Li v Ye [2024] NSWSC 1176

Li v Ye [2024] NSWSC 1176

The relationship between principal actors in the Shield Group had irretrievably broken down; there was no functional board or governance, and the group’s principal trading entity was either insolvent or very close to insolvency. The plaintiffs for the most part failed to establish they were oppressed by the defendants’ conduct. On the other hand, the exclusion of Thomas from management constituted oppressive conduct toward him as a majority shareholder. The only practical course, in light of mutual breakdown, lack of governance, and potential for insolvent trading, was to wind up all companies in the Shield Group.

Parties
First Plaintiff: Xuxu Li; Second Plaintiff: Kevin Ross Waters-Marsh; Third Plaintiff: Xiaosi Chaney Qian; Fourth Plaintiff: Mana Assets Management Pty Ltd; Fifth Plaintiff: XCQ Holdings Pty Ltd; Sixth Plaintiff: Phoenix Group Australia Pty Ltd; First Defendant: Feng Ye; Second Defendant: Thomas Gem Stone Pty Ltd in its own right and in its capacity as trustee of the Ye Family Trust (ABN 39 218 802 573); Third Defendant: Shield Formply Australia Pty Ltd; Fourth Defendant: Shield Resources Pty Ltd; Fifth Defendant: Shield Holdings Australia Pty Ltd; Sixth Defendant: Shield Holdings South Australia Pty Ltd; Seventh Defendant: Shield Hardwood Pty Ltd; Eighth Defendant: Shield Intermodal Pty Ltd; Ninth Defendant: Shield Equipment Qld Pty Ltd; Tenth Defendant: Shield Timber SA Pty Ltd; Eleventh Defendant: Shield Biomass Energy Pty Ltd; Twelfth Defendant: Shield Equipment Pty Ltd; Thirteenth Defendant: Shield Construction Material Group Pty Ltd; Fourteenth Defendant: Oz Plantation and Hewer Pty Ltd
Jurisdiction
Australia
Judgment Date
18 September 2024
Procedural Posture
Equity – Corporations – Oppression Proceedings / Final Judgment
Outcome
Plaintiffs' claims of oppression largely dismissed; defendants' counterclaim of oppression established; order that all companies in the Shield Group be wound up (orders to be finalised after further consideration).
Legal Topics
Oppression, Winding Up of Companies, Directors and Management Exclusion, Conduct of Management, Members’ Remedies, Insolvency
Corporations Law Equity Oppression Winding Up of Companies Directors and Management Exclusion Conduct of Management Members’ Remedies Insolvency

Case Brief

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Parties

Xuxu Li

First Plaintiff

Kevin Ross Waters-Marsh

Second Plaintiff

Xiaosi Chaney Qian

Third Plaintiff

Mana Assets Management Pty Ltd

Fourth Plaintiff

XCQ Holdings Pty Ltd

Fifth Plaintiff

Phoenix Group Australia Pty Ltd

Sixth Plaintiff

Feng Ye

First Defendant

Thomas Gem Stone Pty Ltd in its own right and in its capacity as trustee of the Ye Family Trust (ABN 39 218 802 573)

Second Defendant

Shield Formply Australia Pty Ltd

Third Defendant

Shield Resources Pty Ltd

Fourth Defendant

Shield Holdings Australia Pty Ltd

Fifth Defendant

Shield Holdings South Australia Pty Ltd

Sixth Defendant

Shield Hardwood Pty Ltd

Seventh Defendant

Shield Intermodal Pty Ltd

Eighth Defendant

Shield Equipment Qld Pty Ltd

Ninth Defendant

Shield Timber SA Pty Ltd

Tenth Defendant

Shield Biomass Energy Pty Ltd

Eleventh Defendant

Shield Equipment Pty Ltd

Twelfth Defendant

Shield Construction Material Group Pty Ltd

Thirteenth Defendant

Oz Plantation and Hewer Pty Ltd

Fourteenth Defendant

Procedural Posture

Equity – Corporations – Oppression Proceedings / Final Judgment

Legal Issues

  1. 1 Whether the conduct of either side constituted oppression under s 232 of the Corporations Act 2001 (Cth)
  2. 2 Whether competing claims of oppression were established
  3. 3 Whether companies in the group should be wound up

Ratio Decidendi

The relationship between principal actors in the Shield Group had irretrievably broken down; there was no functional board or governance, and the group’s principal trading entity was either insolvent or very close to insolvency. The plaintiffs for the most part failed to establish they were oppressed by the defendants’ conduct. On the other hand, the exclusion of Thomas from management constituted oppressive conduct toward him as a majority shareholder. The only practical course, in light of mutual breakdown, lack of governance, and potential for insolvent trading, was to wind up all companies in the Shield Group.

Court Disposition

Plaintiffs' claims of oppression largely dismissed; defendants' counterclaim of oppression established; order that all companies in the Shield Group be wound up (orders to be finalised after further consideration).

Orders

  • Winding up of all companies in the Shield Group (to be finalised)
  • Dismissal of other substantive claims including relating to the Chinchilla Property and loans/salaries (to be considered by liquidator)