which was made known openly. Dean did not issue the shares secretly. If Dean wished to steal the company from his parents, this was not the way to go about it. Any company search would reveal the fraud.

5. [131]

   The plaintiffs' contention that Dean, having no lawful or legitimate basis to become a shareholder in Pacific Springs, brazenly, and in gross abuse of his power, sought to deprive the plaintiffs of their 100% shareholding by diluting that shareholding to 10% was an allegation akin to dishonesty which should be scrutinised closely by reference to the Briginshaw standard of proof. It was an allegation inconsistent with the plaintiffs' belief that Dean was honest, reliable and of good character. It was an allegation that jarred with the inherent probabilities. It was inherently unlikely that Dean sought to appropriate to himself a 90% shareholding in Pacific Springs, as opposed to his parents consenting to him having that interest in light of the fact that Dean was successfully running the business. That the plaintiffs denied consenting to the share issue was something they had only come later to believe, reflecting an aversion to Ricards inheriting the advantages bestowed upon Dean, or simply forgotten due to the passage of time and coloured by recent events.

6. [132]

   That the parents consented to the share issued was consistent with their healthy and harmonious relationship with Dean, and the plaintiffs as loving parents keen to assist Dean in his advancement in life, including by financial assistance, as the plaintiffs had done later in Dean's life. Ricards, Mr Salameh and Mr Summerfield gave corroborative evidence that Dean told them something of the share allotment at the time, and to suggest that Dean perpetuated his dishonesty by falsely telling others that his parents had consented to the allotment was inherently unlikely. It beggared belief that Dean had involved others in the ruse.

7. [133]

   The defendants submitted that the plaintiffs' evidence of numerous conversations with Dean regarding the affairs of the company was entirely consistent with the plaintiffs maintaining a small stake in Pacific Springs and showing, as loving, caring parents, an interest in the activities of Dean. It was evidence that went no higher than displaying ordinary familial interaction between parents and their son as to his career and business. It was also relevant that disinterested third party witnesses gave evidence that the plaintiffs never claimed that they were, or otherwise conducted or identified themselves as, the substantial shareholders of Pacific Springs. The fact that Gani and Jorida never requested or received financial statements in respect of Pacific Springs was inconsistent with conduct one might expect from the sole shareholders of a company and consistent with persons holding a token shareholding.

8. [134]

   Nor did the plaintiffs' case explain the issue of a C class share to Gani in 2007, which the defendants submitted only made sense in circumstances where the plaintiffs were not the sole shareholders of Pacific Springs, as otherwise there was no need to issue an additional share to Gani. The Court would infer that the share was issued to enable Dean to declare a dividend to Gani alone, which could not be done if the only shares on issue were ordinary shares. Such action was said to be at odds with the dishonesty with which the plaintiff sought to tar Dean in relation to the issue of 1,800 ordinary shares. This explanation was more probable than the plaintiffs' contention that the C class share was allotted without Gani's involvement or approval.

9. [135]

   The defendants submitted that, as the burden of proof was on the party alleging a fraud on the power, being the plaintiffs, then if the Court did not accept their evidence or was unable to feel an actual persuasion that they did not consent or acquiesce to the allotment, then the plaintiffs failed. Further, "evidence is to be weighed according to the proof which it is in the power of one side to have produced and the power of the other to have contradicted": Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970 per Lord Mansfield. This was said to have particular resonance in respect of the plaintiffs' lack of documentary evidence.

10. [136]

    The defendants submitted that these proceedings were motivated by the fact that, during Dean's life, the plaintiffs and associated family members advanced to him significant sums of money, particularly between 2015 and 2018. That money was not repaid. On Dean's death, the plaintiffs discovered that Dean had left the entirety of his estate to Ricards. Whilst the plaintiffs were content for Dean to own Pacific Springs, that same generosity did not extend to Ricards, as they do not recognise Ricards as Dean's long-term life partner, nor approve of Dean's relationship with him. Thus, the Court would not accept the plaintiffs' denials that they did not consent to the allotment of shares. Rather, they sought to rescind that acquiescence because they disapproved of Ricards inheriting what they saw as a company belonging to their family, which did not include Ricards. At the very least, the Court would find that the plaintiffs have forgotten that they consented to the disputed allotment by reason of the passage of time and in light of their disapproval of Ricards inheriting Dean's shareholding in Pacific Springs. This is consistent with the plaintiffs' failure to recall other significant transactions concerning Pacific Springs, being the issue of the C Class share in August 2007 and the execution of the Loan Agreement and the Fixed and Floating Charge Agreement in February 2010.

Conclusion

1. [137]

   The first thing to observe is that what Dean is alleged to have done is inconsistent with the plaintiffs’ experience of their son throughout his life. Gani and Jorida considered Dean to be honest, reliable and of good character. Although they lived in different countries, they enjoyed a good relationship including regular visits and telephone calls. There is evidence of conflict in respect of money, particularly during the final years of Dean’s life when he was concerned to receive his inheritance. That does not mean that Dean did not do what is alleged. But such acts would be at odds with his character as observed over a long period of time and thus less likely.

2. [138]

   Second, the almost complete absence of documents produced by the plaintiffs is startling in circumstances where, on their case, Pacific Springs was one of the family businesses of the Mualim family, established for 20 years, to which they advanced a loan of $800,000 and which has been operated for their benefit ever since. Whilst one accepts a degree of informality in family businesses, the fact that not a single tax return, bank statement or piece of contemporaneous correspondence has been produced is significant.

3. [139]

   The lacuna of documentary evidence to support the plaintiffs’ case, where the plaintiffs might be expected to be in possession of documents to corroborate their account, may lead to an inference that such documents may not have assisted the plaintiffs’ case: Jones v Dunkel [1959] HCA; (1959) 101 CLR 298 8 at 320 per Windeyer J, citing with approval Wigmore on Evidence (3rd ed., 1940), vol. 2, page 162: “The failure to bring before the tribunal some circumstance, document or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party…”; Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 at [134] (Callinan J) Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 at [44] (Eames JA, with whom Buchanan JA agreed); Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445; [2011] VSC 184 at [131]–[132] (Croft J); Sino-Resource Imp & Exp Co Ltd v Oakland Investment Group Ltd [2018] QSC 98 at [112]. I draw the inference in this case. An absence of documents is also consistent with the plaintiffs having no involvement in Pacific Springs, such as they might have if they regarded the company as owned by Dean.

4. [140]

   Third, the evidence in respect of the incorporation of Pacific Springs, the purchase of “Nice Cream” and the running of the business in the early years is consistent with a loan arrangement rather than the parents buying a business for themselves, to be run by their son. Gani and Jorida were keen to assist Dean in life, including financially and, indeed, generously did so in the final years of Dean’s life when he was in poor health. In 2000, Gani and Jorida provided financial assistance with a $800,000 loan to buy a business. Gani and Jorida then left it to Dean to run the business. While Dean spoke to his parents about the business from time to time, the conversations as described by Gani and Jorida are consistent with parents showing an interest in their son’s business and their son wanting to keep them involved in what he was doing.

5. [141]

   Those working in the business had no idea that the parents owned shares in the company, not even Ricards. Those who provided professional services to the company never dealt with Gani and Jorida. There is some inconsistency between what Mr Trood and Mr Summerfield say Dean told them about the parents’ interest in the business, but the inconsistency is not material. One expects some variation between witnesses’ recollection, genuinely given, of conversations long ago. The impression gained from the evidence of Mr Trood, Mr Salameh, Mr Summerfield, Mr Teuma, Ricards and the parents themselves is that Dean conducted the business of Nice Cream as if he owned it and, beyond regular telephone conversations with his parents in which the business was sometimes talked about, the parents were content for their son to run the business as he saw fit. The parents never sought any financial information or documents to monitor the company’s affairs.

6. [142]

   Fourth, in 2004, the evidence suggests that, given the fact that almost half of the loan had been repaid, Gani and Jorida were content for Dean to be the effective owner of the business as they trusted him to run the business well and continue to repay the loan. By then, Dean was 39 years of age. He had been running the business without his parents’ involvement for four years and, it would appear, successfully. It is likely that Dean wanted to be the majority shareholder. I think it likely that his parents were content for Dean to have control as he had proved himself by running the business for four years and generating enough revenue to repay a sizeable amount of the loan.

7. [143]

   Evidence was given by Ricards, Mr Summerfield and Mr Salameh as to what Dean told them about the allotment of shares. Dean said he had spoken to his parents about it and sent them paperwork. Given the parents’ failure to comply with the notice to produce, the fact that no paperwork was produced by the parents does not mean that Dean did not send it to them at the time. I place little weight on Gani and Jorida’s denials, given the problems I have with their evidence generally.

8. [144]

   It is also evident that Dean lived up to his parents’ trust. He dutifully continued to make payments after the issue of the 1,800 ordinary shares and even after the loan had been repaid in full. He continued to confer financial benefits on his parents. In 2007, he issued a “C” class share to his father and, in 2010, arranged for a Loan Agreement and Fixed and Floating Charge to be prepared, signed, stamped and registered to record his parents’ interest in Pacific Springs. That was when the invoices stopped. Eight months later, Dean and Ricards purchased a property in Wolli Creek, to which Pacific Springs moved its operations. The property was purchased using a different corporate structure, as was the Marrickville property. Whilst the plaintiffs suggest there is something sinister about this, it is also consistent with Dean acquiring assets with his partner rather than his parents, an unremarkable thing for a man in his 40s. Dean may well have spoken to his parents about these transactions, but the fact that Gani and Jorida did not know that the properties were acquired by a different corporate entity may simply be because it was not their concern.

9. [145]

   At the time of Dean’s passing, Jorida was president and commissioner of the family company, PT Gadjah Ruku, Gani was a commissioner, Irwan was a director and each of them together with Yohanna held shares in the company. That is, Dean was not part of this family business. This is because he had his own business in Australia, being Pacific Springs.

10. [146]

    Given that Gani and Jorida’s evidence was so unreliable, I place no weight on their evidence that they did not know or agree to the share issue. I find that they agreed at the time and have either since forgotten or have otherwise chosen to deny that they knew and agreed in order to advance their financial interests in this case. I find that the issue of 1,800 shares to Dean in 2004 was done with the knowledge and consent of the plaintiffs and thus refuse the declaratory relief sought.

APPOINTMENT AS DIRECTOR

1. [147]

   The plaintiffs sought a declaration that Ricards is not a director of Pacific Springs. Ricards only sought to defend this issue if the Court found against the plaintiffs in respect of the share issue. Ricards contended that the combined effect of Article 36 of Pacific Spring's constitution and clause 8(i) of Dean’s Will was that Ricards had the power to apply for and accept directorship of Pacific Springs. Ricards had executed a consent to act as required by section 201D of the Corporations Act. Thus, his appointment was said to have been valid. The plaintiffs submitted that Ricards’ appointment as a director after Dean’s death was not authorised by a combination of the company’s constitution and Dean’s Will. Such a proposition was said to be novel, contrary to principle and without any support in authority.

2. [148]

   In the alternative, the defendants submitted that the Court would cure any irregularity in Ricards' appointment by an order pursuant to section 1322(4) of the Corporations Act as, in this scenario, Ricards could readily appoint himself as a director and secretary at any general meeting of Pacific Springs as he will hold at least 90% of Pacific Springs' ordinary shares. As such, to withhold relief would be to leave Pacific Springs without any directors until a general meeting of shareholders could be properly convened. There was no utility in adopting such an approach, with the power in section 1322(4) of the Corporations Act able to be exercised to address this issue. It was said that there was no risk that "substantial injustice has been or is likely to be caused to any person by making such an order", particularly given Article 62 of Pacific Springs' constitution had already deemed valid all acts performed by Ricards, irrespective of any defect in his appointment. Thus, it was said to be "just and equitable that the order be made": section 1322(6)(a)(iii), Corporations Act.

3. [149]

   The plaintiffs submitted that Article 62 did not assist as Ricards had not been appointed by the plaintiffs. Article 62 echoed the indoor management rule laid down in Royal British Bank v Turquand (1856) 6 E&B 327 but could not validate the activities of a stranger who has chosen to trespass upon the affairs of the company. The plaintiffs submitted that the matter ought not be validated under section 1322(4)(a) as section 1322(6) required the Court to be satisfied that the act sought to be validated was essentially of a procedural nature, that Ricards acted honestly (said to pose a difficulty for Ricards, not being a matter raised in the plaintiffs’ pleadings) and that no substantial injustice had been or was likely to be caused to any person. The plaintiffs submitted that it was incumbent upon Ricards to prove – in respect of every commercial transaction undertaken by the company since his appointment – that no loss had been sustained and that no liability, present prospective or contingent, had been incurred without a corresponding benefit or advantage of value greater than that liability. Absent such proof, it was said that the only inference to be drawn was that the company had incurred losses during Ricards’ directorship, to the consequent prejudice of the plaintiffs as its shareholders.

Appointment of director by Will?

1. [150]

   Article 36 of the constitution of Pacific Springs provides:

2. [151]

   By Article 37, the company can, by resolution, remove a director and appoint another person in their stead. Thus, under Pacific Springs’ constitution, both a director and the members in general meeting have power to appoint a director. “The powers are different in their nature”, as described in respect of regulation 68 of Table A in its full text in Way v A G Way & Co Pty Ltd [1959] ALR 855; [1959] VR 370 at 378 (Herring CJ) and Worcester Corsetry Ltd v Witting [1936] Ch 640 at 650-651 per Lawrence LJ; see more recently Integrated Medical Technologies Ltd v Macel Nominees Pty Ltd (1988) 6 ACLC 426; (1988) 13 ACLR 110 at 114, 116 (Bryson J).

3. [152]

   Articles 43 to 50 of Pacific Springs’ constitution is entitled “Powers and Duties of Directors” and Articles 51 to 63 is entitled “Proceedings of Directors”, the latter concerning meetings, committees, quora, chairpersons and minutes. Article 53 provides: (emphasis added)

4. [153]

   Article 62 provides: (emphasis added)

5. [154]

   There is no question that, under the constitution, Dean had power to appoint Ricards as a director of Pacific Springs, either to serve as an additional director together with Dean or instead of Dean, and either for a specified period of time or at large. But as a general proposition, the office of director is personal to the director, vacated on the director’s death and cannot be ‘handed down’ as personal property nor exercised by a director’s attorney. As Bryson J explained in Mancini v Mancini (1999) 17 ACLC 1570; [1999] NSWSC 799 at [30]:

6. [155]

   Thus, in Mancini v Mancini, a person could not act as director under a power of attorney. The same result pertained in Saad v Doumeny Holdings Pty Limited [2005] NSWSC 893, where the sole director of the company was in a coma and the holder of the director’s power of attorney sought to appoint a director and issue shares. Burchett AJ held that, once the director lapsed into a coma, it was too late for his attorney to seek to perform a duty of a director’s office: at [17]. See likewise, Permanent Trustee Co Limited v Bernera Holdings Pty Limited [2004] NSWSC 56; (2004) 11 BPR 21,505 per Young CJ in Eq; Re Ledir Enterprises Pty Limited (2013) 96 ACSR 1; [2013] NSWSC 1332 at [123] per Black J.

7. [156]

   Pacific Springs’ constitution does not specifically refer to the death of a director nor provide for a director to appoint another director to take their place on their death. Article 36 conferred a power on Dean “at any time … to appoint any person to be a Director”. As Dean made his last Will whilst still a director, potentially a Will could be an instrument of appointment. However, Dean’s power to appoint a director was specified by the constitution to be for two purposes, being “either to fill a casual vacancy or as an addition to the existing Directors”. Appointing Ricards as a director, such appointment to take effect after Dean’s death, cannot be described as an appointment for either purpose. Once Dean died, any power to appoint a director under Article 36 ceased. As Barrett J observed in Beck v LW Furniture Consolidated (Aust) Pty Ltd [2011] NSWSC 235 in respect of an article in relevantly the same terms, and in circumstances where both directors of the company had died, at [36]:

8. [157]

   Article 53 does not assist as it authorises a director to appoint an alternate or substitute director “in his place” and, on Dean’s death, his “place” as a director ceased to exist. Thus, the constitution of Pacific Springs did not confer a power on Dean as a director to appoint a replacement director after his death. That is not to say that a constitution could not confer such a power, but simply to say that the constitution of Pacific Springs did not.

9. [158]

   Nor did Dean by his Will seek to appoint Ricards as a director of Pacific Springs. By clause 2 of his Will, Dean appointed Ricards as executor and trustee of his Estate. If Ricards was not willing or able to act as executor, then Mr L’Orange and Mr Trood were to be executor and trustee instead. By Clause 4, Dean directed his trustee to pay all debts of the Estate and distribute the residue to Ricards. Clause 8 gave the trustees a wide range of powers including to sell assets, apply the capital or income of the Estate for the maintenance, education and advancement of a beneficiary, invest, make loans, acquire or lease assets and, in clause 8(i):

10. [159]

    That is, Dean conferred powers on his trustees which they may choose to exercise, including to apply for and accept directorship of a company in which his Estate was interested or concerned which, of course, included Pacific Springs. Clause 8 can be compared with clause 6 of Dean’s Will, where he specifically appointed Ricards as his nominated successor for the purpose of any power of appointment held by Dean in relation to any trust. Thus, the combined effect of Article 36 and clause 8(i) of the Will did not provide a basis for Ricards’ appointment as director.

11. [160]

    The defendants’ reliance on Article 62 does not advance matters. The article was considered in Wood v Inglis (2008) 68 ACSR 420; [2008] NSWSC 1147, where Barrett J observed that, “the threshold question it poses is whether the particular case is one of defective appointment or no appointment at all”: at [82]. Further, at [83]-[84]:

12. [161]

    In Wood v Inglis, the constitution provided that the company in general meeting had power to appoint a director and, as no such meeting had taken place, “The situation was not one of defective appointment. It was one of no appointment”: at [85]. The same can be said here.

Appointment of executor as director?

1. [162]

   The question then becomes whether, under the Will, Ricard was entitled to apply for and accept directorship of Pacific Springs. It must be immediately noted that Ricards was appointed as a director before a grant of probate of Dean’s Will. Upon Dean’s death, his Estate including his shares in Pacific Springs vested in the NSW Trustee until a grant of probate: section 61, Probate and Administration Act 1898 (NSW). When the grant of probate was made, the Estate divested from the NSW Trustee and vested, as from death, in the executor: section 44, Probate and Administration Act.

2. [163]

   As to whether acts done by an executor before a grant of probate are valid, the law may presently be said to be unclear. There is much authority for the proposition that in New South Wales an executor cannot effectively commence legal proceedings before a grant of probate: Marshall v DG Sundin & Co Pty Ltd (1989) 16 NSWLR 463 at 473 per Yeldham J; Darrington v Caldbeck (1990) 20 NSWLR 212 at 214 per Young J; Byers v Overton Investments Pty Ltd (2001) 109 FCR 554; [2001] FCA 760 at [28] per Branson, North and Stone JJ; Scallan v Scallan [2001] NSWSC 1129 at [10] per Windeyer J cf Hewitt v Gardner (2009) 3 ASTLR 407; [2009] NSWSC 705 at [74] per Ward J. There is also longstanding authority that an executor cannot issue a notice to quit on behalf of a deceased landlord before a grant of probate: Ex parte Callan; Re Smith [1968] 1 NSWR 443 at 448 per Isaacs J.

3. [164]

   However, these authorities were reviewed and a different view was taken by White JA in Carolyn Deigan as executrix for the estate of the late James Boyd Lockrey v Barnard James Fussell [2019] NSWCA 299; (2019) 19 BPR 39,853 (Lockrey v Fussell). In that case, an executor issued two notices to rescind a contract for sale of land which had been entered into by the deceased as vendor. The first notice was issued shortly after the vendor’s death and before a grant of probate. The second notice was issued after a grant of probate. White JA gave a learned exposition of the case law and concluded at [173]:

4. [165]

   White JA noted that the title of the NSW Trustee under section 61 was a bare legal title with no powers of management or administration: at [174]. Further, under the general law, on the testator’s death, the executor was the beneficial owner of the real and personal estate which he or she held for the purpose of carrying out the functions and duties of administration and was a trustee in that sense: at [175], citing Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 17-18. At [176]:

5. [166]

   Thus, his Honour concluded that the notice of rescission issued shortly after the vendor’s death was validly given by the executor but, if not, upon the grant of probate, the contractual rights were taken to have been vested in the executor as from the deceased’s death and the rescission was taken to be validly exercised: at [180]-[181]. The Chief Justice and Macfarlan JA approached the matter on the basis that the second notice of rescission was valid and thus it was not necessary to decide whether the executor had the power to issue the first notice before a grant of probate. Per Bathurst CJ at [5]:

6. [167]

   I note Bathurst CJ’s description of White JA’s reasoning as having “great force”. This case does not concern the commencement of legal proceedings by an executor before a grant of probate, with which Byers v Overton was concerned. By parity of reasoning, however, the conclusion reached by the Full Court of the Federal Court in Byers v Overton would produce a different result than the conclusion reached by White JA in Lockrey v Fussell. This issue was not argued before me.

7. [168]

   The answer in this case emerges from the fact that the appointment of Ricards as director and secretary was ineffective in any event. On 14 September 2018, Ricards consented to act as a director and secretary of Pacific Springs. On 14 September 2018, Ricards signed a “Memorandum of Resolutions of the Sole Director of the Company” in which it was recorded:

8. [169]

   That is, Ricards resolved that he be appointed. The resolution pre-supposed that he had power to do so. Ricards had no power under Pacific Springs’ constitution to appoint a director. Dean’s power to appoint a director had ceased on his death. The constitution did not envisage a director appointing a replacement director by a Will and Dean did not attempt to do so. The power to appoint a director thus rested with the company in general meeting. Section 44 of the Probate and Administration Act does not operate to render valid something which was invalid when done: Ex parte Callan; Re Smith.

9. [170]

   Nor does section 201F of the Corporations Act assist. Section 201F provides:

10. [171]

    Section 201F was utilised in Alexiou v Alexiou [2020] NSWSC 748 where the deceased was the sole shareholder in and director of the company and, after a grant of probate, the executrix transferred the share capital to herself and became a director in a company: at [8]. In Mavris v Level 12 Property Holdings Pty Limited [2018] NSWSC 957, Slattery J considered that section 201F(2) did not apply where neither letters of administration nor probate had yet been granted: at [3], [6]. Rather, his Honour appointed the deceased director’s wife as an administrator of the estate under section 74 of the Probate and Administration Act, under which the Court may, if it thinks necessary or convenient, appoint an administrator with the administration limited as the Court thinks fit. So appointed, the director’s wife could appoint herself as a director of the company under section 201F. But section 201F does not apply here as Pacific Springs had more than one shareholder, including shareholders other than the company’s former sole director. Thus, Ricards’ appointment as director was invalid.

SECTION 1322

1. [172]

   Section 1322 of the Corporations Act provides:

2. [173]

   A case directly on point is the High Court’s decision in Weinstock v Beck, which concerned an order made under section 1322(4) in respect of the invalid appointment of a director where the company’s constitution was relevantly identical. There, the sole director of a company had been acting as a director for some 30 years. In fact, the director was not validly appointed as his appointment had lapsed by operation of the articles of the company at an annual general meeting in 1973. The director was unaware of this. In 2003, the director appointed another director under the equivalent of Article 36 and it was accepted that, as the appointing director was not himself validly appointed, nor was the additional director. In three separate judgments, their Honour’s upheld an order made by Barrett J under section 1322(4) declaring that the appointment of the additional director in 2003 was not invalid by reason of the fact that the appointing director did not hold office as a director at the time. The approach to be taken to construing and applying section 1322(4) was described by French CJ at [39]-[40]:

3. [174]

   Before an order can be made under section 1322(4), the Court must be satisfied of any one of the conditions set out in section 1322(6)(a)(i) to (iii) and, as such, the power to make an order under section 1322(4)(a) is not limited to cases of procedural irregularity: Weinstock v Beck at [10] per French CJ. Thus, it is not necessary for the defendants to establish that Ricards’ appointment was essentially of a procedural nature or that Ricards acted honestly, as the defendants sought an order on the basis that it is just and equitable that the order be made, that is, under section 1322(6)(a)(iii).

4. [175]

   Noting the plaintiffs’ submissions that it would be difficult for the defendants to prove that Ricards acted honesty, I will address this suggested difficulty. In Re ICandy Interactive Limited (2018) 125 ACSR 369; [2018] FCA 533, Banks-Smith J collected the case law in respect of determining whether someone has acted honestly for the purposes of section 1322: at [54]-[57]. Relevant considerations include whether proper competent and expert advice was sought and obtained and whether the person has acted without deceit or conscious impropriety. Mr Ricards said that he was appointed as director at the suggestion of Mr Salameh. Mr Salameh deposed that he expressed the view that Dean’s Will had a provision which allowed Ricards to apply for and accept directorship of Pacific Springs and, given that the plaintiffs had a minority shareholding in the company, lived overseas, had shown no interest in the company in the past and were unlikely to do so now that Dean had died, Mr Salameh asked whether Ricards would like him to prepare the paperwork to make Ricards a director, to which Ricards agreed. Mr Salameh was not required for cross-examination. Thus, the unchallenged evidence is that Ricards acted in accordance with the advice of the company’s accountant. Ricards was entitled to assume that the advice was correct. I find that Ricards acted honestly.

5. [176]

   As to section 1322(6)(a)(iii), “just and equitable” is not defined in the Corporations Act. In The Chinese Cultural Club Limited (2004) 49 ACSR 568; [2004] NSWSC 432, Campbell J, when considering section 1322(6)(a)(iii), adopted Barrett J’s review of the authorities considering how the phrase has been construed in other legislation in Eddy Lau Constructions Pty Limited v Transdevelopment Enterprise Pty Limited [2004] NSWSC 273 at [45]-[47]. See likewise in Re Queensland Bauxite Limited (2018) 364 ALR 661; [2018] FCA 2113 per McKerracher J at [37] and Re Novonix Limited (2019) 141 ACSR 636; [2019] FCA 2198 per Jackson J at [27]-[28].

6. [177]

   Taking the same approach, the words “just and equitable” are words of the widest significance and do not limit the jurisdiction of the Court to any case; it is a question of fact and each case must depend on its own circumstances: Re Bleriot Manufacturing Aircraft Co (1916) 32 TLR 253 at 255. A court directed by statute to proceed according to what is “just and equitable” is given a wide discretion with no necessary limit on the generality of the words, to be applied in their ordinary meaning as calling for the exercise of judgment in the conventional way: Thomas v MacKay Investments Pty Limited (1996) 22 ACSR 294 at 302 per Owen J. In Talga Ltd v MBC International Limited [1976] HCA 22; (1976) 133 CLR 622, Stephen, Mason and Jacobs JJ considered whether it was just and equitable that a transaction be treated as valid under the Banking Act 1974 (Cth). In reaching such a conclusion, at 634:

7. [178]

   Before making an order under section 1322(4), the Court must also be satisfied that no substantial injustice will be caused by the order sought: section 1322(6)(c). As to “substantial injustice”, detriment per se is not the same as substantial injustice. The question is whether the remedial order is unjust in the sense of causing such prejudice overall as to be unfair or inequitable, taking into account the interests of those directly affected: Super John Pty Limited v Futuris Rural Pty Limited (1999) 32 ACSR 398; [1999] NSWSC 627 at [14]-[15] per Santow J. 'Injustice' requires the Court to consider real, and not merely insubstantial or theoretical, prejudice. It is insufficient to show that there may be some prejudice to a member if, on a consideration of the whole matter, the overwhelming weight of justice is in favour of making the order: Re Compaction Systems Pty Limited & the Companies Act (1976) 2 ACLR 135 at 150; [1976] 2 NSWLR 477; followed by French CJ in Weinstock v Beck at [11] per French CJ. See also In the matter of DAC Finance (NSW/QLD) Pty Limited [2020] NSWSC 182 at [35] per Gleeson J; Gofur v Bangladesh Islamic Centre of NSW (BIC) [2020] NSWSC 652 at [41] per Sackar J; Re A Bliss Clinic Pty Limited v Goodwin (No 2) [2020] FCA 869 at [104]-[107] per Colvin J; Car Buyers Australia Pty Limited v Australian Securities and Investments Commission [2020] FCA 599 per Gleeson J at [31]-[32].

Conclusion

1. [179]

   I am satisfied that an order should be made under section 1332(4)(a) of the Corporations Act in respect of Ricards’ appointment as a director of Pacific Springs and any actions which he has taken since. The appointment was made on the advice of Pacific Springs’ accountant in circumstances where Ricards was the executor named in Dean’s Will, the beneficiary of Dean’s Estate and thus soon to become the majority shareholder, and the operations manager of the business for 18 years. Ricards was the obvious person for the job.

2. [180]

   There is no evidence that Ricards has acted in any way untoward in the role of director since his appointment. Ricards is supported by professional accountants and lawyers and a long-serving office manager, Mr Teuma. The minority shareholders had never taken a role in the business and live overseas. Calling a meeting of shareholders will inevitably result in Ricards’ appointment, with no particular benefit to be gained from the time and cost involved in that process. Nor should those who have dealt with the company since Ricards’ appointment be left in any doubt about the validity of those dealings. I consider it just and equitable to make the order sought, and that no substantial injustice will arise from such an order.

LACHES

1. [181]

   It is not necessary for me to consider the defences of laches and estoppel. I will however do so briefly. The defendants submitted that the proceedings were not commenced until almost 15 years after the 1,800 shares were allotted to Dean. Since that time, a significant amount of irremediable prejudice made it unconscionable to sanction the plaintiffs' relief. First and foremost, Dean had passed away. His evidence may have "cast a different complexion on the matter ". It was likely that documentary evidence had been lost by reason of the passage of time. Assuming that Dean owned the company, Ricards allowed Dean to make advances from their personal joint accounts to Pacific Springs as and when the company required working capital. Dean routinely paid business expenses incurred by Pacific Springs using his credit cards, particularly when the company was not generating sufficient cash flow to cover these expenses when they fell due for payment. Ricards marked-up a bundle of credit card statements identifying such payments. Dean then paid his credit card using Dean and Ricards’ personal bank account. Ricards marked-up a bundle of bank statements identifying such payments. Dean told Ricards that Pacific Springs would reimburse their joint bank account when the company was generating enough cash; amounts remaining unpaid would be recorded in the company’s accounts payable ledger in the meantime and, if Pacific Springs could not reimburse the monies in the short term, Dean would record the amounts as a loan to the company. An aged payables report for Pacific Springs indicates that some $300,000 of business expenses is yet to be reimbursed.

2. [182]

   Ricards would not have agreed to this if he had known that Dean’s parents claimed to be substantial shareholders in the company. Nor would he have agreed to work for Nice Cream for the modest annual salary which he received, being from $20,000 to $40,000 a year from 2013 to 2016. Nor would Ricards have agreed to Pacific Springs Investments making unsecured loans to Pacific Springs, recorded in Pacific Springs’ balance sheet for 2016 at $183,467, being rent owed by Pacific Springs to the Pacific Springs Trust, which amount of indebtedness has since increased as Pacific Springs has not paid any rent since. Nor would Ricards have allowed Pacific Springs to occupy the Wolli Creek and Marrickville properties without paying market rent to the Pacific Springs Trust.

3. [183]

   Even if the Court were not satisfied that the plaintiffs consented to or acquiesced in the share allotment, the plaintiffs were said to have been put on notice of the allotment many years ago. The plaintiffs were informed by Dean of his desire to be the effective owner of Pacific Springs. The plaintiffs stopped being involved in the annual general meetings of Pacific Springs from 2004 onwards, in circumstances where they had previously been involved. Such a fact, along with the lack of any financial reports delivered to the plaintiffs, would have indicated that Dean had decided to take over and operate the company as if it were his own consistent with his stated desire. The plaintiffs refrained from taking any steps to monitor the company or their shareholding, including by consulting publicly available material or the records of Pacific Springs, to ensure it remained unaffected notwithstanding indications that Dean had decided to take it over as if it was his own. It was implausible that the issue had not arisen earlier, in circumstances where the plaintiffs were receiving substantial payments from Pacific Springs, which they were treating as dividends. It was difficult to see how the shareholding of Pacific Springs would not have arisen whilst the plaintiffs managed their own tax affairs. In light of these matters, the Court would be satisfied that it would be practically unjust to grant the relief sought.

4. [184]

   The plaintiffs contended that the equitable doctrine of laches had no application as the parents had not acquiesced in the allotment of shares as they had no knowledge that it had occurred. Any prejudice from the passage of time was said to have been attributable to Pacific Springs’ failure to maintain proper books and records as required under the Corporations Act throughout the period during which Dean was its director. The plaintiffs’ evidence indicated that they continued to be involved in the affairs of the company throughout, which was inconsistent with an appreciation by them that they were no longer the controlling shareholders. The Loan Agreement and Fixed and Floating Charge were also said to demonstrate that the defence of laches lacked substance as the documents established the plaintiffs' continuing involvement in the affairs of Pacific Springs (a submission perhaps inconsistent with the plaintiffs’ insistence that they did not execute the documents). Gani said that if he had known that he and his wife’s shareholding in Pacific Springs had been diluted, he would have taken steps to rectify the position earlier.

Principles

1. [185]

   There was no dispute as to the principles. In Crawley v Short (2009) 262 ALR 654; [2009] NSWCA 410 at [163], Young JA (Allsop P and Macfarlan JA agreeing) identified the elements of the defence of laches as comprising three components: knowledge of the wrong, delay and unconscionable prejudice caused by the delay. This summary has been approved in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [415] per Gleeson JA (Meagher and Barrett JJA agreeing); Chung-Yi Pty Ltd v Chih-Yang Chang (No 2) (2018) 128 ACSR 585; [2018] NSWSC 1112 at [96] per Ball J; Finance & Guarantee Company Pty Ltd v Auswild [2019] VSC 664 at [568] per Riordan J; Clementi v Rossi [2019] VSC 725 at [330] per McMillan J.

2. [186]

   In Crawley v Short, Young JA also stated (at [164]): "the key element is whether, in all the circumstances, “it would be practically unjust to give a remedy ... Normally, that means that the defendant must show both delay and detriment suffered by the delay". As Young JA further stated in that same case (at [175]):

3. [187]

   This evaluative analysis accords with what Meagher JA stated in Gerace v Auzhair Supplies Pty Ltd (in liq) (2014) 87 NSWLR 435; [2014] NSWCA 181 at [73] (with whom Beazley P and Emmett JA agreed):

4. [188]

   In respect of the element of knowledge, as Young JA noted in Crawley v Short at [168], the authorities give little guidance as to the extent of the knowledge required. Further, as Young JA observed in Crawley v Short at [180], "it is an unrewarding task to search for some formula as to just what degree of knowledge must exist in any particular case". Instead, it is a "question of fact and degree in each case to be taken together with all the other facts of the particular case ": at [169]. Importantly, however, knowledge encompasses knowledge of the facts giving rise to the cause of action and, as such, the "availability of the means of knowledge is as good as knowledge": Savage v Lunn [1998] NSWCA 204 (unreported) at 3 per the court; Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) and (No 10) (2008) 39 WAR 1; [2008] WASC 239; [2009] WASC 107 at [9306] per Owen J. As the learned authors of Meagher, Gummow & Lehane's Equity Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) state (at [38-070]):

5. [189]

   This accords with the authority confirming that it is not necessarily universally, but rather "ordinarily... necessary that there should be sufficient knowledge of the facts constituting the title to relief”: Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 241 per Lord Selborne; Savage v Lunn [1998] NSWCA 203 (unreported) at 28 per the court. As Dr I. C. F. Spry states in his treatise, Principles of Equitable Remedies (9th ed, 2014), p 447: "It is ordinarily sufficient that the plaintiff has been put on suspicion, that is, that he is aware of sufficient matters to raise in his mind a doubt whether an infringement of his rights has taken place ".

6. [190]

   In respect of the element of unconscionable prejudice, there must be substantial detriment, not merely a trivial inconvenience, caused by the plaintiff’s delay: Duke Group Ltd (In liq) v Alamain Investments Ltd (2003) 232 LSJS 58; [2003] SASC 415 at [153] per Doyle CJ; Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) and (No 10) at [9314] per Owen J. The classic example of prejudice is where the defendant has reasonably acted to his or her detriment in reliance on the plaintiff’s delay: Lamshed v Lamshed (1963) 109 CLR 440; [1964] ALR 321; Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) and (No 10) at [9312] per Owen J. Prejudice may also arise where evidence is lost or witnesses have passed away. In this respect, the issue is not whether evidence per se may have been lost; rather, it is whether evidence that "may have cast a different complexion on the matter has been lost”: Orr v Ford [1989] HCA 4; (1989) 167 CLR 316 at 330 per Wilson, Toohey and Gaudron JJ; Gillespie v Gillespie [2013] QCA 099; [2013] 2 Qd R 440 at [94]-[95] per Margaret Wilson J (McMurdo P and White JA agreeing).

7. [191]

   Ultimately, as noted above, an evaluative analysis must be conducted, cognisant of the matters identified by Meagher JA in Gerace v Auzhair Supplies at [73], as well as "the type of transaction" under consideration (see Crawley v Short at [180]). As Dixon CJ, Webb and Kitto JJ said in Fysh v Page [1956] HCA 13; (1956) 96 CLR 233 at 243:

Conclusion

1. [192]

   The elements of delay and prejudice are clearly present. The shares were allotted in 2004 and no issue was taken with the propriety of the allotment until 2018, 14 years later. Prejudice is obvious: Dean is no longer able to give evidence; his evidence would have been pivotal. Whilst some documents survive, it is likely that other contemporaneous records would have been available if this claim had been brought sooner. Further, Dean and Ricards worked in the business in the intervening 14 years and engaged in a series of transactions which may not have occurred if the parents had asserted their ownership of the business sooner, such as providing funds to the business to support cash flow, leasing properties to the business at below market rent and not taking steps to recover unpaid rent.

2. [193]

   If, contrary to what I have found, Dean allotted the 1,800 ordinary shares to himself without his parents’ knowledge and consent, the following matters are relevant to the element of knowledge:

3. [194]

   If, as the parents said: the purpose of the business was to make money for the Mualim family; Dean regularly told Gani that the business was making money for Gani; the moneys which were paid to them were profits, then the fact that they had not received any money since 2010 must have raised a doubt as to whether the company was profitable as Dean said, or whether their rights as shareholders had been infringed. If the plaintiffs did not know that Dean had allotted 1,800 ordinary shares to himself in 2004, then the plaintiffs had the means of knowledge by performing a simple and inexpensive search of public records. As experienced businesspeople, it would have been within their field of competence to arrange for such searches to be undertaken. Where the parents left the running of the business to the director without any involvement nor return for a protracted period, I consider that the parents were either on notice that the shareholding had changed or were no longer interested in the shareholding of the company. Taking all three elements together, I consider that the defence of laches is established. The plaintiffs acted as to make it unfair that their claim should now succeed.

ESTOPPEL

1. [195]

   Further, it was said that the plaintiffs did not claim to be substantial shareholders of Pacific Springs and, by their silence, impliedly represented to Ricards that they were not the substantial shareholders of Pacific Springs and, induced by and acting in reliance upon this representation, Ricards acted to his detriment in the manner already described such that the plaintiffs are now estopped from asserted that they are the substantial shareholders of the company. The defendants submitted that, in failing to say anything about Dean's shareholding in Pacific Springs (of which they had sufficient knowledge), they impliedly represented that Dean and not them was the majority shareholder and owner of Pacific Springs. Dean and, more particularly, Ricards have acted to their detriment in reliance upon the aforementioned representation. Ricards gave evidence as to conduct he only undertook, and permitted to be undertaken including working for Pacific Springs for below minimum wage, and allowing Dean to meet company expenses with their joint funds, because he believed that Dean was the owner of Pacific Springs. That conduct flowed, in part, from the implied representation stemming from the plaintiffs as to the shareholding ownership in Pacific Springs as their conduct reinforced that Dean was the owner of the company. As Gageler J observed in Sidhu v Van Dyke (2014) 251 CLR 505 at [90]:

2. [196]

   The defendants submitted that this was met in the present case, as was the proposition that the plaintiffs' implied representation caused Ricards to alter his position: Sidhu v Van Dyke at [92] per Gageler J. If the plaintiffs were not held to their implied representation, prejudice would be sustained by Ricards: Grundt v Great Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641 at 674-675 per Dixon J.

3. [197]

   The plaintiffs submitted that their silence could not give rise to an estoppel as a representation must be clear and unambiguous to give rise to an equitable or promissory estoppel: Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at 435.

Conclusion

1. [198]

   It has been held that "mere silence or inaction cannot amount to a representation unless there be a duty to disclose or act": Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947; [1986] AC 80 at 110 per Lord Scarman for the court. However, silence can found an estoppel if the omission to communicate, in conjunction with other surrounding circumstances, creates an implied representation: Amaya v Everest Property Holdings Pty Ltd; Firmstone v Everest Property Holdings Pty Ltd; Sarkar and Islam v Everest Property Holdings Pty Ltd (2010) 15 BPR 28,695; [2010] NSWCA 315 at [156] per Young JA (Beazley P and Campbell JA agreeing); K. R. Handley, Estoppel by Conduct and Election, (2nd ed, 2016, London, Sweet & Maxwell) at [4-005] (citing Black CJ in Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608; (1992) 39 FCR 31 at 32).

2. [199]

   On the plaintiffs’ evidence, the only person they spoke to about Pacific Springs was Dean. They never talked to Ricards about the business. It must have been apparent to Gani and Jorida, on their regular visits to Australia, that Dean and Ricards were devoting themselves to a business which Gani and Jorida owned. The question is whether the parents had a duty to disclose their shareholding to Ricards. I am not satisfied that they did. The plaintiffs were entitled to think that Dean would inform his partner about the company’s shareholders, to the extent that Ricards needed to know. The plaintiffs were entitled to think that it was a matter between Dean and Ricards as to how much of Ricards’ time and resources were devoted to the company. The parents were entitled to assume that adequate arrangements had been made to compensate Ricards for his efforts, such as a wage acceptable to Ricards. The plaintiffs were entitled to think that, even if Dean was giving Ricards wrong information about Pacific Springs, then Ricards was unlikely to believe what they told him in preference to what his husband told him. In the circumstances, the plaintiffs’ silence did not amount to a representation that Dean was the majority shareholder in the company as I do not consider that the plaintiffs had a duty to inform Ricards of the true position.

Orders

1. [200]

   For these reasons I make the following orders:

   1. (1)

      Dismiss the Third Amended Originating Process filed on 19 June 2019.

   2. (2)

      Order pursuant to section 1322(4) of the Corporations Act 2001 (Cth) that the appointment of Ricards Dzelme as director and secretary of Pacific Springs Pty Ltd, and any act performed by him as a director or secretary of Pacific Springs Pty Ltd, is not invalid.

   3. (3)

      Order the plaintiffs to pay the defendants’ costs of the claim and cross claim.

   4. (4)

      Grant liberty for any party wishing to be heard in respect of any variation of Order 3 to apply within 7 days.