FEDERAL COURT OF AUSTRALIA

Norden Holdings Pty Ltd (Trustee) v Martens Investments Pty Ltd (Trustee), in the matter of Amazonia IP Holdings Pty Ltd [2024] FCA 845

ORDERS

THE COURT ORDERS THAT:

1.    The Separate Question, “Were the applicant’s shares in the fourth and fifth respondents validly transferred to the first respondent on or about 27 June 2023?” be answered “no”.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

NEEDHAM J:

1    By its Originating Process filed on 21 December 2023, the applicant seeks, as its ultimate relief:

(1)    declarations as to its ownership of shares in the fourth and fifth respondents. Consequent to this, it also seeks:

(a)    relief pursuant to ss 233(1)(d) or (e), or 1322(4)(b), of the Corporations Act 2001 (Cth) (the Corporations Act); or

(b)    that the fourth and fifth respondents be wound up.

(2)    alternatively, it seeks damages pursuant to s 236 of Sch 2 to the Competition and Consumer Act 2010 (Cth), 1041I of the Corporations Act, or s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth).

(3)    In either case, the applicant seeks interest on any damages or sums awarded, and costs.

2    These reasons are given in relation to a separate question, ordered by Justice Downes on 28 June 2024 pursuant to r 30.01 of the Federal Court Rules 2011 (Cth) (the Rules). The separate question is as follows:

Were the Applicant’s shares in the Fourth and Fifth Respondents validly transferred to the First respondent on or about 27 June 2023?

(Separate Question)

3    In opening, counsel for the applicant put the consequences of each answer to the Separate Question as follows:

… if yes, that means that there has been a valid transfer of shares. The material which has been contained in the affidavits and discovered to us may mean that the misleading and deceptive conduct claim continues with a life of its own. If the answer is no, they haven’t validly been transferred, then the – in my submission, it then moves into the phase of looking at either misleading and deceptive conduct, but more likely an oppression remedy, valuation of the company, and determination of whether, on the applicant’s view, there should be an order that either Mr Martens or the company buy … the applicant’s shares …

4    The applicant submitted that there was a commercial imperative in having the Separate Question determined prior to 2 August 2024. On 24 May 2024, the fourth and fifth respondents (by the second respondent, Mr Dwayne Martens) entered into Convertible Note Deeds with the brother of the second respondent, Wesley Martens (the Deeds). The Deeds provide that on the Maturity Date (being 2 August 2024), the Noteholder may:

… elect to convert some or all of the Notes by giving a Conversion Notice to the Company. Upon giving of the Conversion Notice, these Notes will be deemed to convert and such Conversion Notice once given is irrevocable.

5    Conversion would mean that Wesley Martens would be entitled on conversion to shares in the fourth and fifth respondents. If he elects to convert the notes, the applicant submits it is likely that he will be joined as a party to these proceedings. More will be said about the contested status of the Deeds below.

6    In those circumstances, and despite the fact that there were significant contested factual issues to be determined in the Separate Question which would normally tell against an order under r 30.01 of the Rules being made, the hearing of the Separate Question proceeded before me in Brisbane on 24 July 2024.

7    Given the requirement for judgment on the Separate Question in just over a week after the hearing, these reasons may not go into as much detail as would normally be required. However, the Court has had sufficient time to consider the submissions and evidence, both oral and written, given by the parties.

Procedural history

8    The matter was commenced by way of Originating Process on 21 December 2023. It was accompanied by a Concise Statement, filed on the same day. Particulars of the Concise Statement were sought by the first, second, fourth and fifth respondents (the active respondents) and those particulars were provided on 15 March 2024. The active respondents filed their Concise Statement in response on 12 July 2024.

9    Mr Ben Chislett, the third respondent, has not entered an appearance in these proceedings. Orders for substituted service were made on 16 February 2024, but he has not appeared in the proceeding to date, including at the Separate Question hearing.

10    The proceeding was originally allocated to Downes J for case management and for the active respondents’ application for security for costs. On 28 June 2024 her Honour made the order for the hearing of the Separate Question.

11    The proceeding was then allocated to me and the matter was heard on 24 June 2024 in Brisbane. I am grateful to counsel for providing a trial plan (which was substantially adhered to) and their outline written submissions by 23 July 2024.

The hearing

12    Mr M Taylor of counsel, instructed by Tusk Lawyers appeared for the applicant. Mr T Morahan of counsel, instructed by Safe Harbour Lawyers, appeared for the active respondents.

13    Both the applicant and the active respondents advanced their respective cases through documentary tenders and lay evidence. Additionally, the applicant tendered three audio files.

14    The applicant read affidavits by:

(1)    Mr Christopher Andrew Norden, director of the applicant;

(2)    Mr Corey Meredith, accountant for the applicant and friend of Mr Norden; and

(3)    Ms Tegan Jessica Childs, solicitor for the applicant.

15    The active respondents read an affidavit by Mr Dwayne Frederick Martens, the second respondent.

16    An affidavit in reply of Mr Norden was also sought to be read. However, it was filed only two days before the hearing on 22 July 2024, and as its late filing was prejudicial to the active respondents, it was rejected. The prejudice arose, in part, because the affidavit was contended to be in response to the active respondents’ Concise Statement (filed 12 July 2024), but reply evidence was not raised at the Case Management Hearing on 15 July 2024, or at any time before its eventual filing, and it contained a significant amount of evidential material.

17    Mr Norden, Mr Meredith, and Mr Martens were cross examined.

Factual background

18    Despite the high level of contest between the parties, the following facts are either agreed or not in significant contest.

19    The applicant, Norden Holdings Pty Ltd, is the trustee of the Norden Family Trust. Its director is Christopher Norden (Mr Norden, also referred to in the evidence as Chris). The first respondent, Martens Investments Pty Ltd, is the trustee of the DF Martens Family Trust. Its director is Dwayne Martens (Mr Martens or the second respondent).

20    The fourth and fifth respondents, Amazonia IP Holdings Pty Ltd (IP Co) and Amazonia Group Pty Ltd (Group Co) are the operating companies of the Amazonia Group (the Amazonia Group). Group Co has a number of wholly owned subsidiaries. The Amazonia Group is involved in selling acai and other wellness products. A significant part of the business involves importation of product from Brazil.

21    The third respondent, Mr Chislett, was an insolvency expert retained by Mr Martens on behalf of the first respondent to assist Amazonia Group in preparing for entering voluntary administration.

22    On about 30 June 2014 Group Co adopted a Constitution which contained the following provisions:

7.     Transfer of shares

7.1.     Transfer of shares

(a)    Subject to this Constitution, a Member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form that the Directors approve.

(b)    An instrument of transfer referred to in Clause 7.1(a) must be executed by or on behalf of both the transferor and the transferee.

(c)    A transferor of shares remains the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of Members in respect of the shares.

7.2.     Registrations on transfers

The instrument of transfer must be left for registration at the registered office of the Company, accompanied by the certificate of the shares to which it relates and such other information as the Directors properly require to show the right of the transferor to make the transfer and thereupon the Company may register the transferee as a Member.

IP Co’s Constitution was relevantly in the same terms as at the date of the hearing of the Separate Question.

23    From around 30 June 2014, the applicant owned 30 shares (30% of the total issued shares) in Group Co. From around 11 March 2015, the applicant owned 300 shares (30% of the total issued shares) of IP Co. The first respondent owned the remaining 70% of each of those companies. Through their directorship of the applicant and the first respondent respectively, Mr Norden and Mr Martens controlled the Amazonia Group.

24    From around May 2010, Mr Norden and Mr Martens became managing directors of the Amazonia Group. For reasons which are not relevant to the Separate Question (and so were not explored in evidence), Mr Norden was made redundant as Managing Director in around November 2021, but remained as a director and shareholder. There were some discussions of him selling his shares in 2021, but he did not go ahead with that proposal.

25    Mr Martens gave evidence that the financial difficulties of the Amazonia Group commenced in early 2023. By May 2023 the situation was serious and a board meeting was held, attended by Mr Norden and Mr Martens. The meeting was shown a presentation which demonstrated that the Amazonia Group faced significant financial difficulties. The presentation included information from the ASIC website on “Consequences of Insolvent Trading”. The “urgent recommendation” was to get “professional accounting and/or legal advice as early as possible”. The directors were asked to make decisions as to which creditors to pay as between the ATO and two suppliers from Brazil. The presentation included a statement (although it is not clear whether the statement was made by management or directors) that “We do not believe that we can trade through this”.

26    On 2 June 2023, Mr Martens wrote to Mr Norden and discussed a number of ways in which the business could be managed out of its current financial woes. He said, inter alia:

We can prepare you for a shareholding exit if you so choose this next year working with you to maximise return. Working on a capital raise, partial exit is one of the bigger ticket items this year I will be addressing. Again happy to work with you.

If it wasn’t for your personal situation this would be a comfortable place to sit and overview the work been done to grow your 30% shareholding asset in the company.

27    As a result of the concerns about the financial issues, Mr Norden, Mr Martens, and the CEO and CFO of the Amazonia Group held a meeting on 16 June 2023 to discuss the issues. It was at this meeting that it was determined that it was likely that Amazonia Group was undertaking insolvent trading. The CEO, CFO, and Head of Sales all resigned in June 2023.

28    On 16 June 2023 Mr Martens informed Mr Norden that he was seeking professional advice, and also a “quick cash injection” from his brother, Wesley Martens.

29    Mr Martens then engaged Mr Chislett on or about 19 June 2023 to advise the Amazonia Group on voluntary administration.

The execution of documents on 29 June 2023

30    During mid-2023, Mr Martens and Mr Norden had numerous conversations over various formats including text message, WhatsApp, and phone conversations. Mr Martens gave evidence that Mr Norden was intent on being released from liability for the Amazonia Group’s insolvent trading, saying to Mr Martens words to the effect of: “I want out, I don’t want to lose what I have built”.

31    On 22 June 2023, Mr Martens and Mr Norden joined a three-way telephone call with Mr Chislett. Mr Norden recorded the call, which was transcribed and tendered by the applicant. The active respondents do not dispute the accuracy of the transcript of that call (the recorded call).

32    During the recorded call, Mr Chislett explained the process of voluntary administration and suggested that it would be “the right [course of] action”. Mr Chislett advised that his practice was to have a company go into voluntary administration with only one director, and that the resigning director’s resignation could be backdated to a time before any insolvent trading liability was evident.

33    Mr Norden told Mr Chislett that he was intending to resign as a director in any event, because he had been “out of the day to day of the business for two years”. There was no mention in the recorded call of the issue of Mr Norden’s shareholding, except for a brief discussion of whether the directors would also be creditors of the Amazonia Group by reason of unpaid dividends. There was no mention that Mr Martens required the applicant to “cease its shareholding” or transfer its shares.

34    Mr Norden said in the recorded call that he had already filled out an ASIC form resigning as director. Mr Chislett replied, that “to make it easier [I’ll] get an ASIC agent to do that for you electronically”.

35    Mr Martens said that at no time did he:

… consent to assume sole directorship of the Companies without the concurrent transfer and cessation of all of Chris’ shares in the Companies… I had already made clear my position that I would only accept sole directorship if it was accompanied by the cessation and surrender of Chris’ shares.

36    Mr Martens further stated that:

On 22nd June 2023 at 12:21 pm, during an 18.05-minute call following [the recorded call], I said to Chris words to the effect: ‘Both your shareholding and directorship will need to be ceased concurrently, it is ‘all or nothing’ situation. I won’t be taking all the blame and downfall for the companies on any other condition’. While Chris did not provide a response during the call, he was clearly made aware of my position.

37    It was not suggested that Mr Chislett was a party to that call. The question of whether this conversation took place is an issue between the parties. Mr Norden deposed that at no time did he discuss with Mr Martens or Mr Chislett the question of a transfer of his shares.

38    After the recorded call, at 3.57 pm, Mr Martens texted Mr Chislett the following:

Hey hold off on any lodging of chris been removed as director. Need this as a bargain chip to sell shares

Just in a meeting, will call in an hour

There was then a missed call. At 5.30 pm Mr Martens texted Mr Chislett:-

Sweet mate appreciated [prayer hands emoji] patchy spot

To which Mr Chislett replied

No stress mate, chat soon.

39    On 23 June 2023, following that text exchange, there was a discussion about Mr Chislett meeting the accountant. Mr Martens thought Mr Chislett might be meeting Mr Norden, and texted:

Accountant? Or Chris? Please make sure he knows he will be liable, I don’t be allowing him just to step down as director for nothing. Brrr

Mr Chislett replied:

Hahaha not Chris, the accountant who will correct the books.

I’ll take care of the Chris removal as discussed. [thumbs up emoji]

To which Mr Martens replied:

Legend

40    Mr Norden left for a holiday to Fiji on 23 June 2023. While in Fiji he had some discussions with Mr Chislett, including WhatsApp messages, and emails between 25 June 2023 and 26 June 2023 relating to the documents to be signed to give effect to “what we discuss[ed]”.

41    Between 27 June 2023 and 29 June 2023, Mr Martens deposed that he, Mr Norden, and Mr Chislett participated in a three-way WhatsApp call in which he said:

You will be completely removed from his roles and books of the Companies.

42    Mr Martens went on to say in his affidavit:

We all agreed that both Chris’ shareholding and directorship would be ceased to prevent any potential liability for him.

Mr Norden disputed that this discussion took place and said that he did not have any three-way calls with Mr Chislett other than the recorded call.

43    There is no written confirmation in the evidence of Mr Martens’ position that “both of [Mr Norden’s] shareholding and directorship will need to be ceased concurrently” in any of the texts, emails, or the transcript of the recorded call. Nor was any evidence called from Mr Chislett himself. Mr Chislett was clearly an important witness to the content of the conversation between himself and Mr Martens on the one hand, and Mr Norden on the other, and as to the content of the unrecorded three-way call asserted by Mr Martens to have taken place.

44    On 28 June 2023, Mr Chislett and Mr Martens discussed via WhatsApp messages that Mr Norden had “psychologically moved on now”. Mr Martens texted Mr Chislett on 28 June 2023 that:

I’ve further highlighted to Chris writeoffs of 500k-700k from our international business today. Just making it look dire, need him gone. Also looking more like specialities is an admin play. Organising.

Mr Martens was not asked about this text in cross-examination.

45    On 27 June 2023, Mr Chislett by his agent Skeats, Robinson & Co Pty Ltd lodged two ASIC Form 484 Change of Company Details for the fourth and fifth respondents (Form 484s). Those forms recorded:

(1)    that Mr Norden had resigned as a director of the fourth and fifth respondents on 30 November 2021; and

(2)    that the applicant’s shareholding in the fourth and fifth respondents had been transferred to the first respondent.

The ASIC forms were time-stamped 7.24 am and 7.40 am.

46    Later, on 27 June 2023, Mr Chislett sent Mr Norden a link to a Google Drive with seven folders (being one for each of the Amazonia Group companies). Each folder contained a document entitled “Minutes of a meeting” for the relevant company, and a document entitled “Resignation”.

47    Mr Norden noted that his name was misspelled in some of the documents, and discussed that with Mr Chislett. The spelling was corrected.

48    On 29 June 2023, Mr Chislett sent a link to Mr Norden via the HelloSign platform with 14 pages, being Minutes of a Meeting (Minutes) and resignations for each of the Amazonia Group companies, each amended with the correct spelling of his name, to sign. Mr Norden opened the link on his phone and signed the documents electronically.

49    The meeting of each company to which the Minutes related was asserted to have been held on 30 November 2021, and each of Mr Norden (as Chairperson) and Mr Martens were asserted to have attended. Each of the Minutes contained the words:

It was resolved that there would be a change in Directorship as of the 30th of November 2021.

-    The ceasing of a Director & Secretary Mr Christopher Andrew Norden

50    The Minutes relating to the fourth respondent contained additional words,

It was resolved that there would be a change in Directorship & Shareholders as of the 30th of November 2021.

-    The ceasing of a Director & Secretary Mr Christopher Andrew Norden

-    The ceasing of Shareholders Norden Holdings Pty Ltd.

(Emphasis added)

51    The Minutes relating to the fifth respondent contained the same additional wording.

52    Mr Norden conceded that he read the documents at the time that he initially received them by Google Drive, and he raised the spelling of his name with Mr Chislett. Mr Norden, however, said he did not see that the Minutes of the fourth and fifth respondents included references to a “change in … Shareholders” and “ceasing of Shareholders [the applicant]”.

53    There are in evidence minutes of a meeting of the fifth respondent, dated 30 June 2023, and signed by the then only director, Mr Martens, which resolve:

Resolutions: It was resolved there would be a change in directorship and shareholding as of the 30th November 2021 signed on the 29th June 2023 by Chairperson Mr Christopher Andrew Norden.

•    The ceasing of a Director & Secretary Mr Christopher Andrew Norden

•    The ceasing of the Shareholders Norden Holdings Pty Ltd

It was resolved to approve the following transfer of Ordinary shares in the company from the ceased shareholding of Norden Holdings Pty Ltd ACN: 164 389 100 to the only remaining shareholder Martens Investments Pty Ltd ACN:602 144 703. Share Certificate 4.

There are no corresponding minutes of a meeting of the fourth respondent in evidence.

54    It is not in dispute that no meeting occurred on 30 November 2021. It is further not in dispute that the Minutes signed by Mr Norden on 29 June 2023, along with the previously lodged ASIC Form 484s and the minutes of the meetings of 30 June 2023, are the only written records evidencing any change of ownership of the shares held by the applicant in the fourth and fifth respondents.

55    After signing the Minutes and resignations on 29 June 2023, Mr Norden kept in contact with Mr Martens and made enquiries from time to time as to whether the companies had gone into administration. On 6 July 2023, Mr Martens wrote to Mr Norden saying:

Bud good you could separate yourself completely from this situation with removal and forfeiture. It’s been very heavy as administration is pretty much inevitable now, can’t risk things with sole liability.

56    Mr Norden’s evidence was that he did not think that the “forfeiture” reference referred to his shares, but rather “was referring to [his] forfeiture as director”.

57    On 28 July 2023 Mr Norden enquired again about an update, and whether Mr Martens had been able to raise any cash.

58    In response, on 31 July 2023, Mr Martens wrote an email which read:

Shit mate, what can I say everyone jumped ship and I got left holding the paddle.

Obviously outside investment is not an option due to the urgent nature of things and trading position, there won’t be outside investment, I’ve already begged and been shutdown in that domain. Now I’m sole owner/director I’m doing absolutely everything to salvage. Things simply that would not fly if you were a part of the business due to risk & that’s why you removed yourself from the Business with Ben’s help, he can update you when things move with administration (still setting things up there).

All I’ve got is family members but risk again is very high with bank, size of monies needed, trading position and admin lurking. If by the grace of god I’m able to get through this period it will be the long road as there is so much debt to pay back, huge write-offs (UAE, Europe, Dura) and the need for a lot of the banks lenience. It’s a fucking heavy situation to be in mate, not sleeping much, not paying myself & micro managing payables. Someone else can put the bullet into this as I got nothing to lose.

If you need, Ben can update you when things go down, he is closely managing this situation. Enjoy that house of yours at least you have something at the end of this journey.

59    Mr Norden deposed that, at this point, he sought advice from an accountant and friend, Mr Meredith, and subsequently became aware of the ASIC change of shareholding. He then emailed Mr Martens to say that he had been misled and was taking legal advice.

60    Mr Meredith’s evidence was that what Mr Norden said to him was consistent with Mr Norden’s current contention; that he was unaware that the applicant’s shares had been transferred until 31 July 2023.

The questions to be decided

61    Synthesising the parties’ respective pleadings and submissions, the questions to be determined on the Separate Question are:

(1)    Did Mr Norden agree on behalf of the applicant to transfer its shares in the fourth and fifth respondents to the first respondent?

(2)    If no,

(a)    do the Form 484s filed with ASIC on 27 June 2023 operate as a valid transfer of the shares in each of the fourth and fifth respondents to the first respondent? and/or

(b)    do the Minutes of the meetings purportedly held on 30 November 2021 operate to “cease the shareholding” of the applicant in the fourth and fifth respondents?

(3)    If yes, was a binding contract entered into between the applicant and the first respondent?

(4)    If so,

(a)    do the Form 484s filed with ASIC on 27 June 2023 operate as a valid transfer of the shares in each of the fourth and fifth respondents to the first respondent? and/or

(b)    do the Minutes of the meetings purportedly held on 30 November 2021 operate to “cease the shareholding” of the applicant in the fourth and fifth respondents?

(5)    In either case, is the first respondent bound by an admission by their then counsel in the course of a hearing before Downes J setting down the Separate Question?

Question one – Did Mr Norden agree on behalf of the applicant to transfer its shares in the fourth and fifth respondents to the first respondent?

62    In order for this preliminary question to be answered “yes”, the first respondent must persuade the Court of the following:

(1)    that Mr Martens’ evidence be accepted, specifically that he told Mr Norden on a number of occasions that he was only prepared to agree to Mr Norden resigning on an “all or nothing deal” – i.e., that the applicant cease or give up its shareholding in the fourth and fifth respondents (presumably in favour of the first applicant), along with Mr Norden’s directorship; and

(2)    if so, that there was an agreement entered into between Mr Norden and Mr Martens on behalf of their respective companies.

63    The question in [62(1)] requires a determination as to Mr Martens’ credit. Mr Martens was cross-examined on general credit, as well as on specific aspects of his evidence. One particular point of contention was the amount of shares Mr Martens’ brother, Wesley Martens, would be entitled to following his investment of $1 million into the Amazonia Group. It is important at this point to note that the Deeds, if converted, would entitle Wesley Martens to approximately 89% of the shares in the fourth and fifth respondents.

64    During cross-examination the applicant tendered a printout of the WhatsApp messages between Mr Martens and his brother Wesley Martens between 23 December 2016 until 3 July 2024 – some 89 pages. In it, Mr Martens discussed the value of the Amazonia Group in October 2023 and suggested to his brother that:

Assume we want it super simple 1 million [AUD] injection for 34% of shares.

To which Wesley Martens replied:

1 million equals 34%

65    Mr Martens was asked by Mr Taylor about a letter headed “to whom it may concern” on Amazonia Pty Ltd letterhead (the Amazonia Letter) which stated that “For the capital injection of 1 million AUD Wesley Alan Martens will receive a stake of 34% in shareholding in [the fourth and fifth respondents].” Mr Martens sought to explain the discrepancy between the 34% figure of the text messages and the Amazonia Letter, and the approximate 89% figure in the Deeds as the former being the “minimum” stake that Wesley Martens would receive. However, neither the WhatsApp messages nor the Amazonia Letter includes language to that effect. Mr Martens sought to avoid the impact of this controversy by noting that the Amazonia Letter was “for the bank”, the implication being that it was not necessary to give a truthful picture to a bank.

66    It is fair to say that the picture that emerged from that part of the cross-examination of Mr Martens was that he was prepared to say different things to different people. For example, a WhatsApp voice note played in Court (referred to as the “food for thought” message), sent from Mr Martens to his brother, demonstrated that Mr Martens was contemplating using the process that became the Deeds by working with his brother together “to fucking dodge this guy” (clearly a reference to Mr Norden). Mr Martens later expanded on his proposal in a WhatsApp voice note sent on 28 June 2024, a month before the hearing:

It’d probably be best if we just held off on the convertible note because if the 24 July occurred and we win, then it’s all gone and we can just keep it as is, if you know what I mean? Just issue your 34 per cent. Right. But if it doesn’t, then we have to do the convertible note. Right. I’m just thinking that out loud.

67    Mr Martens maintained that the Deeds were valid documents reflecting his and his brother’s agreement, but the reference to “24 July” (being the date of the Separate Question hearing) tends to indicate that there was an alternative arrangement in place.

68    Additionally, Mr Martens’ text to Mr Chislett after the recorded call (see [38] above) made it clear that he was prepared to use Mr Norden’s fear of liability for insolvent trading in order to obtain the benefit of the applicant’s shareholdings.

69    Mr Martens admitted that he was emphasising the risks of the Amazonia Group to Mr Norden in order, at least in part, to “scare” him about his potential liability as a director of a company which was trading insolvently and likely to enter administration soon, while at the same time telling his brother that the position was significantly better than that. The following exchange occurred during cross-examination:

TAYLOR: The stories that you were selling, to use your word, to Mr Norden, on the one hand, and your brother on the other, were entirely different, weren’t they?

MARTENS: I was doing what I needed to do to ensure that the company would stay afloat. Right? And I was ensuring that my brother was receiving the positive information and, you know, the risks were communicated to Chris.

70    Additionally, Mr Martens sought to colour particular events in a way which was detrimental to Mr Norden and which placed himself in a better light. An example of this is the contention that the idea to backdate the various company documents signed by Mr Norden was “at the suggestion and request of [Mr Norden]”. In fact, as the recorded call shows, the suggestion was made in the first instance by Mr Chislett and taken up by Mr Norden.

71    Mr Martens was, it must be said, reasonably forthcoming under cross-examination, to the effect that he said what, in his view, needed to be said to different parties to get them to do what suited him at the time – that is, for Mr Norden to resign as director (and for his shareholding to be “ceased”), and for his brother to provide significant funding of around $1 million to keep the Amazonia Group afloat. While one can certainly see the advantage to Mr Martens and the first respondent of Mr Norden transferring the shares along with his resignations as director, it is not at all clear that there was in fact any agreement to do so. In fact, there is nothing to show that it was actually discussed with Mr Norden at all.

72    Generally speaking however, it is difficult to accept Mr Martens as a witness of truth. His approach that he would say what needed to be said from time to time to get the best result for himself and the Amazonia Group appeared to be brought into the witness box. The WhatsApp voice notes (discussed at [66]) demonstrate this ability to be malleable with the truth, and to say what needed to be said to “dodge” Mr Norden. I explicitly make no findings as to the validity of the Deeds, as this was not a matter which was the subject of argument before me. But in relation to credit, the WhatsApp voice notes demonstrate that the Deeds were another way of arranging the Amazonia Group’s affairs so that it appeared that there was an arms-length arrangement between Mr Martens and his brother which provided Wesley Martens with approximately 89% of the share capital, when that may not have been the case.

73    The only evidence that there was an agreement between Mr Norden on behalf of the applicant on the one hand and Mr Martens on behalf of the first respondent on the other, is Mr Martens’ evidence that he, in a phone call with Mr Norden, made his “all or nothing” case clear and Mr Norden did not respond.

74    If any discussions as to shareholdings were had, I am satisfied on the evidence that they were not had between Mr Martens and Mr Norden. It is unclear what the discussions were between Mr Martens and Mr Chislett, and between Mr Norden and Mr Chislett. Mr Norden said that he never discussed relinquishing his shareholding with Mr Chislett and of course Mr Chislett has not given evidence.

75    The applicant submits that the evidence of Mr Chislett would have been critical to the determination of whether Mr Chislett had discussions with Mr Norden in which he agreed to the share transfer. That submission is clearly correct. The applicant further submits that as Mr Norden has joined Mr Chislett as a respondent in these proceedings, Mr Chislett should be seen as a person whose evidence would reasonably have been expected to have been adduced by Mr Martens (see Jones v Dunkel [1959] HCA 8; 101 CLR 298; Blatch v Archer (1774) 1 Cowp 63; 98 ER 969 at 970).

76    The active respondents submitted that because the relevant conversation was a three-way conversation in which both Mr Martens and Mr Norden were participants, there was no need to call Mr Chislett. I find this submission difficult to accept, given that there is both a significant dispute between the parties as to the existence and content of an alleged later unrecorded three-way conversation, and (from the various texts relating to “holding off” on the resignation and removing Mr Norden as director (see [38] above]) there was at least one conversation between Mr Martens and Mr Chislett out of which the proposal to draft the Minutes evolved. The terms of that conversation are not in evidence. Mr Chislett could have been asked about those conversations, had he been called.

77    I agree with the applicant that Mr Chislett’s evidence could reasonably have been expected to have been called by Mr Martens, and his unexplained failure to do so leads me to draw an inference that Mr Chislett’s evidence could not have assisted Mr Martens.

78    Additionally, Mr Norden’s evidence was impressive. He answered questions in a straightforward manner, including giving answers which did not assist his case (such as his acceptance that a backdated resignation as director was of advantage to him given that it removed him from liability for insolvent trading for the past two years).

79    I prefer the evidence of Mr Norden, to the effect that he did not have discussions with Mr Martens relating to a cessation or transfer of his shareholdings. I am satisfied that the agreement reached between Mr Norden and Mr Martens was that Mr Norden would resign as a director with effect from 30 November 2021, and that was what he was expecting to sign for when he received the documents from Mr Chislett. The agreement to backdate the resignation is not a matter that stands to the credit of any of the participants. Nonetheless, I accept Mr Norden’s evidence where it conflicts with that of Mr Martens.

80    I am accordingly satisfied that there was no agreement between Mr Norden and Mr Martens that Mr Norden would “cease” his shareholding (whether by transfer, forfeiture, or, as noted by Mr Martens in a WhatsApp voice note, cancellation).

Question two – do the ASIC forms and Minutes of Meetings operate to effect a valid transfer of the shares?

81    The conclusion as to a lack of an agreement to transfer the shares leads me to the next questions for consideration, which are:

(1)    do the Form 484s filed with ASIC on 27 June 2023 operate as a valid transfer of the shares in each of the fourth and fifth respondents to the first respondent? and/or

(2)    do the Minutes of the meeting purportedly held on 30 November 2021 operate to “cease the shareholding” of the applicant in the fourth and fifth respondents?

82    The timing of the ASIC forms, which were lodged via Mr Chislett noting the transfer of the applicant’s shares to the first respondent, took place before Mr Norden had signed the Minutes by which it is alleged by the active respondents that his shareholding was “ceased”.

83    It is useful at this point to set out briefly the requirements for a valid transfer of a share. Division 2 of Ch 7 of the Corporations Act deals with “Transfer of Certain Securities” and relevantly provides:

1071B  Instrument of transfer

(1)     This section does not apply to a transfer of a security through a prescribed CS facility.

(2)     Subject to subsection (5), a company must only register a transfer of securities if a proper instrument of transfer (see subsections (3) and (4)) has been delivered to the company. This is so despite:

(a)     anything in its constitution; or

(b)     anything in a deed relating to debentures.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

…

84    In their submissions, the active respondents sought to pinpoint the question of the validity of the transfer of the shares by reference to s 1070A of the Corporations Act. That section provides:

1070A  Nature of shares and certain other interests in a company or registered scheme

(1)     A share, other interest of a member in a company or interest of a person in a registered scheme:

(a)     is personal property; and

(b)     is transferable or transmissible as provided by:

(i)     the company’s, or scheme’s, constitution; or

(ii)     the operating rules of a prescribed CS facility if they are applicable; and

(c)     is capable of devolution by will or by operation of law.

(2)     Paragraph (1)(c) has effect subject to:

(a)     In the case of a company:

(i)     the company’s constitution (if any); and

(ii)     any replaceable rules that apply to the company; and

(iii)     the operating rules of a prescribed CS facility if they apply to the share or interest; and

(b)     in the case of a scheme:

(i)     the scheme’s constitution; and

(ii)     the operating rules of a prescribed CS facility if they apply to the interest.

…

85    Accordingly, the active respondents argued that “dealings in shares are no different from dealing in other personal property; they are subject to the usual laws of contract and principles of equity”.

86    The Constitutions governing the fourth and fifth respondents provide:

7.1. Transfer of shares

(a)    Subject to this Constitution, a Member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form that the Directors approve.

(b)    An instrument of transfer referred to in Clause 7.1(a) must be executed by or on behalf of both the transferor and the transferee.

(c)    A transferor of shares remains the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of Members in respect of the shares.

87    The active respondents’ approach to this aspect of the Separate Question was that the critical aspect was the word “validly”. The definitions contended for were that “validly” meant “efficacious” (Shorter Oxford English Dictionary) or “having legal force; legally binding” (Butterworths Concise Australian Legal Dictionary, 3rd edition).

88    The active respondents submit that the minutes of the meetings of the fourth and fifth respondents of 30 June 2023, which resolved to approve the transfer of the shares from the “ceased shareholding” of the applicant to the first respondent, functioned as the documents required by the Constitution and the Corporations Act. Leaving aside the fact that only a minute of the fifth respondent is in evidence, and assuming in favour of the active respondents that the fourth respondent made a similar resolution approving a transfer, the applicant submits:

(1)    There was no “transfer” in terms by the applicant, as the Minutes signed by Mr Norden only notes a “ceasing of Shareholders [the applicant]”. A “ceasing” of a shareholding is not a concept recognised by the Corporations Act. As highlighted in the applicant’s written submissions, a “ceasing” in the circumstances of this case cannot have been a buyback of the shares by the first respondent by reason of s 257H of the Corporations Act, nor was it a selective buyback in accordance with s 257B. Nor is a “ceasing” a transfer; the word “cease” is unilateral, in that it would refer only to the relationship of the applicant to the shares; a transfer is a bilateral process which involves both a transferor and a transferee (as envisaged by the Constitution).

(2)    The Minutes do not comply with clause 7.1(b) of the Constitution, since it was not executed by either the transferor or the transferee, or clause 7.2 of the Constitution, as the applicant retains its share certificates.

89    The active respondents submit that Mr Norden’s signature on the Minutes was sufficient because he was a director of the applicant. But it is clear from the face of the document that he did not sign it in such a capacity; he signed it as Chairperson of the meeting of the fourth or fifth respondent, as noted in the Minutes themselves. Additionally, it may have been the case that he resigned his directorship before signing the Minutes; if so, he had no standing on behalf of the relevant respondents at all. He was not a director of the fourth and fifth respondents at the time of the later minutes approving the transfer on 30 June 2023.

90    It is clear that the Minutes have no effect as a transfer. Clause 7.1(b) of the Constitutions of the fourth and fifth respondents provides that a transfer of shares must be executed on behalf of both the transferor and the transferee. Leaving aside the fact that the Minute in each case referred only to a “ceasing of shareholders”, there is nothing to indicate that Mr Norden’s signature on each Minute was placed there as an execution of a transfer by Norden Holdings Pty Ltd, the applicant. Additionally, he has only signed each Minute once, in his capacity as Chairperson of the meeting of the first respondent. Nothing in the evidence indicates that the applicant authorised Mr Norden to execute the Minute on its behalf or as a transfer of its shares.

91    The active respondents pointed to the general proposition that the company’s register of members is and should be the primary source of information as to who is, and who is not, a shareholder – see Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] ALR 792; 78 CR 353 at 363. Notwithstanding the correctness of this proposition, it alone is not sufficient to overcome the lack of a valid transfer, or otherwise suggest that such an enquiry is not necessary. In any event, the applicant still holds its share certificates as prima facie evidence of its ownership of the shares (see s 1070C(2) of the Corporations Act).

92    The Form 484s were lodged, as I have found, without a contract underpinning them, and without a proper instrument of transfer having been delivered to the fourth or fifth respondents. Indeed, they were lodged prior to the signing of the Minutes. The requirements of s 1071B of the Corporations Act have not been fulfilled. Accordingly, no comfort can be drawn by the active respondents from the state of the register.

93    The answer to the second question is “no”.

Questions three and four

94    As a result of the analysis above, questions three and four do not arise, and therefore do not need to be answered.

95    However, in relation to question three, on my analysis above, there was no agreement between Mr Norden and Mr Martens (on behalf of the applicant and the first respondent respectively) for a transfer of the applicant’s shareholdings which found its expression in the lodgement of the ASIC Form 484s and the signature of Mr Norden on the Minutes of 29 June 2023.

96    Accordingly, it is not necessary for me to consider whether:

(1)    the terms of any contract are sufficiently certain; or

(2)    whether the advantage admitted by Mr Norden of escaping liability for insolvent trading was sufficient consideration to ground a contract (as contended by the active respondents) or illusory, because it was clearly a fabrication, given the many documents signed by Mr Norden as director after 30 November 2021 (as contended for by the applicant).

97    I note in addition, in relation to the question of certainty of the terms of the alleged contract, that there is no concept in the Corporations Act of a cessation of shareholding as envisaged in the Minutes.

98    In relation to question four, my analysis of question two would apply equally to it and be answered in the same way.

Question five - admission by the active respondents’ counsel

99    It was asserted by the applicant in the Concise Statement and the applicant’s written submissions that the active respondents were bound by an admission made by counsel previously briefed by the active respondents. The alleged admission occurred during an interlocutory hearing before Justice Downes on 10 May 2024 and contained the following exchange between counsel and her Honour:

HER HONOUR: …. So do the documents also refer to a transfer of shares or not?

[counsel]: They refer to a ceasing shareholder, but they don’t in terms, I accept – or my understanding is – they don’t in terms use the language that the shares are transferred as at x date.

HER HONOUR: I see. So there is, in fact, no valid documentation supporting – under the company’s constitution, supporting the transfer of shares?

[counsel]: No, there is not.

100    The applicant contended that an admission in the course of interlocutory hearings is binding, and cannot be withdrawn without leave, citing Roads Corporation v Love [2010] VSC 238 at [49]-[50]. However, Vickery J in that decision at [49] cited H Clark (Doncaster) Ltd v Wilkinson [1965] 1 Ch 694 at 702-703 where Denning MR thought that that proposition – that an admission in an interlocutory proceeding bound the maker – was “stated too widely” and that an admission could always be withdrawn, unless the circumstances are such as to amount to an estoppel. I am of the view that the alleged admission does not give rise to an estoppel; in particular, there is no detriment demonstrated by the applicant were the active respondents to seek to step back from any such admission.

101    In any event, this case would not be determined by the highest meaning which could be put on such admission. Counsel was asked a direct question in the context of whether “the documents [referred] to a transfer of shares or not”. From the transcript it appears that counsel attempted to answer that question, and the inclusion by her Honour of the word “valid” in her second question does not, in the greater context of the transcript, appear to have been the focus of counsel’s answer.

102    The admission point was not developed in oral argument, and it was raised, and dealt with, only faintly in the written submissions. It should however be noted that the applicant would not have succeeded on this point alone, had it not succeeded on the matters determined above.

Determination

103    Accordingly, the Separate Question, whether the applicant’s shares in the fourth and fifth respondents were validly transferred to the first respondent on or about 27 June 2023, should be answered “no”.

104    I see no reason why costs of the Separate Question should not follow the event. However, I will, if necessary, hear the parties on that question. If this is to be the case, then my Associate should be advised of that fact by a joint communication from the parties.

Associate:

Dated:    1 August 2024