Re Sunstar Freight Pty Ltd[2023] QSC 65

SUPREME COURT OF QUEENSLAND

1. [1]
   The applicant, Mr Jianfeng Yang, brings an application to wind up Sunstar Freight Pty Ltd ACN 650 486 178 (“Sunstar Freight”) pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (the “Act”) on the ground that it would be just and equitable to do so due to a breakdown in the relationship between Mr Yang and Mr Chuan Qin, the other equal shareholder of Sunstar Freight, which is said to be irretrievable. Mr Yang and Mr Qin are the directors of Sunstar Freight.
2. [2]
   Mr Qin opposes the order for winding up and makes an interlocutory application that the winding up should be discontinued or stayed and Mr Yang restrained from acting as a director of Sunstar Freight under s 233 of the Act until Mr Qin has instituted proceedings against Mr Yang to recover damages caused by him to Sunstar Freight arising out of alleged breaches of his director’s duties.
3. [3]
   The matter came on for hearing pursuant to an originating application.  According to Mr Yang’s counsel there is no real factual dispute that the relationship between Mr Yang and Mr Qin has irretrievably broken down, such that the matter does not require the Court to resolve factual disputes between the parties as to alleged breaches.
4. [4]
   Both Mr Yang and Mr Qin provided affidavit material in support of their positions.  Mr Qin appeared as a self-represented litigant with the assistance of an interpreter, Ms Gao.

Factual background

5. [5]
   Given the basis of the application for the winding up, it is relevant to examine the historical background that led to Mr Yang and Mr Qin becoming directors and shareholders of Sunstar Freight.
6. [6]
   Mr Yang was introduced to Mr Qin by an associate, Mr Degang Li, in March 2021. Mr Qin had been involved in the food industry for fifteen years and worked for Fung Lea Food Pty Ltd (“Fung Lea Food”). Mr Qin stated that he was aware at the time that Mr Yang was working for a company named EPH Seafood and Groceries but not that he had his own company, Sunstar Tradings Pty Ltd ACN 609 099 201 (“Sunstar Tradings”). According to Mr Yang, he had an idea to establish a business for the interstate delivery of food products and a plan to set up a new company. Mr Yang states that Mr Li put him in contact with Mr Qin to see if Mr Qin was interested in participating in the new business. According to Mr Qin, it was his idea to start an interstate delivery business for food products and Mr Li had introduced Mr Yang to him. In any event, regardless of whose idea it was, both Mr Yang and Mr Qin were interested in establishing a company to conduct a business for the interstate delivery of food products.
7. [7]
   Originally it was proposed that Mr Yang, Mr Qin and Mr Li would all be involved in the business. However, as there was a dispute as to what stakeholder interest Mr Li should hold, Mr Li declined to participate in the new company. 
8. [8]
   In or around May 2021, Mr Yang and Mr Qin agreed to be equal shareholders in the new company, Sunstar Freight. Mr Qin states that had he been aware that Mr Yang owned Sunstar Tradings he would not have agreed to a company name with “Sunstar” in it. That is contrary to Mr Yang’s evidence that the name was chosen because of its association with him and his company, Sunstar Tradings.
9. [9]
   According to Mr Yang, the agreement reached was that Mr Yang was to contribute his know-how, management skills and contacts. Mr Qin was to contribute Fung Lea Food’s truck and cold storage facilities and procure a weekly freight contract between Sydney and Brisbane from Fung Lea Food. There is a dispute as to whether Mr Qin informed Mr Yang that the storage would be for free or for a fee. Both Mr Yang and Mr Qin claim they were responsible for management of Sunstar Freight and bringing new clients into the business. For the present purposes, the Court does not need to resolve either matter.
10. [10]
    According to Mr Qin, he tried to find other business partners and did not contact Mr Yang for more than a month after Mr Li indicated that he did not wish to be part of the business. Mr Qin stated that Mr Yang had subsequently contacted him multiple times and offered to take charge of all the early work, including by registering the company and purchasing trucks, and that Mr Qin would only have to introduce new customers to the business. Until the company started to generate cash flow, Mr Yang agreed to defer payment for the interstate trips which had been agreed to be $900 per trip. According to Mr Qin, “I sensed his sincerity and agreed to cooperate with him, saying that the company would not be busy when it started, I would contact clients and expand the business in my spare time. Then, I said if there was no driver available, I could drive on weekend as a backup driver.”
11. [11]
    According to Mr Yang, however, it was in around September 2021 that Mr Yang and Mr Qin agreed that the company would pay each of them $900 for each interstate delivery.
12. [12]
    When Sunstar Freight commenced business, Mr Yang and Mr Qin were to each contribute at least $40,000 in start-up capital. Mr Yang and Mr Qin would be regular drivers in the new business. There are disputes between them as to whether the level of financial commitment was to be $40,000 per shareholder or $200,000 per shareholder and who was to be primarily involved in generating the new business, however, again those disputes are not matters which need to be resolved for the purposes of resolving the present application.
13. [13]
    On 25 May 2021, Sunstar Freight was incorporated. Mr Yang and Mr Qin each hold five ordinary shares in the company and both are directors. 
14. [14]
    In July 2021, the company commenced business. Mr Yang and Mr Qin paid the capital sum of $40,000. Mr Qin obtained his multi-combination vehicle licence. Mr Yang and Mr Qin agreed that Sunstar Freight would purchase a prime mover truck and refrigerated trailer from Scania, which provided finance. 
15. [15]
    There is disagreement as to what was agreed in terms of the driver allocation responsibilities. The arrangements were not recorded in writing.
16. [16]
    Mr Yang completed his first haulage trip from Brisbane to Sydney in July 2021.  He completed most of the delivery trips interstate and locally, apparently without taking payment in the initial period. At that stage, the company did not have funds to pay contracted drivers. Sunstar Freight also did an interstate trip for Fung Lea Food each weekend. Mr Qin did the driving for local deliveries around Brisbane when his employment with Fung Lea Food permitted. He did an interstate trip in September 2021. The business grew and by October 2021, the company could afford to contract out some of the driving. 
17. [17]
    According to Mr Yang, in February 2022 he was called by Mr Bill Tang of Fung Lea Food. Mr Tang told Mr Yang that he objected to Sunstar Freight’s use of Fung Lea Food’s warehouse for storage and informed Mr Yang that the company had to remove its stock in two weeks.
18. [18]
    Mr Yang states he set about finding alternative warehouse space and that Sunstar Freight subsequently sub-leased part of the premises at a Rocklea warehouse (“Warehouse”). It hired a refrigerated shipping container which was placed in the Warehouse yard on or about July 2022.
19. [19]
    Mr Qin’s evidence differs from Mr Yang. Mr Qin stated that the other owner of Fung Lea Food, Mr Sam Tang, supported the Sunstar Freight business. According to Mr Qin, as the business became busier at the end of 2021, he had proposed that they lease a warehouse so as not to interfere with Fung Lea Food’s business. He spoke to a warehouse owner who was willing to lease space and referred the details to Mr Yang by text message who failed to follow it up for some time. Mr Qin also found out about a refrigerated container manufacturer which he referred to Mr Yang. He says again that Mr Yang failed to follow up the manufacturer until June 2022.
20. [20]
    According to Mr Yang, he transferred the hire of the container into the name of Sunstar Tradings because it was not delivered until 1 July 2022, after he was in dispute with Mr Qin. Mr Qin states that Mr Yang also transferred the lease of the Warehouse into Sunstar Tradings’ name.
21. [21]
    According to Mr Qin, in February 2022 Sunstar Freight needed to purchase a forklift.  Mr Qin claims Mr Yang bought the forklift using monies from Sunstar Freight but placed the forklift in the name of Sunstar Tradings. Apparently, Mr Yang had stated he could get cash back if the forklift was purchased through Sunstar Tradings. Mr Qin states other items such as a pallet jack and electric pallet jack purchased by Sunstar Freight have also been taken over by Mr Yang.
22. [22]
    At the end of March 2022, Mr Qin and Mr Yang agreed to purchase a non-refrigerated trailer. Mr Qin stated that Mr Yang subsequently told him that the trailer had been purchased, which surprised Mr Qin given he had not signed any loan documents.
23. [23]
    According to Mr Yang, he was told by a broker that Sunstar Freight could not obtain finance to purchase the non-refrigerated trailer because of its lack of trading history. Mr Qin challenges the accuracy of this as previously Sunstar Freight had been informed it could take a loan of up to $500,000 when it purchased the truck and refrigerated trailer. 
24. [24]
    Mr Yang purchased the trailer in the name of his own company, Sunstar Tradings.  Mr Yang told Mr Qin that because Sunstar Freight could not obtain the loan, Sunstar Freight could make the finance payments in the form of a lease to repay the loan and that Sunstar Freight would own the trailer once payments were complete. Sunstar Freight met the monthly payments. Mr Yang claims Mr Qin agreed with the arrangement from the outset. Mr Qin’s position in this regard was confused as to whether or not he accepted the arrangement at the time. However, there is evidence that Sunstar Freight was making the repayments but Mr Yang claimed Sunstar Tradings owned the trailer.
25. [25]
    According to Mr Yang, he became increasingly frustrated from April 2022 when he was doing more haulage trips to and from Sydney and felt he was doing all the work.  His wife had also been doing Sunstar Freight’s book-keeping but had not been paid until March 2022. He said that in April 2022 he was paid $1,200 per haulage trip to Sydney but also wanted to be paid a management fee.
26. [26]
    According to Mr Yang, by June 2022 he was again unhappy. He considered Mr Qin was doing very little work in the business compared to him. Mr Yang states he met with Mr Qin in early July 2022 and gave him three options: to resign from the business, increase Mr Yang’s interest to 70%, or pay Mr Yang a wage the same as Mr Qin was being paid by Fung Lea Food. Mr Qin refused to agree to those options and Mr Yang told him he could not work with him anymore.
27. [27]
    According to Mr Qin, on 4 July 2022 Mr Yang asked Mr Qin’s wife for all customer records as well as other information of Sunstar Freight. On 7 July 2022, Mr Qin discovered that Mr Yang had changed the password for the company’s email and invoice system without warning. On 7 July 2022, Mr Qin sent an email to Mr Yang asking why monies had been transferred from Sunstar Freight to Sunstar Tradings and asked him to cease making transfers without permission. According to Mr Yang, the transfers were for the loan payments for the trailer purchased by Sunstar Tradings on behalf of Sunstar Freight.
28. [28]
    According to Mr Yang, on 7 July 2022 he telephoned Mr Qin asking him to reconsider the three options put to him, to which Mr Qin replied that he had never agreed to Mr Yang being paid a wage by Sunstar Freight.
29. [29]
    On 7 July 2022, there was an exchange of messages by WeChat between Mr Qin and Mr Yang. The messages were in Mandarin and translated by Mr Yang, which translation is undisputed by Mr Qin. They were in the following terms:

30. [30]
    On 8 July 2022, Mr Qin stated that he found the refrigerated trailer attached to another truck which did not belong to Sunstar Freight, which he was subsequently told by Mr Yang belonged to Sunstar Trading.
31. [31]
    According to Mr Qin, he and Mr Yang met on 10 July 2022 at the Warehouse. Mr Qin saw that the trailer was still on the back of the Sunstar Tradings truck and that Sunstar Freight’s truck had been locked inside the Warehouse. Mr Yang refused to give Mr Yang the key to the truck. 
32. [32]
    According to Mr Qin, at that time he found out that the refrigerated trailer had been registered in Mr Yang’s name after he had called the police to stop Mr Yang from removing it. He states that it was at that point he changed his view about closing the company because he suspected that Mr Yang had been using Sunstar Freight assets to the benefit of Sunstar Trading’s business.
33. [33]
    Mr Qin stated that on 10 July 2022 he had his solicitor write a letter to Mr Yang asking him to cease using the company’s assets without his permission. That letter raised potential conflicts of interest of Mr Yang arising from him owning Sunstar Tradings and transferring monies from Sunstar Freight to Sunstar Tradings as well as potential breaches of director’s duties by Mr Yang.
34. [34]
    Mr Qin said he carried out further investigations and on 13 July 2022 found that the Sunstar Freight trailer was parked at a Sydney warehouse. Mr Qin contended that his signature had been forged on the chattel mortgage agreement. He stated that Mr Yang had purchased the second trailer in March 2022 in Sunstar Tradings’ name but was collecting rental from Sunstar Freight, had purchased a forklift in Sunstar Tradings’ name and transferred $33,990 from Sunstar Freight to Sunstar Tradings. He suspects these matters were because Mr Yang was taking steps to prepare for running the business from Sunstar Tradings rather than Sunstar Freight.
35. [35]
    Mr Qin stated that he had been informed by customers of Sunstar Freight that they thought services provided to them in August and September 2022 had been provided by Sunstar Freight rather than Sunstar Tradings and there was evidence of nine payments to customers being refunded by Sunstar Freight in the company’s bank statements in August and September 2022. He also provided evidence that Mr Yang continued to use the truck and trailer purchased by Sunstar Freight after June 2022 until October 2022 given their odometer readings.
36. [36]
    Mr Qin considers Mr Yang took advantage of his position in Sunstar Freight and his trust in him to benefit Sunstar Tradings, and Sunstar Freight should be compensated for the wrongdoings he committed. He contends that it was always Mr Yang’s intent to use Sunstar Freight’s business to benefit Sunstar Tradings, demonstrated by Mr Yang placing assets of Sunstar Freight into the name of Sunstar Tradings. 
37. [37]
    In cross-examination of Mr Yang by Mr Qin, Mr Yang agreed he had used the truck and trailer of Sunstar Freight for his own business after July 2022.
38. [38]
    A company search of Sunstar Tradings was also presented to Mr Yang in cross-examination. It showed that a form was filed to change Jianfeng Yang’s name to Yang Jianfeng. According to the form it had been lodged by Mr Ting, who has been acting as Sunstar Freight’s accountant.  Mr Yang denied that he had anything to do with the lodging of that document and even though the document states that it was lodged with the director’s authorisation,
39. [39]
    he stated he did not instruct his accountant to change his name. Mr Yang’s evidence was not particularly persuasive in that regard, but in any event the evidence is equivocal and does not cast any light on Mr Yang’s actions either way. 
40. [40]
    After July 2022, Mr Yang and Mr Qin largely dealt with each other through lawyers. Attempts to negotiate a buyout of Sunstar Freight by either of them failed. Mr Yang states that he has not seen or spoken to Mr Qin since July 2022. He does not believe there are any prospects of them resolving their differences and being able to work together given the allegations that have been made.
41. [41]
    There is also no doubt Mr Qin has lost all faith in Mr Yang. Mr Qin only wishes to defer the winding up of Sunstar Freight so he can take legal action against Mr Yang.
42. [42]
    According to Mr Yang, regardless of the issues raised by Mr Qin in relation to Mr Yang’s conduct and potential breaches of director’s duties, what is uncontroversial is that there was a total breakdown in the relationship between Mr Yang and Mr Qin by July 2022 which is irretrievable, and it is that breakdown which founds the present application. Mr Yang’s legal representatives contend that the disputed facts as to whose idea it was to start Sunstar Freight, the amount of start up capital, what was agreed that each would contribute, the level of disclosure about Sunstar Tradings, the purchase of assets and any question of wrongdoing do not need to be determined by the Court as part of this application.
43. [43]
    Mr Qin was not cross-examined. Mr Yang did not respond to the matters raised in the affidavit of Mr Qin by way of reply. If the Court had to resolve whether Mr Yang breached his duties it would require the exchange of pleadings and a trial. 

Position of Sunstar Freight

44. [44]
    According to Mr Yang, Sunstar Freight presently has liabilities totalling almost $10,000. He claims $15,000 is owing to his wife but notes that is disputed by Mr Qin.  The truck and trailer purchased by Sunstar Freight and financed by Scania have been surrendered to Scania for auction, which is expected to result in $120,000 (less some expenses) being paid to Sunstar Freight. There is a small amount of cash totalling approximately $3,000 in the bank.
45. [45]
    Sunstar Freight has not traded since July 2022, although there is an issue as to whether Sunstar Tradings accessed the customers of Sunstar Freight after that time to generate business for itself.

Legal principles

46. [46]
    A winding up order is recognised as an extreme step, especially where the company is solvent. However there is no assumption that winding up an insolvent company is inappropriate.^[1]
47. [47]
    Pursuant to s 461(1)(k) of the Act, the Court may wind up a company if it is of the opinion that it is just and equitable to do so. 
48. [48]
    Pursuant to s 467(4) of the Act, it is provided that:

“Where the application is made by members as contributories on the ground that it is just and equitable that the company should be wound up or that the directors have acted in a manner that appears to be unfair or unjust to other members, the Court, if it is of the opinion that:

2. (a)
   the applicants are entitled to relief either by winding up the company or by some other means; and

2. (b)
   in the absence of any other remedy it would be just and equitable that the company should be wound up;

must make a winding up order unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.”^[2]

49. [49]
    The just and equitable ground permits the Court to apply equitable principles in determining whether to wind up a company in certain circumstances. In Re Westbourne Galleries,^[3] Lord Wilberforce stated that the just and equitable ground “does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way”^[4]. 
50. [50]
    One of the circumstances where the Court may order a company to be wound up on the just and equitable ground is where the company was formed as a “quasi partnership” and there is a deadlock or irreconcilable difference at both director and shareholder levels. 
51. [51]
    Lord Wilberforce in Re Westbourne Galleries stated that the just and equitable ground does not permit a party to disregard the obligations that he or she assumes by entering into a company.^[5] The application of equitable considerations therefore requires something more than the association being a purely commercial one where the basis of association is often established by the articles of the company. The superimposition of equitable principles will usually include circumstances such as where an association is formed or continued on the basis of a personal relationship involving mutual confidence, which will often be found where a pre-existing partnership had been converted into a limited company or where there is an understanding that all or some of the shareholders shall participate in the conduct of the business.^[6]
52. [52]
    In Re Yenidje Tobacco Company Ltd,^[7] Lord Cozens-Hardy MR applied the just and equitable ground to order a private company, which in substance was like a partnership, be wound up.^[8]  In that case, his Honour considered that given the two directors would not speak to each other, a third party had to convey communications between them and no business in the name of the company could be carried on, it was not just and equitable for the state of things to be allowed to continue, contrary to the arrangement made when they entered into the company which assumed that the two would act as reasonable men with reasonable courtesy and reasonable conduct in every way towards each other.^[9] His Lordship considered that the company was in substance a partnership.
53. [53]
    Re Yenidje Tobacco Company Ltd was applied in the case of Khamo v XL Cleaning Services Pty Ltd^[10], where Barrett J found that the company had been based on an association formed or continued on the basis of a personal relationship involving mutual conduct which brought equitable considerations into play.^[11] His Honour found that the company in that case had been conceived as a 50/50 partnership in corporate form where the parties made the mistake of not recording clearly their common understanding of the commercial terms.^[12] Disillusionment emerged between the two shareholders/directors as to their respective work contributions and the role of one shareholder’s wife. Allegations of dishonesty and expressions of loss of confidence were made. His Honour found that dissatisfaction and disharmony had begun prior to the issues as to the role of the shareholder’s wife. Whatever the outcome in relation to the allegations made in relation to the shareholder’s wife, Barrett J found that the relationship between the parties was not going to be restored to enable them work to constructively together. His Honour stated that by the time the matter came before the Court, the parties were at odds as to what the 50/50 partnership meant and most matters involving company business could not be resolved except through the solicitors’ correspondence. As his Honour found the relationship between the plaintiff and second defendant had suffered a form of irretrievable breakdown where there was mutual disillusionment and distrust and they could only communicate through solicitors,^[13] his Honour considered the observations of Lord Cozens-Hardy MR in Re Yenidje Tobacco Company Ltd to apply with equal force to the situation with which his Honour was dealing. His Honour concluded that the company should be wound up on the just and equitable ground as “there is deadlock, mutual distrust and a complete breakdown in communication and relationships which make the company unable to function in its current configuration.  It is unnecessary to seek to apportion blame. Both participants have contributed to the present situation.”^[14]
54. [54]
    Given the application of equitable considerations, the Court may not grant relief where a party comes to the Court with unclean hands, as Mr Qin contends that Mr Yang has done. In Re Amazon Pest Control Pty Ltd, Black J stated:

“The Court may withhold a winding up order where the plaintiff lacks clean hands or has himself or herself been the primary contributor to the breakdown of the relationship: Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426 at 430; Wondoflex Textiles Ltd [1951] VLR 458 at 465; Ruut v Head (1996) 20 ACSR 160; Argyle Concrete & Quarry Supplies Pty Ltd [2000] WASCA 170; (1999) 34 ACSR 469. However, even if a lack of clean hands were established, it is not an absolute bar to a winding up order because, as Santow J pointed out in Ruut v Head above at 162, otherwise neither party could obtain a winding up order where both were at fault. In Duc v PTS Australian Distributor Pty Ltd [2005] NSWSC 98 at [17], Barrett J referred to Ruut v Head and noted that the respective contributions to the breakdown should be assessed in determining what is just and equitable; and observed that a degree of fault on the part of the applicant in that case, viewed in the context of the fault of the other shareholder, should not deter the court from making an order for winding up so as to address the deadlock in the Company’s affairs.”^[15]

55. [55]
    What of the interlocutory relief sought by Mr Qin to bring proceedings against Mr Yang and restrain him from acting as a director under s 233 and/or ss 236–237 of the Act and its effect on a winding up application on the just and equitable ground
56. [56]
    If the Court has determined that it is just and equitable to wind the company up it must do so pursuant to s 467(4) of the Act unless it considers the applicant has brought the application unreasonably. McMurdo JA in Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd^[16] (with whom Gotterson JA and Jackson J agreed) considered the purpose of the proviso in s 467(4) is to “avoid the extreme step of a winding up if there is an alternative and adequate remedy”^[17].
57. [57]
    McMurdo JA further rejected an argument that where the just and equitable ground is established the Court may disregard s 467(4) in circumstances where the Court’s discretion is engaged by s 233 of the Act. According to his Honour:

“… there will often be facts and circumstances by which the court has powers both under s 233 and s 461. Conduct in the nature of oppression can make it just and equitable that a company be wound up. In such cases, s 467(4) will not be engaged by the exercise of a judicial discretion. Rather, it will be engaged by an application being of the kind described in the chapeau to the provision, and by the formation of the court’s opinion that the applicant is entitled to relief, either by winding up the company or by some other means, and that in the absence of any other remedy, it would be just and equitable that the company should be wound up. Where, as in the present case, that opinion is reached, the provision by its mandatory terms, requires a winding up order unless the court is also of the opinion which is described in the proviso. The requirements of s 467(4) cannot be avoided by a court declaring that it is exercising only the discretion under s 233.”^[18] 

58. [58]
    His Honour in that case found out that the buy-out order proposed by the appellant was another remedy which was available but that the respondents were not unreasonable in seeking to have the company wound up, in circumstances where performance of the buyout order was uncertain and the ultimate outcome might still have been a winding up order.^[19]
59. [59]
    Mr Yang contends that in the present case, notwithstanding he conceded that there is a serious question to be tried in relation to whether there is a breach of conduct by Mr Yang at least in relation to the non-refrigerated trailer, that he is not disbarred from pursuing winding up on the just and equitable ground as there has been an irretrievable breakdown between the relationship of Mr Yang and Mr Qin which is not disputed on the facts, and that the application was not engineered by his earlier conduct and made by him unreasonably. 

Consideration

60. [60]
    I find that the relationship between Mr Qin and Mr Yang, which resulted in them becoming joint shareholders and directors of Sunstar Freight, arose as a result of a mutual agreement to enter into a business relationship with each other. Each had confidence in the other and acknowledged what the other could bring to a business in terms of contacts, know-how, labour and other matters and there was a level of trust. The relationship was in effect a quasi-partnership, which is supported by the fact that they had equal shareholding, made equal capital contributions and that both Mr Yang and Mr Qin were directors working in the business, albeit that their perceptions of how it was agreed to operate differed, unaided by the fact that the terms agreed were not recorded in writing.
61. [61]
    There is no doubt that the evidence supports the fact, and I find, that by approximately July 2022 Mr Qin and Mr Yang had suffered a breakdown in their relationship which resulted in a loss of trust in the other and an inability to resolve matters in order to continue to conduct the everyday business of Sunstar Freight and cooperate in order to discharge the company’s obligations. The truck and trailer which were the principal forms of transport underpinning the business have been surrendered and are to be or have been auctioned. Given the business involved the interstate delivery of food products, the sale of those items which underpinned the business effectively eliminates any prospect of a continuation of the business of Sunstar Freight. Neither Mr Yang nor Mr Qin wishes to carry on business with the other. More than that, their lack of trust in each other, and the fact that they have largely dealt with each through lawyers since July 2022, means they are incapable of doing so.
62. [62]
    Mr Qin attributes the breakdown in the relationship to him discovering Mr Yang’s plan to use Sunstar Freight’s business to benefit Sunstar Tradings and deciding not to trust him anymore. That view of Mr Qin has developed based on matters he discovered after the business relationship had broken down. Mr Yang attributes the breakdown to the failure of Mr Qin to contribute to the business in accordance with his perception of what they agreed and Mr Qin then refusing to meet his demands as to changes when his expectations were not met. Whoever might be more accurate in their view is not a matter which can presently be determined. On any view, the business relationship operating through Sunstar Freight deteriorated to the extent of being unworkable, and that was the case at least by 7 July 2022 with matters only deteriorating thereafter.
63. [63]
    Attempts between Mr Yang and Mr Qin to negotiate a sale of shares in the company through third parties have failed. 
64. [64]
    I am therefore satisfied that given the breakdown between Mr Yang and Mr Qin, there is a prima facie basis upon which Sunstar Freight should be ordered to be wound up.
65. [65]
    Mr Qin does not contend that the business of Sunstar Freight should continue but rather opposes the winding up on the basis that he wishes to ensure Mr Yang is held accountable for what he perceives are breaches of duty by Mr Yang, which have resulted in Sunstar Freight suffering losses or Sunstar Tradings experiencing gains at Sunstar Freight’s expense. He has indicated his intent to bring a derivative action under ss 236 and 237 of the Act to that end.  He and Mr Yang are the only shareholders and there is force in his submission that in those circumstances, if Mr Yang has engaged in conduct in breach of his director’s duties to Sunstar Freight which has benefitted Sunstar Tradings and caused loss to Sunstar Freight, any loss suffered is, in effect, suffered by Mr Qin as the only other shareholder of Sunstar Freight.
66. [66]
    That raises the question of whether it is not appropriate to order Sunstar Freight be wound up because Mr Yang, who is the applicant, has come to the Court without clean hands or is acting unreasonably in seeking to have the company wound up. In particular the question is whether the application to wind up may benefit him, given the allegations of breaches of conduct, rather than being just and equitable for all.
67. [67]
    There are matters of concern arising out of Mr Yang’s conduct.  Mr Qin has provided evidence which does raise give some basis for the suggestion that Mr Yang used funds and assets of Sunstar Freight for the benefit of his business which may found an action for breach of director’s duties. The evidence does not, however, allow the Court to assess the prospects of any such action. Mr Yang has provided some explanation as to why monies of Sunstar Freight were transferred to Sunstar Tradings and assets were put in Sunstar Tradings’ name even though the payments were being met by Sunstar Freight, particularly in respect of the trailer, forklift and container purchased after March 2022. There are also questions arising from refunds made from Sunstar Freight’s accounts to customers in August and September 2022, the use of Sunstar Freight’s truck and trailer by Mr Yang in his business for Sunstar Tradings after July 2022, and Mr Yang claiming ownership of the second trailer purchased. They are matters which call for investigation. The Court cannot resolve those matters nor in the circumstances is it necessary or appropriate for it to do so.
68. [68]
    However, there is evidence of an irretrievable breakdown and I am not satisfied that Mr Yang’s conduct is such to cause the Court to refuse the application. While Mr Yang may have contributed to a greater degree to the breakdown in the relationship, I am satisfied that the application to wind up is not made unreasonably where there is such a breakdown in the relationship, where the business of Sunstar Freight has largely ceased and its continuation has been effectively brought to an end by the sale of the truck and trailer. Neither party is willing to continue to operate the business or buy the other out. In those circumstances, there is no real alternative remedy to ordering the winding up of the company, even if there is conduct enlivening s 233 or s 236 of the Act and notwithstanding I am conscious that Sunstar Freight appears to be solvent and winding up is an extreme step. The evidence does support the fact that there was a breakdown in the relationship of Mr Qin and Mr Yang by July 2022. I am not satisfied that Mr Yang engineered the breakdown or has brought the application with unclean hands to circumvent responsibility for any wrongful conduct.
69. [69]
    Mr Qin’s principal argument is that because there are only two shareholders and he contends that Mr Yang has engaged in conduct in breach of his director’s duties which has benefitted his own company Sunstar Tradings to Mr Qin’s detriment by virtue of the loss he will suffer as a shareholder of Sunstar Freight, the winding up should not be ordered and he should be able to pursue the action against Mr Yang. As I have indicated, there is some evidence which supports the suggestion that Mr Yang has acted in breach of his duties to Sunstar Freight which may potentially found a cause of action against him, but there is insufficient evidence to evaluate the prospects of success of any action.  However, in my view there is no real alternative available to winding up even though I appreciate Mr Qin as the potentially innocent party may suffer greater loss as a result of Sunstar Freight being wound up than Mr Yang. While Mr Qin considers the application is to stop him taking action against Mr Yang on behalf of Sunstar Freight, a liquidator will be in a position to bring such an action and will be better placed than Mr Qin to do so given the experience of liquidators and the powers they hold.
70. [70]
    If a winding up occurs, Mr Morgan Lane of Worrells is a registered liquidator and has agreed to be appointed as the liquidator. As a result of his being appointed by the Court he will be obliged to act in the best interests of Sunstar Freight, not Mr Yang. Given the matters canvassed in this judgment, he will have to exercise caution in assessing claims by Mr Yang. He will have powers which will enable him to investigate the actions of Mr Yang complained of by Mr Qin. If he considers it appropriate in all of the circumstances he can take action against Mr Yang on behalf of Sunstar Freight including by litigation. There appears to be sufficient funds for him to do so. Given there are few creditors and only two shareholders he should also be able to bring objectivity to his tasks.
71. [71]
    Accepting as was conceded, quite properly, by Mr Yang’s counsel that there is a serious question to be tried arising out of Mr Yang’s conduct, Mr Qin although directly affected by any alleged misconduct of Mr Yang is a self-represented litigant and any such claim for breach of director’s duties would be one that vests in Sunstar Freight.
72. [72]
    Mr Qin’s prospects of being able to successfully pursue a derivative action, which will not be available if Sunstar Freight is wound up, cannot be assessed. In the circumstances, the question of whether the Court would grant leave to him to bring a derivative action is doubtful. There is also no evidence before the Court that he would be able to prosecute any litigation on behalf of the company, including in regards to his ability to indemnify the company for any costs of any litigation. While the Court has a level of sympathy for Mr Qin in not wishing to have the assets of the company dissipated through the appointment of a liquidator and being concerned that there is a prospect the liquidator may not pursue any action against Mr Yang, he has not presently demonstrated it is in the best interests of the company that an action be brought against Mr Yang and more particularly that it is in the best interests of the company that it be brought by him such that leave would be given to pursue any action under s 237 of the Act. If a liquidator is appointed, the liquidator will be able to investigate the allegations of misconduct by Mr Yang and, if appropriate, bring an action and institute proceedings against Mr Yang to recover any losses to Sunstar Freight caused by Mr Yang.^[20]
73. [73]
    While Mr Qin seeks alternative relief under s 233 of the Act, he has not raised a factual basis supporting an action under s 232.^[21] Further, there is some doubt such relief would be given since he effectively seeks to use s 233 of the Act to bring an application on behalf of Sunstar Freight. Section 467(4) of the Act requires the Court to order the winding up of Sunstar Freight unless there is an alternative remedy, or the application has been made unreasonably such that the proviso operates. I have not found that to be the case. The interlocutory application of Mr Qin should be dismissed.
74. [74]
    I will therefore make the order in accordance with paragraphs 1, 2 and 3 of the draft. 
75. [75]
    I consider that while Mr Qin’s application for interlocutory relief has been refused and the winding up ordered that there should otherwise be no order as to costs as the matters he raised had to be properly considered by the Court in the contest of the winding up application.