Entsch v Mr Crocodile Pty Ltd [1990] QSC 252
10
20
30
40
50
60
IN
THE SUPREME
COURT OF
QUEENSLAND
CIVIL
JURISDICTION
BEFORE
MR.
JUSTICE
LEE
CAIRNS,
28
JULY
1990
~
------------
0
j
1-lEVISED COPI.ES -ISSUED
\
--"\
..9ourt P.eporting Bureau
Date•.·
/ I
5f
l_j.52-
_
_J
--
No.
42
of
1990
o~
s.
2 2
of
19
9 O
(Copyright
in
this transcript
is
vested
in
the
Crown.
Copies
the~eof
must
~ot
be
made
or sold
without
the
written authority of
the
Chief
court
Reporter,Court
Reporting Bureau.)
BETWEEN:
HIS
HONOUR:
WARREN
GEORGE
ENTSCH
-and-
MR.
CROCODILE PTY. LTD.
ORDER
Applicant
Respondent
Having
regard to
the
material
placed
before
me,
the
attitude
of the applicant
and
Mr.
and
Mrs.
Schoenemann,
the
attitude
of the
major
creditors
who I am
told
exceed
90
per cent of the
total,
and
the
fact that
the
applicant's
case
was
expressly
based
upon
oppression
and
not
insolvency,
and
also
having
regard to
all
of the material
placed before
me,
the matter
should
be
disposed of
now
in
the
interests
of
all
concerned.
It
seems
to
me
that
the
share of the applicant
ought
to
be purchased
by
the other
shareholder,
either
Mr.
or
Mrs. Schoenemann
or both of
them,
and
it
seems
to
me
that
the
sum
of
$500
offered
by them on
the present material
is
in
excess of
what would be
its
true
value
when
considering the net assets of the
company. This
was
not disputed
by
the solicitors
for the applicant.
Having
regard to the orders
made
in the writ action,
and the several undertakings given therein
by Mr.
and Mrs.
.-··:t
1
10
20
30
40
50
60
-- 1 of 61 --
10
20
30
40
50
60
Schoenemann,
both
to
the
applicant
and
to
the
court,
and
the
applicant's
desire to
sever
all
interests in
and
all
contact
with the
company,
it
seems
that
I
should
order
that
Mr.
and
Mrs. Schoenemann
purchase
the
applicant's
share
for
the
sum
of
$500.
In the
winding-up
application,
the
official
order
is
one,
that
the
applications
be
dismissed;
that
there
be
no
order
as
to costs;
order
that
Mrs.
Schoenemann
purchase
the
'
share of
Mr.
Entsch
for the
sum
of
$500;
order
that
within
seven days
Mrs. Schoenemann
tender, to
the
solicitors
for
\the applicant,
a
share
transfer
form
to
be
executed
by
the
applicant;
order
that
the
applicant
execute
the
same
within
seven
days
thereafter
and
that that
document
be
delivered
forthwith
to
the
solicitors
for
Mrs. Schoenemann
in
exchange
for
a
cheque
for
$500.
I
give
liberty
to
apply.
The
undertakings in the
writ
action are
noted
herein.
~-
. -
..
• Qld.
2
10
20
30
40
50
60
-- 2 of 61 --
IN
THE
SUPREME
COURT
____ _
OF
QUEENSLAND
CAIRNS
DISTRICT
REGISTRY
BETWEEN:
AND:
DELIVERED
WARREN
GEORGE
ENTSCH
MR.
CROCODILE PTY. LTD.
JUDGMENT
- LEE
J.
28 JULY,
1990
Writ
No. 42
of
1990
O.S.
No.
22
of
1990
Plaintiff
Defendant
I
have
before
me.two
matters
-
one
is
an
action
42/1990
commenced
by
writ
on
the
1 May,
1990, and
the
other,
an
application
by O.S. 19/1990
instituted
on
22 May,
1990
seeking
the
winding
up
of
the defendant
company
and
the
appointment
of
a
provisional
liquidator.
The
hearing, fixed
for
two
days,
in fact
occupied
the equivalent of three
sitting
days
with extended
sitting
hours so as not
to prejudice the
commencement
of
a
criminal
sittings
fixed for
18
July,
1990.
-The
parties
have
requested
an
urgent decision not
withstanding the pressure of other
work
during
this short circuit
sittings
and
limited library
facilities.
This
request
is
understandable having regard to
the following circumstances:-
1.
A
written offer
was made
on
the
13
July,
1990 by
a
buyer
to purchase
a 75%
control in the defendant
company
for
$1.5
million subject to certain conditions,
which
offer
remains- firm
only
until
Monday 30
July,
1990
(exhibit 22).
2.
On 27
June, 1990 Mr.
Peter Frederick
Schoenemann and
. .. - . - --·
- . -
- -
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..
- . - - - .
_.,:...
___________
,._
__
.:... ____
----~.: ~
= --~
.
--
- - - -
-- 3 of 61 --
-·2
Mrs.
Pauline
Margaret
Schoenemann
(his
wife)
representing
one
facti~n
in
these disputes (the
plaintiff
Warren George
Entsch
being
the
other
faction)
gave an
undertaking
to
Mr.
Justice
Kelly
to
5 pm
Tuesday
17
July,
1990
not
to
part
with possession
of or
deal
with
any
property of the
defendant except
in
the ordinary
course
of business,
not
to
issue
shares
in
the
defendant
and
not
to
appoint
or
purport
to
appoint
any
other
director
of
the
defendant. This undertaking
was
then extended
to
5 pm
on
18
July,
1990 when
it
was
further
extended
to
the
handing
down
of
this
decision
or
until
12
noon
Monday
30
July,
1990,
whichever
is
the sooner.
3.
The
very
existence of the application to
wind-up
based
upon
s.
364(1
)(f)
Companies
(Queensland)
Code
("the
Code")
(the
directors
have
acted
in
the
affairs
of the
company
in
their
own
interests rather
than
in the
interests
of the
members
as
a
whole,
or in
any
other
manner
whatsoever
that
appears
to
be
unfair or
unjust to other
members),
ors.
364(1)(j)
(
the
Court
is
of the
opinion
that
it
is just
and
equitable
that
the
company
be
wound
,'
up),
or
alternatively
based
upon
s.
320
of the
Code
-
(oppression), together
with the application for the
appointment
of
a
provisional liquidator
warrant
a
speedy
decision, the
parties
having agreed
that
these applications
should
await_
the
result of the writ action.
In the writ action the
plaintiff claims:-
(i)
A
declaration that the appointment of Pauline Margaret
Schoenemann ("Mrs. Schoenemann") as
a
director of
Mr.
Crocodile
- . : : - - - : - ..
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--- -- ~--------. - --
-- ---
.
----~---
...
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-- 4 of 61 --
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,
______
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.·:...-··.·:··.
- ';-:
-:·.·
.
·:-"
.-
- -
,.·
..
-
Pty. Ltd.
(the
defendant)
on
8
September,
1989
was
invalid.
(ii)
A
declaration
that
the allotment
of
49
shares
to
each
of
Peter Frederick
Hans
Schoenemann ("Mr. Schoenemann") and Mrs.
Schoenemann
on
8th
September,
1989
was
invalid.
(iii)
A
declaration
that
the
further
allotment of
450
shares
to
each
of
Mr.
and Mrs.
Schoenemann
on
the 21st
November,
1989 was
invalid.
(iv)
Rectification
of the
registers
of
members,
directors
and
directors
shareholdings
in
the defendant.
The
plaintiff
was
represented
by
Mr.
J.S.
Douglas
Q.C.
with
Mr. K.
Wilson
of
counsel.
The
defendant
was
represented
by
Mr.
P. White
of
counsel. In
addition to extensive
oral
submissions,
the following
were
reduced
to writing
and
will
be
placed with the
papers
marked
as
indicated:-
A.
Plaintiff's
chronology.
B.
Defendant's chronology.
c.
Outline of defendant's
submissions
D.
Outline of
plaintiff's
submissions
E.
Defendant's concessions
F.
Defendant's reply
on
matters of
law
G.
Further
submissions
of the
plaintiff
-H.
Further
submissions
of the defendant.
Counsel
for
each
party agreed
that the evidence
and
material
in the writ action is
to
be considered as
part of the material in
the applications in the originating
summons,
in addition to the
material read therein, but that the material read in the
originating
summons
is not to
be regarded as part of the evidence
-- 5 of 61 --
4
or material
in
the
writ action,
except
where
parts of
affidavits
in
the
originating
summons
applications
were
incorporated
into
the
transcript
in
the
writ action.
As
indicated,
both
parties
asked
that
the
determination
of the
originating
summons
applications
be
deferred
until
a
decision
is
handed
down
in
the
writ action.
I
must
say
that
as
the
winding-up
application
is
conceded
to
be
a
special
application,
I am
concerned
that neither
the
applicant
nor the
respondent
company
nor
any
contributory
has
obtained
the
mandatory
directions
required
by
rule
56
of the
Companies
(Queensland) Rules
1985
although
an
application in that
regard
was
filed
on
behalf of the applicant
Warren
George
Entsch
on 22nd
May,
1990.
This
matter
has
also
by
agreement
been
deferred
until
disposal of the
writ action.
rt-was submitted
that
the
fate
of
the
originating
summons
applications
would
probably follow the
result
of the writ action.
This could
be
the
result
but
it
is
not
necessarily
so,
because
once
a
winding-up
application
is
presented
and
particularly after notification
to
the
Commissioner
for Corporate
Affairs
pursuant
to
s.
370
of the
Code
(see the affidavit
of
John
Christian
Carey
filed
2
June,
1990
deposing
to
the
lodgment
of the notice
on 16
May,
1990)
the
matter ceases to
be one which
is
of concern only
to the
immediate
parties to the dispute.
Evidence
was
given during the writ action of debts said to
be owing by
the
company
in the order of $700,000.00 which ·are
overdue, apart
from monies owing
to
Queensland Industry
Development Corporation
(
11
QIDC
11
)
upon the security of the
a
- -
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--· -
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..
~;..-
-•
-- 6 of 61 --
defendant's crocodile
farming
property
at
Babinda.
It
was
said
that
the
company
had
been
in
touch with
its
creditors.
There
is
also
evidence
of
demands
made
by
Australian
Guarantee
Corporation
Ltd.
on
the
plaintiff
and
Mr.
Schoenemann
as
guarantors
of
a
lease of
a
tractor
to
the
defendant
and
also
demands
by
the
ANZ
Bank
Limited
on
the
plaintiff
as
sole
guarantor of
the
defendant's
bank
overa·raft.
Accordingly,
directions
were
given
to
the defendant
to forthwith
file
and
serve
affidavit
material
clearly indicating
the
state
of the defendant's
affairs,
its
creditors
and
their attitude,
which
seems
to
be
necessary
regardless of the
fate
of the
writ action.
It
is
not
in
dispute
that
the
plaintiff is
a
shareholder
and
director
of the
defendant as well as
Mr.
Schoenemann. Mrs.
Schoenemann
also
claims
to
be
a
director
and
shareholder,
.a
matter disputed
by
the
plaintiff
and which
is at
the
heart
of
this
litigation,
as
well as
the
quantum
of shares
allegedly
held
by
Mr.
Schoenemann.
The
plaintiff's
whole
case
was
that
only
he
and
Mr.
Schoenemann were
at
all
material
times
and
still
are the
sole
directors
of the
company
and
that
each
of
them,
to
the
total
exclusion of
Mrs. Schoenemann
hold
one
share
which means on
his
version
that
he
and
Mr.
Schoenemann
own 50%
each
of
all
of the
issued
capital in the
company.
He
contended
in
evidence
that
he
did not
know
following
demands upon him by
creditors pursuant to
guarantees
and
until
a
search of
company
records
was made by
his
solicitors in
Febr.uary, 1990
that
Mrs. Schoenemann was
allegedly
a
director
and shareholder holding
499
shares
and
that
Mr.
Schoenemann
held
500
shares
compared
to his
one
share only.
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--
-
The
plaintiff's
case
amounted
to
an
allegation
that
his
50%
interest
in
the
issued share
capital
of the
company
had,
unbeknown
to
him,
been
surreptitiously
diluted
by Mrs.
and Mrs.
Schoenemann
without
reference to
him
by
two
stages
-
one
said to
have
occurred
at
a
directors'
meeting
on
the
7
September,
1989
whereby
49
shares
were
issued
to
each
of
Mr.
and Mrs.
Schoenemann
thus reducing
his
interest
from
50%
to
1%
in
the issued share·
capital,
and
again
on
the
21
November, 1989
by
the alleged
further issue of
450
shares
to
each
of
Mr.
and Mrs. Schoenemann
thereby
further diluting his
interest
in
the share
capital
of
the
company
to
only
.1%
whilst
his
obligations
under
the guarantees
for various debts of the
company
remained. His
principal
complaint
was
that
Mr.
Schoenemann
had
agreed
to release
him from
three guarantees
after
he,
the
plaintiff,
had been
instrumental
in
obtaining
a
crocodile
farming
license for the
defendant
which
was
obtained
on
22
January,
1990
(ex.
20) and
that
Mr.
Schoenemann
had
not
done
so.
Conflicting versions
were advanced on
the
one hand by
the
plaintiff
and on
the other
hand by
Mr.
and
Mrs. Schoenemann
as
tc
whether
or not directors'
meetings occurred
on
7
September,
1989
and
21
November, 1989
and whether
or not
certain resolutions
were
passed
thereat
as the
company's
records plainly
show. The
resolution of this
dispute
depends on
the credit of witnesses,
aided
by
certain
documentary evidence.
Both
counsel have
conceded
that this is
so.
A
wide range of issues
which
occurred
before, between and
after
those alleged meetings,
all
of
which
bear upon
the credit of various witnesses, will of necessity be
referred to. It will also be necessary to
make
reference to the
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7
history of
this
unfortunate dispute
between
former
firm
friends
who
have
now
fallen
out.
Some
comment
must
first
be
said in
relation
to
matters of
credit.
It
must
be
said
at
once
that
each
of the
plaintiff
and
Mr.
Schoenemann
were
undoubtedly
men
of
affairs
and had
full
Rnowledge
of
their
business
activities
and
the various
transactions
into
which
they
entered
willingly
even though
some
details
might
have been
forgotten.
This
is
so
despite
on
different
occasions
and
in
respect
of
different
matters,
the
evidence
by
each
that
they
had
little
experience
in or.detailed
knowledge
of
certain technicalities
of
compan~
affairs.·
The
plaintiff
in
particular
claimed ignorance
of
many
important
matters
of
which he
was
or
should
have
been
well
aware,
particularly details
of
meetings
and
documents,
either
due
to
what he
admitted
was
his
poor
memory
of
significant
events
or
because he
was
not prepared
to
come
to grips
with matters
which
could
not
be
disputed.
Also each
of the
plaintiff
and
Mr.
Schoenemann
were
prepared
to
put misleading information
into
a
''
written application for
a
loan
from
QIDC
(ex.
10.)
on
1
October,
1989
and
in applications for
a
crocodile
farming
license
from
the
Department
of
Environment and
Conservation
(referred to
as the
National Parks
and
Wildlife Service) exhibit
21
of
14
August,
1989
and
exhibit
13
of
9
November, 1989.
Also
Mr. Schoenemann
in giving evidence tended
at
times
to
blandly agree with propositions put to
him when
in fact
he·
did
not intend to
do
so. This
at
times created
a
wrong impression of
what he was endeavouring to say. Accordingly,
I
have paid
- . - -
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:
:.
. - -··· : - .·
.:
-.--·- ---:--··-· ~--·
__
-:-._----~\:..-.~~--:·~-----·------------·-·---::---- -
-- 9 of 61 --
·--·--·
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·.-.
:.--•--·--"····
..
•·.~---··-·a····•
particular attention
to
the
evidence
of
each
of
the
plaintiff
and
Mr.
Schoenemann and
have
looked
where
possible
and
when
necessary
for corroborative
evidence
from
other
witnesses
or
documents,
particularly in relation
to
matters of
importance
in
the case.
I
found Mrs.
Schoenemann
to
be
generally
impressive as
a
witness
who
was
doing
her
best to
recall details
of events
which
occurred
a
long
time ago.
In
some
matters her
precise
recollection
was
better
than
in
others
and
in
matters
which
she
could
not
recall
she
freely said
so.
It
must be
expected
in
a
case
of
this
type
where
much
of
the business of the defendant
was
conducted
on
a
very informal
basis, that
there
would
be
differences
in
the versions
of
various witnesses
and
with
some
inconsistencies.
Due
allowance has been
made
for matters
such as
these.
There
is
no
reason
to
doubt
the
evidence
of
Mr.
Lane,
Mr.
Smith
or
Mr.
Conlon,
subject to certain qualifications
which
later
appear.
I
found
that
Miss Law's
evidence
was
unreliable in
certain respects
although
of
some
use
in others.
Also,
despite
the f~ct
that
she
was
employed.by
Mr.
and Mrs. Schoenemann
there
,.
seems
to
be no
reason
why
Miss Laugersen should not
be
regarded
as
a
reasonably
reliable
witness.
The
plaintiff
and
Mr.
and Mrs. Schoenemann were
very
good
friends
up
until
early January,
1990 when
they
fell
out for
various reasons.
The
plaintiff
contended
that
Mr. Schoenemann
had undertaken to release
him
(the plaintiff)
from
various
guarantees he had executed with respect to certain of the
company's debts
which Mr. Schoenemann obviously had not done.
Demands upon the plaintiff
were made by
certain creditors causing
.
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-
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--
·-·-·•····
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-··-.
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him
concern.
Mr.
and
Mrs
Schoeneman
were
experiencing
financial
difficulties.
They
contended
that
the
reason
for
the
ultimate
parting of the
ways
was
the
plaintiff's
directorship
in
a
company
Deugro
(Northern
Territory)
Pty.
Ltd.
("Deugro")
owned
and
controlled
by
a
Mr.
Press
who
had
made
an
offer
for the
total
purchase
of the
defendant
in
the order
of
$1
million
which had
been
negotiated
on
behalf of
Mr.
Press
by
the
plaintiff
with
Mr.
Schoenemann
and
which
Mr.
Schoenemann
categorically rejected in
early
January
1990.
It
was
also
contended
for
the
defendant
that
as
Mr.
Press
was
admittedly
funding
the
plaintiff's
action
and
winding
up
proceedings, the
aim
of the
plaintiff
and
Mr.
Press
was
to
bankrupt
Mr.
and Mrs.
Schoenemann
because
of the
disappointment
suffered
by
Mr.
Press
in
the
refusal
by
Mr.
Schoenemann
of
Mr.
Press'
offer to
buy
out the defendant,
rather
than
to
buy
merely
a
part interest
as
Mr. Schoenemann
had hoped
for.
The
plaintiff
had
known Mr. Schoenemann
for
some
3
to
4
years before
June
,1988
at
which
time
he
commenced
working
for
a
family
company owned
by
Mr.
and Mrs. Schoenemann,
called Seacrest
International
Pty.
Ltd
("Seacrest"),
which
was
involved with
importation
and
exportation of
seafood products
in particular
lobster
tails
mainly
from Papua
New
Guinea.
The
plaintiff
said
he
was
engaged as general
manager
of
that
company's
resorts
and
projects division
whereas
Mr. Schoenemann
said the
plaintiff
was
engaged
as
a
consultant.
Nothing
turns
on
this difference.
It
appears
that the plaintiff
continued to
be engaged by
that
company
until
some
unspecified time during the
first half of
1989
and probably to about
May
or June of that year.
- - -----·-· - - - ---·-----
--
··-·------- -·
--~--
-------- -
-- 11 of 61 --
(
- · -
..
·
·-----
--·
·10
··--·····-· .
·_:
__
:_
__
~-:-:-.-.-::;."';
__
- . ···::-:
...
--:·_·
___
-.:.:·:··.__.
__
._
-
On
the
15th
August,
1988
the
defendant
was
incorporated
with
Mr.
and
Mrs.
Schoenemann
the
sole directors
each
holding
a $1
fully
paid
share.
They
were
the subscribers
to
the
memorandum
showing
that
one
share
each
was
to
be
taken
(exhibit 3).
According
to
the
members'
minute
book
page
1
(part of exhibit
3)
on
that
date
as
such
subscribers
they appointed
themselves
as
first
directors
of
the defendant as
required
by
Article
30.
By
Article
30,
the
number
of
directors shall
not
be
less
than
2
nor
more
than
10,
unless_otherwise
determined
by
resolution
of the
company. The
first
meeting
of directors
was
held.on
that
date
(see
page
1
of
directors'
minute
book
exhibit 3).
The
directors
then appointed
Mr.
Schoenemann
as
Chairman
of the
Board
of
Directors
in
accordance
with
Article
40
and
resolved
that
he be
Secretary of the
defendant.
By
Article
46
he had
a
second
or
casting
vote
in
the case
of equality
of votes: Petsch
-v-
Kennedy
[1971-3]
A.C.L.C. 27187.
In addition to
formal
matters,
they
resolved
that
as
subscribers to
the
memorandum
they
be
entered
~n
the reg4ster of
members
as
the holders of
one_ordinary
fully
paid share of
$1
each.
Article
81
states that
the shares
are
under
the control of the directors
who may
allot
or
otherwise
dispose of
them
to
such
persons
on such terms and
conditions
and
at
such times as the
directors think
fit.
Exhibit
3
shows
prima
facie that the defendant's registers
and
official
records
were
precisely kept.
.
The
defendant
initially
intended to trade in crocodile
products only
i.e.
skins, meats
etc.
The
plaintiff at
Mr.
Schoenemann's request went to
New Guinea to negotiate meat for
. --·- ----·--
-·-
--
....
- .
:.
:· - - --· " . . ~
- -
--
- -
..
-- - -- - - -
______________...
__________ ..
___
- -
-- 12 of 61 --
------
-11·-
-~----·•··
the
company
which
apparently
handled only
one
such consignment
for
purchase
and
export
to
Japan.
Later
whilst
the
plaintiff
was
still
working
for
Seacrest,
Mr.
Schoenemann became
interested
in
crocodile
farming. Discussions occurred
between
him
and
the
plaintiff.
Mr. Schoenemann
is
not
clear
who
actually
brought
the
subject
up.
The
plaintiff
said that
Mr.
Schoenemann
brought
the
subject
up,
telling
the
plaintiff
that
he
would
like to
become
involved
in
crocodile
farming
generally.
Again
it
does
not
appear
to
be
very
significant
as
to
who
actually
initiated this
interest.
According
to
Mr.
Schoenemann
the
plaintiff
said
it
could be
very
profitable
but
that
there
were
problems
obtaining
the necessary
license.
He
told
Mr.
Schoenemann
that
he
ha~
a
reputation
"with the
department"
and
was
quite
sure
that
he
could
obtain
a
crocodile
farming
license
for the
company.
The
plaintiff
agreed
that
neither
Mr.
or
Mrs. Schoenemann
had any
previous experience
in
crocodile
farming whereas he had
6
to
7
years previous experience
and
many
years
involvement
with
the
Queensland
National Parks
and
Wildlife Service, including
its
trapping
programme.
To
farm
crocodiles,
a
license
was
essential.
He
had
prepared
a
previous submission
to that
body
for
a
license
for
Freeman
Corporation,
his
previous
employer which
apparently
was
successful.
He made known
to
Mr. Schoenemann
his
experience
and
reputation
and
Mr.
Schoenemann
accepted
that to obtain
a
license
it
would be advantageous
that the
plaintiff
or
someone
with sim£lar
knowledge,
experience
and
standing should be
involved
in
its
preparation
and submission.
Mr. Schoenemann
said
that
he
relied
upon
the
plaintiff's
statement in this regard
and
there is
no reason not to accept his evidence on
this point
.
.. - - --·
--·-·
'
.. ----------
.- --
._
-
__
----·
..
·
------- --~--::-_:..·~------"-::··-: -
-- 13 of 61 --
:_: ·.-1 2
Indeed,
the
plaintiff
in
substance
agreed with
this.
I
also
accept
that
the
plaintiff
told
Mr.
Schoenemann
that
without
a
person
of
his
experience
and
standing,
it
would
be
unlikely
that
the
defendant could
get
a
crocodile
farming
license.
It
is
clear
that
the
plaintiff
was
jealous of
his reputation in the crocodile
farming
industry
generally
and
was
anxious
to
maintain
that
reputation.
Towards
the
end
of
1988
Mr. Schoenemann
asked
the
plaintiff
to
become
a
director
of the
defendant
and
to
take over
his wife's
one
share.
The
result
would
be
to
make
him
an
equal
shareholder.
with
Mr.
Schoenemann.
The
plaintiff
said
that
initially
he
could
not
afford
to
take
up
this offer
but
that
Mr.
Schoenemann
urged
him
·to
do
so.
When
asked
about
the value of the share
at
that
time
(i.e.
28
November,
1988),
his
answer
was
vague and he
immediately
referred to the
later
purchase
of
.land
(8
April,
1989).
At
page
9
of the
transcript
he
said:-
"That
was
my
concern
was
the value.
When we
purchased
the
property for
$300,000.00, he
came
back with
a
figure of
a
hundred
- I
can't
remember
whether
it
was
either
$150,000.00
or
$180,000.00
was
the shareholding
that
he
offered to
me
as
my
contribution to
purchase acquiring crocodiles,
first
of
all,
from
Mr.
Craig
and
secondly
from
preparing thesubmission for the National
Parks and
lending
my
credence
tO •
II
•
When
asked what
Mr.
Schoenemann
wished
the
plaintiff to
do
for
the defendant
in return for the shareholding the
plaintiff said:-
"Prepare
a
detailed
submission or application for
a
license
to
farm
crocodiles
at
Babinda and
also to acquire
-
negotiate
and
acquire
-
crocodiles
from
Mr. _George
Craig."
It is clear that
no
significant discussion as to the value
of the share could have occurred in late
1988. Indeed,
it is
-- 14 of 61 --
"
·
13
difficult
to
see
why
the
plaintiff
said
he
could
not
afford
to
take
up
the
offer
when
first
made
as
the
company was
a
$2
company
with
no
assets
at
that
time
and he
was
never
asked
to
and
never
provided
any
captial
or other
funds
by
way
of
loan
to
it.
The
Babinda
property
was
not purchased
until
8
April,
1989
with
settlement
due
on
30
September,
1989.
Even
the deposit
was
payable
by
monthly
installments
over
six
months
so
the value
of
the
one
share
could
even
then hardly
have been
fixed
by
a
reference
to
that
"asset"
and
the
amount owing
in respect of
it.
It
must
be
kept in
mind
that
the
plaintiff
and
Mr.
Schoenemann
were
then firm friends
and
the
plaintiff
worked
for
Mr~
Schoenemann's
companr
Seacrest.
On
28
November, 1988
Mrs.
Schoenemann
transferred her
one
share
to
the
plaintiff
who
was
then appointed
a
director.
Mrs.
Schoenemann
resigned
as
a
director.
See
director's
minute
of
that
date
(part
of exhibit 3).
There
is
no
complaint
by
the
plaintiff that
his
appointment
in this
way
was
invalid.
Whilst
that
minute
is
expressed
to
be
part
of
a
formally held meeting,
I
it
was
in fact
conducted
on
a
very informal
basis
as
would
be
expected having regard to the relationship of the
parties.
Indeed,
this
is
the precise
evidence of the
plaintiff
with
respect to decisions taken
at that
time and indeed
all
decisions
since.
See
transcript at
24-26.
Article
45 empowers
the directors to
meet
together for the
dispatch of business
and
otherwise regulate their meetingi as
they see
fit.
Meetings can be held
by telephone without physical
presence being essential. Willing directors
may
hold
a
meeting
. - - :
~
. . .
--
- ·-· . - --•~
__
..
____ -.. -·-_.:._:.-~-
..
-.::
~-----~--~--~~~-_-
- ~--.-- ------ ·----
-- 15 of 61 --
· 1·4----- - ··- -
under
any
circumstances.
See
also Articles
46,
55
as
a
pointer
to
informality:
Smith
-v-
Paringa
Mines [1906]
2
Ch.
193;
Barron
-v-
Potter
[1914]
1
Ch.
895
per
Warrington
J
at
901,
applied
by
the
Court
of
Appeal
in
Worcester
Corsetry,
Limited
-v-
Witting
[1936]
1
Ch.
640
in particular
per
Lawrence
J
at
651
which
in turn
was
approved
generally
by
the
High
Court
in
Grant
v-
John Grant-&
Sons
Proprietary
Limited
[1950]
82
CLR
1; Swiss
Screens
(Australia)
Pty. Ltd.
-v-
Burgess
[1987]
11
ACLR
756
at
758-9,
followed
by
the
Court
of
Criminal
Appeal
in
Western
Australia in
Versteeg
-v-
R.
[1988]
14
ACLR
1
at
14.
Nothing
appears
from
the decision
referred to of
Connolly
J
in
Eastern
Resources
of
Australia
Ltd.
-v-
Glass Reinforced
Products
(GRP)
Pty. Ltd.
[1987]
2
Qd.R.
31
which
is
contrary
to
the foregoing.
Rather
it
supports the
principles
above
referred
to.
See
page
35
and
also
His Honour's
statement
that
there
is
not
any
general
requirement
that
the business
to
be conducted
at
a
meeting
of the directors
be
specified in
the notice of the
meeting.
It
is
also
clear that at
properly
convened
meetings,
however
short the notice or
even
where
they occur spontaneously
by
agreement,
directors
may
transact
all
business within
their
powers though no
notice
has been given
to the
members
of the
board
that
any
special business
is
to
be
transacted:
Compagni~
de Mayville
-v-
Whitley [1986]
1 Ch 788
per Lindley
LJ
at
797.
See
also the decision of the
New
South Wales
Court of
Appeal
in
Petsch -v~·Kennedy (supra) per Jacobs
JA
at
27192.
Some
unstated time
thereafter the plaintiff
arranged for
an
overdraft for the defendant with the
ANZ
Bank
to the extent of
. . . - - - .. - . . - - . . . -
·- ----. -·
____ __,.,___
________ ..
- - ·-
...
-
-- 16 of 61 --
..
----
=··--···..:...
___
1.5
________
.
$30,000.00
to
$35,000.00
which he
alone
guaranteed.
This has
been
availed of
to
the extent of
$35,509.50.
See
the
demand
on
the
plaintiff
by
the
Bank
on
the
2
July,
1990.
(exhibit 7).
It
does
not
emerge
why
the
plaintiff
alone guaranteed
this
overdraft.
Mr.
Schoenemann
said
the
plaintiff
had
good
contacts
with
or
was
known
to
that
bank.
By
exhibit
23
dated
18
July,
1989,
Mr.
and
Mrs. Schoenemann
gave
written
undertakings
to
the
plaintiff,
as
well as
to the
Court,
that
they consent
and
undertake
to
sign
a
deed
of personal
guarantee
indemnifying
the
plaintiff
in
the
event
that his
guarantee
to
the
bank
is
called
upon
for
payment.
·
They
have
instructed
their solicitors
to
draw
a
deed
of
personal
guarantee
to
this
effect.
It
appears
that
the
plaintiff
was
asked
to
acquire
a
suitable-acreage property.for
the
company
on-which
to establish
the
proposed
crocodile
farm.
The
plaintiff
was
at that
time
employed and
paid
by
Seacrest.
Mr.
Schoenemann·said·that
the
plaintiff
was
engaged
to
look
for suitable
land
because he
was
the expert.
This accords with the
plaintiff's
evidence.
The
I I
plaintiff
in fact
arranged
and
signed
a
contract to
buy
a
farm
for the
company
at
Babinda on
the 8th April,
1989
with settlement
due on
30th September, 1989.
The
deposit
was
to
be
paid
by
equal
monthly
instalments with the balance
due on
settlement.
The
plaintiff said that
he purchased
this
only under
the direction of
and
with the consent of
Mr. Schoenemann.
It
was
clear to
both
parties at that
time
that the defendant apart from-the overdraft
facilities
arranged
by
the
plaintiff,
had no
financial resources
either
by way
of capital or
income.
-- 17 of 61 --
16
After the
purchase,
plans
were
developed
for
a
lay-out
design.
The
plaintiff
agreed
that
he
was
the expert
in
regard to
pond
design
and such
matters but
that
there
were
a
lot
of other
things
over
which
he had
no
control
and
which
Mr.
Schoenemann
handled.
He
said
that
Mr.
Schoenemann
made
the
decisions
and
that
whilst
he
and
Mr.
Schoenemann
agreed informally
on day
to
day
matters,
Mr.
Schoenemann
in fact
had
the
say
and
"I
went
along
with
it"
or "I
did as
I
was
instructed".
With
his
admitted
expertise
and
the lack of
experience
by
Mr.
and Mrs. Schoenemann,
this
stand
is
strange,
having
regard
also to his stated belief
that
he
was
always
an
equal
director
and
an
equal
shareholder.
The
plaintiff
appeared
through?ut
to
give the impression
that
he
had
been
pressured
into joining the
defendant as
a
director
and
shareholder
by
Mr.
Schoenemann,
but
without
any
real
say
in
its
affairs,
whilst
ending
up
with
a
substantial potential
liability
under
the guarantees.
It
appears
that
Mr.
Schoenemann
soon
after
the signing of
the
contract did
~9me
landscaping, slashing, planting of
palms
and
various other
works
including
some
fencing
on
the land.
Apart
from
funds
from
the
ANZ
Bank by
reason
of the overdraft,
which
Mr. Schoenemann
at
86
volunteered
was
arranged
by
the
plaintiff,
Mr. Schoenemann
provided
all
of the defendant's
funds
by
way
of
a
loan
from
Seacrest.
These
consisted
by
far the bulk
of the funds
ulitised
by
the defendant.
The
plaintiff
admitted
that this
was
so
(p
26).
The
plaintiff
put
no funds whatsoever
into the defendant. Neither did he
or
Mr. Schoenemann draw any
payment from
the defendant for their services. Apart from one
transaction involving the purchase and export of meat from New
-- 18 of 61 --
·-·-
:
__
-.:·:
..•
·:::. - •
-_7_:·
-_,-
___
·_-::-·.
•·.
··-·--:
·-
·1
7
-·
·•-··
··.
Guinea,
it
had
no
other
income
or
funds.
In
about
March 1989
Mr.
Schoenemann met
Mr.
Press,
a
West
German
businessman
in
Singapore
and
later
introduced
him
to
the
plaintiff
in
about
that
month
or
perhaps
in
April
1989.
The
plaintiff
agreed
with
this.
Negotiations
were
then
entered
into
with
Mr.
Press
with the hope-that the
defendant
would
have an
interest
with
Mr.
Press
in
a
proposed
crocodile
farm
in
the
Northern
Territory
or in
other
ventures.
It
appears
that
there
was some
hope
that
Mr.
Press
would
acquire
an
interest
in
the
defendant.
The
evidence
at
that
stage
is
very
vague.
In
any
event, nothing
actually
came
of
proposals
with
Mr.
Press
at
that
time.
The
plaintiff
said
that
Mr.
Schoenemann
had
planted
palms
and done
certain
work
at
the
Babinda
property shortly
after
the
signing
of the contract
on
8
April,
1989
so
that
it
would
appear
to
Mr.
Press
that
the defendant
had
actually started
a
crocodile
farm
before
Mr.
Press
arrived
on
the scene.
The
plaintiff
, ·
suggested
that
Mr. Schoenemann was
trying to
impress
Mr.
Press
whose
acutal arrival
time
is
not
clearly stated.
There
was
little
time
to
carry out
much
work
before
Mr.
Press'
arrival.
The
plaintiff's
evidence
is
in
my
view
a
pointer to
one
of
the reasons
why
his relationship
with
Mr. Schoenemann
finally
broke
down
fn early January 1990. Throughout the
entire period
since
March,
April,
1989,
there
had been
some hope
existing
on
the part of
Mr. Schoenemann and the plaintiff that
Mr.
Schoenemann would be able to
come
to
a
deal with
Mr.
Press either
. ·- -
~-- ------ _. ..;.
___
.,: __ - - -~-·-----·
- --~------:._:_:_:_::__· -·_-
_____
.;.~--=---
--------·
- -
.....
-- 19 of 61 --
- .
18
·
involving
other properties or
with
respect
to
an
interest
in
the
defendant.
The
latter
negotiations
were
actively
revived
towards
the
latter
half
of
1989
with the
plaintiff,
then
employed by
Mr.
Press'
company
and
a
director
of
it,
representing
Mr.
Press
in
negotiations
with
Mr.
Schoenemann.
It
appears
that
Mr.
Schoenemann was
interested in selling
a
partial interest
only
of
the defendant
to
Mr.
Press
who
was
apparently
dissatisfied
with
Mr.
Schoenemann by
virtue
of
another deal
which
was
not
specified.
In
late
December 1989
or early
January
1990
after fairly
detailed negotiations,
Mr.
Press offered
$1
million
for~
100%
interest
in the
defendant
which
Mr.
Schoenemann
totally
rejected,
having
as
he
said,
spent considerably
more
than
that
on
the
project.
It
was
put
to the
plaintiff
in
cross
examination
that
this particular refusal
by
Mr. Schoenemann
to
accept
any
such
deal
caused
the
complete
break
down
of
their
relationship
and
there
seems
to
be
little
doubt
that
it
finally
occurred
at that
time.
The
animosity over
this
matter
emerged
clearly
from
the
evidence
of the
plaintiff
in particular,
confirmed
by
Mr.
Schoenemann
at
103
that
the
plaintiff
told
him
that their
relationship
was
terminated forthwith
when
the
plaintiff
hung up
on
the telephone.
It
was
put to the
plaintiff that
Mr.
Press
was
funding the
_,
plaintiff's
action against the defendant, to
which
the
plaintiff
agreed, and
that the
plaintiff's
motive was
to bankrupt
Mr.
Schoenemann and or his
company. The
plaintiff in response to
this question endeavoured to explain that he did not use the word
-·-·----- ---·----- - ---------·------
~
-- 20 of 61 --
--·-··--19
. -- - -
--
-
--
- . - --..- -- - - - -
bankrupt,
"not
in
those
words no"
(58}~
He
went
on
to
explain
what
he
meant by
this
but
there
can
be
little
doubt
that this
particular
transaction
has
had
considerable bearing
on
the
plaintiff's
attitude
in
this
case.
Had
Mr.
Schoenemann
accepted
the
$1
million
offer
for the
total
control of the
defendant,
it
appears
that
the
debts
of the
defendant
would
have
consumed
that
sum
at least.
Now,
with
other
improvements and
considerable
funding
spent
on
the property since
then,
its
potential
worth
may
well
exceed what
is
owing
with
respect
to
it.
There
is
also
the
offer
of
$1.5
million for
only
a
75%
interest
which
may
greatly
exceed
the debts outlined
in
evidence
by Mrs. Schoenemann.
On
the
7
April,
1989
the
plaintiff
and
Mr.
Schoenemann
executed
a
lease
of
a
tractor
with
A.G.C.
and
both guaranteed the
terms
of the lease
which
provided
for
48
monthly payments
of
$634.47
(exhibit
6).
Mr.
Schoenemann
said
that
the
plaintiff
acquired
this tractor
but
that
it
proved
to
be
entirely
unsuitable for
the defendant's
purposes.
As a
result
the
·plaintiff
took
this tractor
to
a
grazing property
in
which he
was
I
' .a.
interested
where
it still
remains. That
property
made
use
of the
tractor
for
a
time but
it
is
no
longer used and
is
stored there,
the
plaintiff
contending
that
he wished
to return
it
to the
defendant whereas
Mr.
Schoenemann
refused to take
it
back. There
is litigation
pending between
the
plaintiff
and
the defendant in
the Magistrates
Court with respect to lease
payments
paid
by
the
plaintiff
which he says were
paid
on
behalf of the
company. Mr.
Schoenemann's
attitude is that
he should not
pay
the lease
payments
whilst the tractor
was
taken and used by
the plaintiff
on a
separate enterprise. It
was submitted by
senior counsel for
----·--
-
--:.: ____ :·.:_ - .--
·-·
- ------- ·---------~-:.-·---.""~-::-:--,:_..·.
-- 21 of 61 --
20
the
plaintiff
that
whatever
the nature of
the
conflict
between
the
plaintiff
and
Mr.
Schoe_nemann
with
respect to the
tractor,
the
lease
payments
constituted
a
debt
owing by
the
company
to
AGC
Ltd.
in resepct to
which
each
of
them
are
guarantors.
This
appears
to
be
so.
In
May
1969
after
the land
was
purchased,
the
Queensland
National Parks
and
Wildlife
Service
imposed
a
moratorium
on
grants of crocodile
farming
licenses,
making
it
more
difficult
for
a
license to
be
granted.
This
was
the
attitude
of
the
plaintiff
from
that
time
and
no
doubt
the
plaintiff
made
this
known
to
Mr.
Schoenemann.
It
became
evident
to
the
plaintiff
that
Seacrest suffered
an
acute shortage
of
funds
by
that
time
at
the
latest.
The
plaintiff,
whilst
employed by
Seacrest
and
with
Mr.
Schoenemann's knowledge, on
a
date not
specified,
went
to
Darwin
with
Mr.
Press
and
Mr.
Chai
to
look
at
a
crocodile
farm which
Mr.
Press
was
interested in
purchasing, following
which
Mr.
Press
offered the
plaintiff
a
well-paying job as Australian
Manager and
head
of his Australian enterprise.
The
plaintiff
said that
he
initially
declined
this offer
but discussed the matter with
Mr.
Schoenemann
as
he
felt
loyalty to
Mr. Schoenemann
and because
he
felt
he
should not leave Seacrest or the defendant as
Mr.
Schoenemann was
going through
substantial financial
problems.
The
plaintiff
said that
Mr.
Schoenemann's
attitude
was
that
it
would be
to the defendant's advantage
if
the
plaintiff
worked
for
Mr.
Press due
to the prospect of future deals. Also Mr.
Schoenemann could not afford to pay the plaintiff further. This
------------------- ··-----
. .
--------- -.- ---·-=--- -.
--?""---:-: -_ -
·-
-·------.:. -·· ---
-~-
_
......
_______
--·
- - --
-- 22 of 61 --
/
-
··-
--··21
.·
.-
.
·.-·
·-:....:...::..:.-:-:..-_
"';,;:
offer
must
have
occurred
in
about
April
or early
May,
1989.
On
the
17 May,1989
the
plaintiff
was
appointed
a
director
of
Mr.
Press's
company
Deugro
and
on
the
1
July,
1989
he
commenced
full
time
employment
with
that
company
as
head
of
its
Queensland
operations.
Up
to
that
time
the
plaintiff
had
worked
for
that
company
from
the
premises
of Seacrest
and
according
to
Mr.
Schoenemann,
initially
without
any
rental
charge, but
on
1
July,
1989
he
moved
to
separate
premises
of
Deugro,
situated
some 200
metres
away
from
Seacrest
and
the defendant's
office.
There
is
no doubt
that
Mr. Schoenemann
knew
that
the
plaintiff
was
working
for
Mr.
Press
in
a
responsible
position
before
30
June,
1989
and
encouraged
him
to
do
so, although
he
claimed
that
he did not
know
that
the
plaintiff
was
a
director
until
much
later.
He
knew
that
the
plaintiff
was
a
director
by
no
later
than
14
August, 1989.
On
the balance of
probabilities
however
he
knew
of
this fact
at
an
earlier
time. This
is
confirmed
by
Mr.
Schoenemann's hope
to enter into
some
type
of
11
business deal
with
Mr.
Press for
a
part
interest
in the
defendant's crocodile
farm,
a
hope which
apparently continued
up
until early
January
1990 when
the
relationship
between
the
plaintiff
and
Mr. Schoenemann
finally
broke
down.
Deugro
in fact
purchased
a
crocodile
farm
in the Northern
Territory called
Janamba. The
plaintiff said
he spoke
to
Mr.
Schoenemann
saying that
he had
a
conflict of interest, i.e.
being
a
director of
Mr.
Press's
company
as well of the defendant
because Mr.
Press
was
considering purchasing into the defendant
·- -------~-·---- :
-- 23 of 61 --
,
- -
·-·-. ·-
•-•
---·---- --··-·
·--·-
.--
22
-
company.
There
is
no
evidence as
to
whether
or
not
the
plaintiff
is
a
shareholder
in
Deugro.
The
evidence
is
quite
clear that
he
had
a
responsible
and
well paid
position
with
that
company
in
which
his future lay.
Mr.
Schoenemann
however
asked
the
plaintiff
to
remain as
director
of
the defendant
until
such time
as
the
applications for the crocodile
farming
licenses
had
been
lodged
and
approved.
Mr.
Schoenemann
considered
that
with
the
plaintiff
in
Mr.
Press's
camp
as well as being
a
director
of the
defendant,
a
suitable
deal
with
Mr.
Press
was more
likely
to
come
to Fruition.
The
plaintiff
said
he
agreed
to stay
on
as
a
favour
to
Mr.
Schoenemann,and
was
quite
definite that
when
the licenses
had
been
attended
to
and he
was
released
from
his
various guarantees
(at
that
time only with
respect to the
AGC
Lease
the
A.NZ
loan)
his intention
as well as
that
of
Mr.
Schoenemann
was
to
cut
all
ties
with
the
defendant
and
to get
out
of
all
involvement with
the defendant
company
i.e.
both as
a
shareholder
and
as
a
director.
His
stand
was
that
he had
agreed
to
do
this
for
Mr.
t t
Schoenemann
as
a
friend.
He
also said
that
he
relied
upon
Mr.
Schoenemann
to
honour
his
committment and
make
sure
that
he
was
released
from
the guarantees
which
was
all
he
desired.
Counsel
for the defendant submitted
that
the
plaintiff
in fact
felt
an
obligation to
continue with
Mr. Schoenemann
because
his
change
of
position
left
the defendant
somewhat
in the lurch.
At
all
events,
all parties are adamant
that the
plaintiff
intended no long term involvement with the defendant.
The
plaintiff said in the clearest of terms that he did not expect
..
- :. - - .. ·- -:,."
- -- ~
-- 24 of 61 --
..
-
·-
~-·
. ., ..
23
..
--
·-·
any payment
at all
from
the
defendant
or
Mr.
Schoenemann
for
what
he had done
or
was
to
do
for
the
defendant.
From
about
mid 1989
onwards
it
was
clear
to
all
concerned
that
the
plaintiff
was
to
sever
all
contact
with
the
defendant
company
and he
expected
that
Mr.
Schoenemann would
release
him
in
some
unexplained
way
from
his
various guarantees. Strangely,
he
thereafer
incurred
a
further substantial
liability
as guarantor
to
QIDC
on
25th
September, 1989.
There
was no
evidence
as
to
how
the
plaintiff's
release
from
these guarantees
was
to
be
carried into
effect.
The
plaintiff
said
that
the
bank
and
AGC
would
not
now
release
him
f_rom
the
guarantees.
Any
release
would
require
the
consent
of the
creditor
unless
Mr.
Schoenemann
or
the
defendant discharged those
debts
or unless the
parties
intended
to effect
these
"releases"
by
some
form
of
indemnity.
See
now
exhibit
23
with
respect to
the
ANZ
Bank
overdraft
and
also exhibit
24
regarding
the
QIDC
guarantee as well
as
the
unequivocal evidence
of
Mr.
Conlon
that
the
plaintiff
would
be
released
from any
liability
to
QIDC
under
,·
the guarantee providing
QIDC
had
the written
consent
of
Mr.
and
Mrs. Schoenemann and
his (the
plaintiff's)
resignation
as
a
director of the
defendant
together
with the
lodgment
of the
company
form
evidencing
this fact.
On
14
August,
1989
the defendant
company
under
the
plainciff's
hand wrote
to the
Queensland National Parks and
Wildlife Service applying for
a
crocodile license {exhibit. 21).
Of
significance is section
3
headed "Management
Experience", in
which the plaintiff
with
Mr. Schoenemann's concurrence, set out
- . -· -
-· --~--:----::-·__:_..
-
..
- .,,. -.--:- ·
.. - . -
-:
-·
---·
- - -- . - -·----·"·---=--:.:;:;.:;::._.;:'--"--
-- 25 of 61 --
........•
-·-·
----c:;:c
-=··:·.-.,::-:
c-·--24
....
··
·---c·.:·.
his
extensive expertise
including
his
directorship
with
the
company
which purchased
Janamba
(Deugro).
He
referred to
Mr.
Schoenemann
as
being
his partner.
He
said
that
the defendant
was
owned
by
himself
and
Mr.
Schoenemann.
There
is
no
doubt
that
both
the
plaintiff
and
Mr.
Schoenemann
by
that
letter
misled
the
Queensland
National
Parks
and
Wildlife
Service
as
it
gave
the
clear
impression
that
the
plaintiff
intended
to
give
the
defendant
the
benefit
of
his
expert
management
experience
indefinitely,
when
in
fact
it
had been
agreed
by
him
and
Mr.
Schoenemann
that
he
was
to
sever
all
contact
with
the
defendant
company
after
the
license
was
granted
and
his
guarantees
were
"released".
This
was
followed
by
a
more
formal
application
on
9
November, 1989
(ex.
13)
to
which
reference
will
subsequently
be
made.
In evidence the
plaintiff
said
that
he
did not
know
that
Mr.
Schoenemann
had
borrowed
money
from
QIDC
to
enable
the
defendant
to
settle
the
land purchased
by
30
September, 1989. His evidence
at this
point
was
very
vague and he
admitted
that
he
was
not
clear at
all.-as to
events leading
up
to
this
loan yet as
submitted
by
counsel for the defendant
he
purported
to
be
very
clear
as
to events
on
the
7
September,
1989 and
21
November,
1989. His evidence
was
generally quite
vague and
indefinite,
answering
many
questions
-
"I
have
no
recolection of that".
Mr. Schoenemann
agreed
that
he had
made
other applications
for finance without success.
He
said that the
plaintiff
was
well
aware
that the defendant and Seacrest
was
suffering
a
significant
shortage of funds.
I
accept
Mr. Schoenemann's evidence that in
- . . ------ - - - -
-_ ----- .- - -·--·-----··---·-----·-- _....-.-
-- 26 of 61 --
----
- · ·-·- -··
25
_,
___
·.
.--~-~------
---
···--····
late
August
1989 he
spoke
to
Mr.
Conlon and
as
a
result
informed
the
plaintiff
that
Mr.
Conlon
requested
a
meeting
with
the
current
directors
which
was
set
for the
1
September, 1989.
Mr.
Schoenemann
said that
Mr.
Conlon
required
a
valuation
and
that
the
plaintiff
suggested
the valuation required
by
Mr.
Conlon be
~done
by
Mr. Doug
Jones
of
Collins
International.
The
plaintiff
confirmed
this.
See
page
50
of
the
transcript
and
also exhibit
1 2 , i
tern
4 ( 1 ) .
The_plaintiff also said
that
he
did not discover
that
monies
were
being
borrowed
from
QIDC
until
he
received
a
telephone
call
from
Mr.
Conlon
asking
for
details
of
his
personal
assets
and
liabilities.
This took
place
between
1
September,
1989
and
4
August, 1989.
See
exhibit
11.
Mr.
Conlon
said
that
at
the
end
of the-meeting
on
1
September,
1989
he
realised
he had
not
asked
for
this
and
took
steps to
telephone
both-Mr.
Schoenemann
and
the
plaintiff to
make
sure
that this
formality
was
completed.
However
in
paragraph
25
of his affidavit
sworn
19
May,
1990
in
O.S.
22
which
was
incorporated
in
the
transcript
he
creates
a
I I
somewhat
different
impression.
These
paragraphs
are-as follows:-
- . - ·-
. - . - .
"25.
The
purchase of the
Babinda
Property
was
due
to
be
settled
on
the 30th September, 1989.
Unbeknown
to
me,
-Mr.
Peter
Schoenemann had
arranged finance
to
purchase
the property
from
the
Queensland
Industry
Development
Corporation. ("Q.I.D.C.")
On
the 25th September,
1989I
attended
at
the offices of Q.I.D.C.
and was
requested
to sign
a
Guarantee
of
a
loan
by
that
Company
to
Mr.
Crocodile Pty. Ltd. because
I was a
Director of the
company. Mr. Schoenemann
assured
me,
and
I
did believe
that
I
would be
released
from
the Guarantee as soon as
the
company was up and running and
financially viable.
Now shown
to
me
and marked with the
letter
"H"
is
a
copy of the Guarantee which
I
signed.
26.
I
enquired
why Mrs. Pauline Schoenemann was
also
a
Guarantor.
Mr. Schoenemann
told
me, and I
did believe,
--
--·- ·-----:- . -
....
. ·:
....
;::-
- ·-
-- 27 of 61 --
- 2 6
~
· - - - · · ·
..
that
Mrs.
Schoenemann
had
to
guarantee the
loan as
his
wife as
their
assets
were
in
joint
names
even though
she
was
not
a
Director of the
company."
The
foregoing gives the
impression
that
the
plaintiff
did
not
know
about
the
QIDC
loan
until
either
he
signed
his
personal
statement
on
4
September,
1989
or
alternatively
until
he
signed
the guarantee
on
the
25
September,
1989. Yet
on
the
1
September,
1989
the
plaintiff
and
Mr.
Schoenemann
attended
Mr.
Conlon's
office.
See
exhibit
10.
Mr.
Conlon
gave
evidence
of
this
meeting.
Whilst generally
I
accept
Mr.
Conlon's evidence,
it
should
be
noted
that
in
some
respects
he
was
not
as
precise as
might have
been expected
in
matters of
detail.
Mr.
Conlon
filled
out the
form
in
the
presence
of the
plaintiff
and
Mr.
Schoenemann.
It
shows
the applicants
as
Mr.
Schoenemann, Mrs.
Schoenemann
and
the
plaintiff,
that
the three
were
directors
and
that
the
"principal
shareholders"
were
Mr.
and Mrs. Schoenemann
with
no
mention
of the
plaintiff's
share.
Mr.
Conlon
made
it
clear that
he
knew
that
Mrs.
Schoenemann was
not then
a
director
or shareholder.
Mr.
Conlon
was
told
at
the
meeting
that
the
I
plaintiff's interest
was
intended
to
be
short-term
only
and
that
he
was
to
move
out of the
company
in
due
course.
He
said
at
page
166:-
"Was
anything said to
you
about
when,
as
it
were,
the
details of the directors in the application
form would
become
accurate?
- I
was
told that the
change
of the
directorship
would be
made
as soon
as possible to
enable the
-
because
I
said that the
- I
submitted the actual
application in the
name
of the three directors,
and on
thatbasis the loan
was
approved."
Of some
significance is the attachment to that
form
containing similar details of
management experience to that
: .:..
. - ---· - . -
-·-:.
- ____ :.·_
-- -
7·~--------.: - - ·--·----- ·--------~--·- -- ;; . "
-- 28 of 61 --
submitted
to
the
National
Parks
and
Wildlife
Service
on
14
August, 1989.
Information
remained
therein
without
qualification
when
Mr.
Conlon
sent
that
application
on
to
the
head
office in
Brisbane
for
consideration
and
ultimate
acceptance.
Again
the
plaintiff
and
Mr.
Schoenemann
misled
QIDC
by
asserting
that
the
plaintiff's
expert
management
experience
was
to
continue
to
the
__
benefit of the
company,
although
Mr.
Schoenemann
explained
that
it
was
hoped
that
the
plaintiff
would
continue
to
be
utilised
in
some way
through
his
connection with
Mr.
Press'
company.
It
appears
that
the
plaintiff
and
Mr.
Schoenemann
informed
Mr.
Conlon
of these
details
namely
that
the
plaintiff
intendeq
to
.move
out of the
company
but
this
information.was not passed
on
to
the
head
office
of
QIDC
where
the
approval
for
the loan
was
given.
There can
be
little
doubt
that
both the
plaintiff
and
Mr.
Schoenemann
were
prepared
to cut
corners
in
an endeavour
to
secure
their
commercial
interests.
That
aside,
Mr.
Conlon
said to
both the
plaintiff
and
Mr.
Schoenemann
that
because
the majority of
funding
had
come
from
'
Mr.
and Mrs. Schoenemann
via Seacrest,
one
of the conditions of
the loan
would be
that
because the defendant
had no
funds
of
its
own
and no
anticipated
income
for quite
a
number
of years,
Mrs.
Schoenemann
as
a
director of Seacrest
must
also
become
a
director
of the defendant
company
and
that
he would
require
a
guarantee of
the loan of
$320,000.00
to the defendant
from
all
three directors
and from
Seacrest to secure the loan. Without
her being
a
director, the loan
would
not be forthcoming. This
clearly
indicates that the plaintiff
was
well aware
that
Mrs. Schoenemann
had to be duly appointed
a
director as
a
matter of urgency to
-
- --- -·
-:----
" -
:'.
- - -- - -
-· --:::-::-.-.--:_-:-·:.;~
:;;.:.._
..
:. ..::__:____~----_:;:-: --
-- 29 of 61 --
I
enable
the loan to
be
made
and
the
completion
of the
contract
of
purchase
which he
had
personally
arranged
on
8
April,
1989
to
be
duly completed
on
30
September,
1989.
Mr.
Conlon
said
that
he
required
a
form
61
which
is
the
form
which
follows
showing
the
due
appointment.
This
is
supported
by
the cross
examination of
the
plaintiff at
about
page
35
and
following
of
a
conversation
said to
have
occurred
between
Mr.
Schoenemann
and
the
plaintiff
soon
after
1
September, 1989.
At
that
time
Mr.
Conlon
was
told that
the
plaintiff
and
Mr.
Schoenemann
were
the
only
directors
which
was
of course the
correct position.
He
said
that
there
was
no
discussion
as
to
the
actual
numbers
of
shareholdings
(162).
However
at that
meeting
Mr.
Conlon
was
told
apparently
by
Mr.
Schoenemann
in
the
plaintiff's
presence
that
Mr.
and
Mrs. Schoenemann
were
to
be
the
principal
shareholders
because
the
funding
of the defendant
was
almost
entirely
via
their
company
Seacrest
(164).
It
is
clear
that this
along with the statement as
to directors
was
a
statement of future intention.
::
Mr.
Conlon could not
remember
the
details
of the shares.
At
165
he
said:-
"I
cannot
remember
the fact of the shareholding, the
main
reason being
it
was
supposed
-
its
being
a $2 company
with
equal share or whatever,
that
I was
told
initially
-
that
being the fact,
I
didn't really
pursue the acutalshareholding as
to
who was
-
or
if
there
was
going
to
bemore
-
the
only
- I
just can't.
remember."
At 168
in cross examination he
said he knew.at the time that
the plaintiff
was a
shareholder and he agreed with the
a
. -
--
- .
. -
_:
:
~
- - : . -
-- 30 of 61 --
..
,,--
..
~- -
--
---
- --
·--··2
9
-···
·····-
--·
proposition
that
he
understood
it
was
"to
be
a
$2
company".
He
was
then
asked
the
following
questions:-
"So,
did
you
expect
that
Mr.
Entsch's
share
would
be
transferred
to
Mr.
Schoenemann?
--
I
didn't
even worry
how
it
was
going
to
be done
between
the
directors.
You
see,
what
I am
most
intrigued
about
is
the
fact that
you
put
Mr.
Entsch
in
as
a
director
but
you
don't
put
him
in
as
a
shareholder.
I'm
trying to
discover
whether you,
yourself,
can
remember
why
that
was
done
that
way?
--
During
the
course
of the interview
at
some
stage
-
and
I
don't
remembe~
by
whom
-I
was
led to
believe
that
Mr.
Entsch
would
basically
only
be
a
short
term
or
have
short-term
involvement:
with
the
company."
(p.
168)
Questioning
then
continued
168-9:-
"You
will
see
in
Item 3,
where
it
talks
about
full
names
of
principal
shareholders,
it
also
says
"stating
shares held
by
each,
private
companies
only".
This
was
a
private
company,
wasn't
it? --
That's
right·
You
understood
it
to
be
a
$2 company?
(Witness
nods.)
One
share?
(Witness
nods.)
Two
shares
each
paid
to
a
dollar?
(Witness
nods.)
You
don't
put beside
either
Mr.
or
Mrs.
Schoenemann's
name
the
number
of shares held
by
each,
do you?
No,
because
I
expected
that
to
be
$1
each."
The
foregoing
was
relied
upon by
senior
counsel
for
the
''
plaintiff
but
in
my
opinion having regard
to the
way
in
which
Mr.
Conlon gave
his
evidence and
his
agreement with.much
of
what
Mr.
Schoenemann
said,
it
is
of
little
value as
to the true
state
of
what
the actual
shareholding
would
be.
Mr. Schoenemann
said
at
page
88
to
89
that
Mr.
Conlon
said
in the presence of
Mr. Schoenemann and
the
plaintiff that
Mrs.
Schoenemann had to
become
both
a
director
and
a
shareholder
and
guarantor.
The following occurred:-
"Try as best
you can to relate everything that
was
said at
that meeting in
Mr.
Conlon's presence? --
Mr. Conlon
-- 31 of 61 --
--~=-·
-:-.·.
-.-
--·-··-· ~-.••:---.•·-
30
pointed out
to
both
Mr.
Entsch
and
myself,
firstly
the
need
of the loan application
having
to
be
filled
out
in
detail,
giving
all
directors
and
all
shareholders.
He
further
reiterated
that
Pauline
Schoenemann
had
to
be
made
both
a
director
and
a
shareholder.
He
explained
very-----
Before
you
go
on,
when
he
said
this,
did
somebody
tell
him
who
the current
directors
and
shareholders
were?
--
Yes,
it
was
pointed
out
to
him
that
Mr.
Entsch
and
myself
were
the
only
shareholders
and
he--
expressed
a
need
for
Mrs.
Schoenemann
to
become
a
shareholder
and
guarantor
and
director
of
the
company.
He
said
those
were
the
QIDC
ground
rules.
Was
this
while
he
was
filling
out the
form?
--
This
is
while
he
was
filling
out the
form,
and
he
furthermore
said
that,
if
we
had
to
wait
for
a
meeting
to
make
Mrs.
Schoenemann
a
director,
then
the
application
could
not
be
processed.
So
we
had
to
do
it
right
then
and
there.
Then
as
the
form
was
being
filled
out,
were
there questions
asked
about the
affairs
of the
company
for
the
purposes
of
filling
out
the
form?
--
Would
you.like
me
to
look
at
the
first
page
or
throughout
the
pages?
Throughout
the
pages?
--
The
first
page he
particularly
reiterated
the
need
to
make
Mrs. Schoenemann
a
director
and
he
informed
me
that
Form
61
had
to
be
presented
to
him
as
part
of the
loan
application.
Before
we
go on
to that,
as
you
were
sitting
there,
were
you
able
to
see the
parts
on p.1
that
he
was
writing,
as he
did
so?
--
He
was
telling
us
what he
was
putting
down,
·information
-
for
example, he had
informed us
that there
was
three directors
and
a
shareholders---."
Mr.
Schoenemann went on
to
say
that
Mr.
Conlon
stressed that
Mrs.
11
Schoenemann
had
to
be
a
guarantor
and
director
as
part of
QIDC
requirement and
thereafter
the
following
occurred:-
"At
that
stage the shareholders of the
company,
in fact
were
yourself
and
Mr.
Entsch?
--
That's correct.
If
you
look
at
the
form, you
can see
that
yourself
and your
wife
are listed
as the· major shareholders
- I
think
on
the
form? Yes, he
explained
-
he
was
basically interested in
the principal shareholders
and
that
was
the reason
for
it.
Can you
recall
the conversation in
any more
detail
than
that? Don't guess
at
it. If
you can
recall, tell
us.:
if
you
can't, just
say so?
--
No, I
think the only one
thing
that
I
do
recall
-and
we
pointed out to
him
that
it
was Mr.
Entsch's idea to leave
Mr.
Crocodile once the license
was
obtained and the
company was up and running and we
mentioned
that, as
we
provided most of the funds and Mr. Entsch was
not injecting any fund~
at
~11,
we_
should have an increased
' . . - - ..... - . -
- - -
-·
- ".
- -· - ':"
.
___
,_
:
-~--
.
_. _______ ;
___ - -
-- 32 of 61 --
·-
31 ·
-·
..
- ·
shareholding.
Then
subsequently
to
this
Mr.
Conlon
put
in
principal
shareholders.
BY
HIS
HONOUR:
Are you
saying
that that
was
mentioned
to
Mr.
Conlon
at
the
time
on
1
September
1989?
--
That's
correct.
At
that
time
who
were
the
shareholders?
were
Mr.
Entsch
and
myself.
That
is
one
share
each?
--
Yes
The
shareholders
You
say
at
that
time
it
was
mentioned
to
Mr.
Conlon
that
the
plaintiff
intended
to
move
out of the
company?
--
That's
correct
Notwithstanding
that
the
application
goes
on
to
say
in clear
terms
that
he
was
going
to
be
the
manager,
provide
the
expertise?
--
That's correct
-
except
when
it
comes
to
manager,
we
had
a
manager on
the
farm and
Mr.
Entsch's
main
role
was
to
obtain the
license."
It
seems
to
me
that
Mr.
Schoenemann's
evidence
was
·substantially
in
agreement
with
that
of
Mr.
Conlon
whereas
the
plaintiff
claims
no
knowledge
whatsoever
of
what
occurred
at that
very important
meeting.
It
seems
that
the
only
reference
to
increased
shareholdings occurred
in
the
manner
mentioned
by
Mr.
Schoenemann
above namely
that
"we
should
have an
increased shareholding".
This
did not
get
down
to
any
particular details.
Nor was
it
mentioned
whether
he
alone
would have an
increased shareholding
,,
or
whether
his
wife
would
also participate.
Having
regard
to
the
later
evidence of
Mr.
and Mrs. Schoenemann and Miss
Laugersen
to
the
effect that
Mrs. Schoenemann
said
at
the alleged
meeting
on
the
7
September,
1989
that
as
Mrs. Schoenemann was
to
be
a
director
she
also
wanted
to
be
a
shareholder,
it
appears
that
no
precise
mention
was made
at
the meeting before
Mr.
Conlon
of
who
-·
as between
Mr. Schoenemann and Mrs. Schoenemann would
hold the
"increased shareholding". Nevertheless,
I
accept that this
disussion occurred in the
plaintiff's
presence.
. . .
- - - - - . - -
• - -•----••----•--•---A- -
. -- -
____ .... ___
--- - -
-- 33 of 61 --
.f
-------
-
32
-
From
the
foregoing
and
in particular
exhibit
10
which
the
plaintiff
signed including the
initialling
of
an
alteration
of
$300,000.00
to
$320,000.00,
it
is
clear that
all
concerned
knew
from
that
point
of
time
that
Mrs.
Schoenemann
was
to
be
at least
a
director
as
soon
as
possible
before the loan
could
in fact
be
made
by
QIDC
to
obtain settlement
on
30
September, 1989.
It
is
also
likely that
the
plaintiff
then
knew
that
she
was
to
become
a
shareholder
in
the near
future.
It
is
also clear
from
the
foregoing
and
the
plaintiff's
own
evidence
including exhibit
8,
that
his oral
evidence
that
he
did
not
know
of the
loan
from
QIDC
either until
his
statement of
affairs
was
signed
on
the
4
September,
1989
or
until
he
signed
the
QIDC
guarantee
on
25
September,
1989
must be
rejected.
Whilst
this
of
course
does
not
prove
that
any
meeting
occurred
on
7
September,
1989
or
21
November,
1989
it
seriously effects
the
plaintiff's
credit.
It
is
inconcieveable
that
he
did not
know
of
the
application to
QIDC
on
1
September,
1989
or
its
contents
or
what
occurred
at
that
meeting.
He
was
well
aware
that
Seacrest
"
and
the defendant
had
a
severe
liquidity
problem and
that
the
loan
from
QIDC
was
essential.
Also having
regard
to
Mr.
Conlon's evidence,
I
reject
the
plaintiff's
statement in
paragraph
26
of his affidavit
as
reiterated
by him
in oral
evidence.
This leads to the
critical
events
on Thursday
7
September,
1989 when
exhibit
3 shows
that
a
directors'
meeting
was
held
and
attended by Mr. and Mrs. Schoenemann and
the plaintiff at
which
various resolutions were said to have been passed. Particulars
·-·---------:- ---
....
- - __.._ ----
~
---- •·•.... .
-- 34 of 61 --
_33
were
sought
in exhibits
1
and
2
by
solicitors
for
the
plaintiff
of
this
meeting
and
that
alleged to
have
been
held
on
21
November,
1989.
The
reply
in exhibit
1
is
as
follows:-
"With
respect to
paragraphs
2
and
5
of the
Defence
to
the
best recollection
of the
Chairman
of Directors, Peter
Schoen~mann,
the
time
of the
Meeting
of Directors
on
that
date
was
between
the
hours
of
2pm
and
3pm.
The
manner
in
which
Mrs.
Pauline
Schoenemann was
appointed
was
by
Mr.
Peter
Schoenemann
proposing
that
Mrs.
Pauline
Schoenemann
be
appointed
a
Director of
Mr.
Crocodile
Pty
Ltd
to
which
Mr.
Entsch
replied
'Yes,
that's
fine
by
me.'"
By
exhibit
2,
the
solicitors
for the
defendant advised
that
there
no
written
notice of intention
to
call either
meeting,
that
the
meetings took
place·
at
the
office
of Seacrest,
that
at
each
meeting
the
plaintiff,
Mr.
and
Mrs.
Schoenemann
were
present
whereas
at
the
first
meeting
a
secretary
Paula
Laugerson
was
also
present
in the
room.
It
was
stated that
no
formal
resolutions
were
presented
at
the
meetings
and
that
the decisions
were
made
based
on
the
unanimous
consent of the
directors present
at
each
meeting.
It
is
clear
from
the
authorities
and from
the
way
in
which
the
parties carried
on
their affairs that decisions
were
regularly reached
in
an
informal
way
and
indeed
often
on
the
telephone. This
was
freely
admitted
by
the
plaintiff in
particular
with respect to the
first
meeting
when
he
was
appointed
a
director
and
shareholder.
If
the resolutions
contained in the
minutes were agreed to
by
the
plaintiff
a.nd Mr.
Schoenemann on
7
September, 1989,
there
is little
doubt
that the
manner
of reaching agreement did not render invalid that
meeting
- - --·
--:---
_..:._;
..
-
-·--·----·:
-~
----:·_;-~ :.:. ·~
..=. ..~~
..
=~-~..
-2::..~..::=--.-..:.:
..
~
.
:..=::..:.:..~---· --·---·--
-- 35 of 61 --
,3_4
and
the
decisions
taken
thereat.
The same
may
be
said
of the
meeting
on
21
November,
1989.
It
is
first
necessary
to
examine
events
after
the
meeting
on
1
September, 1989.
Mr.
and
Mrs.
Schoenemann
freely
stated in
evidence
that
they~discussed
the
proposed
shareholding
between
themselves
as
one
would
expect
of
husband
and
wife.
This appears
to
have
resulted
in
the telephone
call
from Mrs. Schoenemann
to
Mr.
Smith
on
6
September,
1989
as
indicated
in exhibit
4, which
indicated the
shareholding
to
be:
Peter
Schoenemann
50
Pauline
Schoenemann
49
Warren
Entsch
1
100
rt'
was
stated that
98
extra
shares
were
to
be
issued with
a
confirmation
letter
to
follow.
It
is
not disputed
by
the
plaintiff
but
in fact
agreed
to that
between
early April,
1989
and up
to
1
September,
1989
Seacrest
had expended
about
.$145,000.000
in
works on
behalf
of the
defendant (86).
Also
Mr.
Schoenemann
at
101
said
that
between September
1989
and
November
1989
a
further
sum'of $250,000.00
was
expended
by
Seacrest.
I
also accept
that
since
that
time, Seacrest
has spent
in
all
about
$600,000.00 on
behalf of the defendant
company
which
is
owing
to
it
by
the defendant apart
from
interests.
Mr. Schoenemann
said that
a
directors
meeting had been
arranged between himself
and
the
plaintiff
to deal with the
matters raised
by Mr.
Conlon (92) on
1
September, 1989. At 92 he
said:-
"Had you agreed that there
would be
a
meeting
at
any
specific time or anything like that, this is at the
meeting or after the meeting on 1 September?
--
r-
a
- - .. -----
- -------------- . --- - : - - - - -·---· -
___ .
__
__..,_
______ - - .:
-- 36 of 61 --
,!
:· ·-----.-.·.-·
.---,·-
-
.·-·--·-.--:-,.=·
~-.-c-,
..
,;3.5
__
-.
phoned
Mr.
Entsch
early in
the
week
because
Mr.
Conlon
had,
on
the
1st
of
September,
requested
a
personal
asset
and
liability
statement
and
I
phone
Mr.
Entsch
to
remind
him
and
he
told
me
he had
already
given
it
to
Mr.
Conlon and
I
said
'would
you
be
able
to
come
around
on
the 5th'
and he
said,
'no,
I
will
be
too
busy'.
He
had
Japanese.
On
the 6th,
I
believe
he
had
to
go
to
Hurricane
Station
and
I
remember him
saying,
"I
will
have
a
short
time, I'm very, very
busy,
on
the
7th',
so
in
a
fairly
loose
way,
the 7th, but
no
time.
I
cannot
recall
a
time.
I
believe
it
to
be around
about
two
o'clock.
·
You
say
that's
when
the
meeting took
place,
but
there
was
no
pre-arrangement
of
any
particular
time?
--
No,
only
the
fact
that
a
meeting
was
agreed
upon.
On
the 7th,
you
say
it
was
the settlement
of the
sale
of
a
share
in
Hurricane
Station?
--
That's correct.
Did you
see
Mr.
Entsch
on
7th of
September
1989?--
Yes,
I
did.
Where
did
you
see
him?
--
At
my
office at
Seacrest
International
and
Mr.
Crocodile.
Are you
able to
tell
us
at
all
or
give
us
some
idea of
your
recollection
of the
time
at
which
Mr.
Entsch
came
to
the
office?
--
Well,
I
believe
it
to
be
appr_oximately
1 .
30
or
two
o'clock,
but
I am
not
one hundred
per cent sure.
Was-he
there
long?
less."
At
the
most,
ten
minutes,
possibly
Some
of the matters
raised
by
Mr.
Schoenemann
in his alleged
I I
telephone
..
call
to
the
plaintiff
"early
in
the
week"
are
corroborated
by
other witnesses.
Mr.
Conlon
said that
at
the
end
of the meeting
on
the
1
September,
1989
or
immediately
thereafter,
he requested
a
personal
asset
statement
from
the
plaintiff
which
was
in fact
completed on
4
September,
1989
(ex.
7).
7
September,
1989 was
a
Thursday and
4
September, 1989 was
a
Monday. The
plaintiff
admitted
at
page
35
that
he completed
his
statement on
that date.
There
is
no argument
that settlement of
Mr.
Schoenemann's share in Hurricane Station occurred on
7
September, 1989. See the
plaintiff's
evidence at
35-36. The
- - --------· - -- - ~.
-- ---- - .
-- 37 of 61 --
.. ·36 · --· -
---
·-··.-
-
·-
-· ·
-.•·
plaintiff,in
fact
said
that
he
drew
the
cheque.
The
plaintiff
himself
said
that
from
1
July,
1989
onwards,
apart
from weekend
barbecues
at
the
farm,
telephone conversations
were
mainly
used
for discussions
of the
defendant's
business with
rare
visits
to
Seacrest's
office.
Miss
Laws
who
was
employed
as
a
secretary
gave
evidence
of
events
on
7
September, 1989.
She
herself said
the
plaintiff
had
to
go
to
Hurricane
Station
on
6
September, 1989.
She would
be
in
a
position to
know
so
it
clearly
appears
that
some
time
prior
to
that
date
Mr.
Schoenemann
probably
had
a
telephone
call
with
the
plaintiff
as
he
alleges
when
the
plaintiff
told
him
of the
proposed
visit
to
Hurricane
Station
on
that
date.
This
was
also
of
particular
significance to
Mr.
Schoenemann
because
of the
pending
settlement of
Mr.
Schoenemann's
share
interest
in
Hurricane
Station
on
that
day.
He
was
due
to
receive
a
cheque
for
$105,000.00
and no
doubt they
would
have been
in
fairly
constant
communication
as indeed
was
put
to
Mrs. Schoenemann
in
cross examiantion.
Unfortunatley
Mr.Schoenernann's
statement
that
he
telephoned
Mr.
Entsch
"early in the
week"
to
arrange
a
meeting
for
7
September, 1989 was
not put to the
plaintiff
in cross
examination,
it
being submitted
on
behalf of the
plaintiff that
Mr. Schoenemann
tailored his
evidence
to get
around
the time of
between
2
and
3 pm
particularised in exhibits
1
and
2
as to
when
the meeting occurred "to the best recollection of the chairman of
directors, Peter
Schoenemann".
It
was
submitted that the fact
that this
was not put to the plaintiff in cross examination went
. -
- ---··-----
-- 38 of 61 --
\
-
~~---=-
. -
..
to
Mr.
Schoenemann's
credit.
Regard must be had
to
the
manner
in
which
the
particulars
were
given.
It
was
submitted
for
the
defendant
that
it
would
be
artifical
in the
extreme
that
the
defendant should
suffer
if
in
fact
the
Court
came
to
the
veiw
that
a
meeting
was
held outside
the
time so
particular~sed.
This
may
have
resulted
from an
oversight
by
counsel,
or
Mr.
Schoenemann
may
not
have been asked
the
point or
had
not
told his legal
advisors
of
it
previsouly.
The
particulars
in exhibits
1
and
2
go
to written notices.
In
my
opinion
failure
to
examine
the
plaintiff
as
to
this detail
is
not
conclusive
of
the question of
whether
or
not
notice
was
given
about
5
September,
1989
or
whether
the
meeting
was
held
on
7
September,
1989
although
it
is
clear
from
the
evidence
of
Mr.
Lane
-that
any
such meeting
did not occur
between
the
precise
hours
of
2pm
to
3pm
that
day.
It
must be
remembered
that
both
the
plaintiff
and
the defendant
were
very-busy~business peopl~
and
that
they ran
their affairs
informally. Decisions-were
frequently taken
"on
the
run"
and
at
times
by
telephone.
It
is
therefore not
unusual
that
the precise
time
of
any
actual
discussion could
be
forgotten.
On
the balance of probabilities
I
conclude
that
Mr.
Schoenemann
telephoned the
plaintiff
about
5
September, 1989, he
being concerned
that everything
was
put in order so
that the loan
would go
through be£ore settlement then only one month away. Mr.
Schoenemann would
necessarily
have had on
his
mind
the fact that
Mr. Conlon
required
an
official
Form 61
indicating the
appointment of
Mrs. Schoenemann as
a
director.
Mr. Schoenemann
-
• - -
-•
----c••-
: - - . - -------·-~--·- -------------~
~:
-
-- 39 of 61 --
. _
38.
-·-
was
also
concerned about
his
share
transaction
with Hurricane
Station
and
its
pending
settlement
on
7
September, 1989,
it
being
accepted
by
all
concerned
including
Miss
Laugersen
that
Seacrest
was
undergoing
financial
difficulties.
Miss
Laugersen
said
that
she
had
been
telling
creditors that
they
would
be
paid
after
that
date.
The
plaintiff
said
that
he
drew
the
cheque
for Seacrest
on
7
September,
1989 and
that
Mrs.
Schoenemann
picked
it
up from
his
office.
Miss
Laws
confirms
this
also.
However,
having observed
Mrs. Schoenemann
state
in
evidence
that
she
had
no
recollection
of
going
there
but
that
her secretary
Miss
Laugersen
picked
it
up
and
that
Miss
Laugersen
positively
confirmed
that
she
did,
I
prefer
their
evidence
and
conclude
that
the
plaintiff
and Miss
Laws
are
mistaken as
to
who
collected
the
_cheque
that
day.
Mr.
Smith
said
that
he had
control of the
company's
records
and
prepared the
minutes.
He
said
however
that
he
prepared only
some
of the
documentation such as
letters
of resignation,
·,
consents,
company forms
etc.,
and
it
emerges from
exhibit
3
and
Mrs.
Schoenemann's evidence
that
Gayler Cleland
and Dunstan
prepared
Forms
35
and
61
immediately following the alleged
meeting on
7
September,
1989
whereas C.E. Smith
&
Co.
did those
following the
meeting
of
21
November, 1989.
Mr.
Smith's
office
was
the registered office of the defendant.
See minutes of
9
August, 1988 and Forms 150 and 155
lodged
by him.
It
may
well
be
that the ~olicitors did only
Forms 35 and
61
following the
meeting of
7
September, 1989 whereas
Mr. Smith prepared
all
of
the minutes, as he
stated as
a
result of information given to
him
..
- - -------·- - - ---·-----.·
-- 40 of 61 --
. (
--
- •
--
-·-
- -·.
·-···-·
---
....
---
....
- -
·::--
- -
:.,-"'.'
-=-=
:.-.
,-.··
-
--··-c··.-c-·-c-
. .
:.-
. ..39 .
·-
on
the telephone
by Mrs. Schoenemann,
commencing
with
the
minutes
of
21
November,
1988.
All
of the
minutes
thereafter
appear
to
be
by
the
same
typewriter.
There
is
no
reason
to
doubt
Mr.
Smith's
evidence
that
he
in fact
prepared the
minutes
in
accordance with
telephone
calls
from Mrs. Schoeneman
nothwithstanding
that
he
did
not
receive
a
letter
of confirmation
from Mrs. Schoenemann
as
indicated
in
the diary note
(ex.
4).
This
of
course
does
not
mean
that
the
meetings
as recorded
in
the
mintues
actually
occurred.
It
is
also
necessary
to
first
refer
to
some
other
documents
which
bore
on
the general question of
credit.
These
were.relied
on
prinicpally
by
the defendant.
On
20
September, 1990,
QIDC
sent
a
letter
of
acceptance
to
the
defendant (ex.
12).
It
-offered
to
provide
a
loan
-of
$320,000.00
and
requested
an
acceptance
of
facility
as
set
out
on
the fourth
page
under
the
heading
"Securities".
QIDC
required
a
first
registered
mortgage
from
the defendant over
the
Babinda
property, insurance over
dwelling.and sheds
on
the property,
a
guaranteed indemnity
for
$320,000.00 from
the
directors
of the defendant
(Mr.
Schoenemann,
Mrs. Schoenemann and
the
plaintiff,
each
of
whom
were
specifically
named) and
also
a
guaranteed indemnity
for
$320,000.00 from
Seacrest.
The
loan
was
approved
subject to
a
satisfactory valuation
from
Colliers International for at least
$460,000.00 which
the
plaintiff
was
instrumental in arranging.
It
also required
a
copy
of the license for the crocodile farming from
the Department
when
issued.
The
last
page thereof required the signature of all
. "
> - -
-··
-.---
. - -- - ------· - - - -
._.
__
.
--:-
--
- -- .
---- --- ---- ----- -·
.. · -. - - - - -
-- 41 of 61 --
\·
•\
-·· ----.-,-.--
.·
40.~,~---··
~
- '--~·-·=
persons concerned.
The
evidence
establishes
both
from-Mr.
Schoenemann
and
Mr.
Conlon
that
Mr.
and Mrs.
Schoenemann
first
signed
alongside
the
common
seal
of
the
company. Mrs.
Schoenemann
signed
as
director/secretary
and
Mr.
Schoenemann
signed as
director
and
thereafter
the
plaintiff
signed
as
a
director
immediately
above
their
signature.
During
his
evidence
he
stated that
he
could not
remember
the
particular
details
and
did not read
it.
I
do
not accept
his
evidence
in
that
regard.
The
document
indicated
on
that
date
that
Mrs. Schoenemann
was
in fact
a
director,
.a
matter.Mr.
Conlon
particularly
required
before settlement
was
due
only
10
days
later.
Whilst
this
does
not
mean
the
meetings
necessarily
occurred
on
7
September,
1989
and
21
November, 1989,
it
is
a
further
reason for rejecting
the
plaintiff's
several assertions
that
he
believed
that
only
he and
Mr.
Schoenemann
were
the
directors
and
shareholders of
a
company
up
until
a
search
was
conducted
in
February,
1990.
> I
Furthermore
that
document
was
promptly
returned
to
QIDC who
on
the
25
September,
1989
prepared
a
guarantee (exhibit 5).
The
front
page
thereof
shows
that
the
agreement
was
between
Mr.
and
Mrs. Schoenemann and
the
plaintiff
on
the
one hand
called the
"guarantor" and
QIDC.
At page
8
thereof,
it
was
signed
first
by
Mr.
Schoenemann and Mrs. Schoenemann and
thereafter
by
the
plaintiff.
This is the "personal guarantee of the directors"
referred to on page
5
of the
letter
of acceptance (ex. 12).
As
a
consequence of the guarantees which were signed, settlement on
-- 42 of 61 --
----41
--·
the
purchase
of
property occurred
on
the
30
September, 1989.
I
find
that
the
plaintiff
well
knew
of the contents
of
this
document.
This
is
further
supported
by
paragraph
25
of
his
affidavit.
Once
again
this
does
not
establish that
the
meetings
occurred
but
it
is
relevant to his
credit.
--
It
is
also
necessary
to
move
onto another
document
which
assumed
importance
particularly
during
the
defence
case.
It
was
not
raised
during the
plaintiff's
evidence
in chief.
It
is
the
draft
of
a
document
prepared
by
Mr.
Smith
intended
for
lodgment
to the
Department
of
Environment
and
Conservation
for
a
crocodile
license.
There
are various
possibilities
which
~xplain
the
existence of
this
document
(ex.
14) and
the various
alterations
to
it,
which
emerge
from
the
document
itself
in
conjunction with
the
oral
evidence.
Mr.
Smith
said
that
it
was
the
plaintiff
who
instructed
him
on
the
need
for particularity
and
that
it
must be
"very
comprehensive and be
as convincing as necessary".
The
plaintiff
: t
said
he gave
Mr.
Smith
a
"brief
idea of the
format
of
what
is
required"
(43)
and
that
he
(the
plaintiff)
rejected the
first
draft.
He
said that
he
read the
first
draft.
He
also said that
he
suggested
to
Mr.
Schoenemann
changes which were needed
(44).
The
plaintiff
said that
he
did not read the
final
document
exhibit
13
typed next
day because of the dead-line (43).
I
find
-this
difficult
to accept in
view
of the
plaintiff's insistence
throughout
that
it
had
to
be
in
a
certain precise
form and
particularly in
view of his desire to ensure that
a
license
would
be granted so that
he would then leave the defendant with his
-
. - -
--
-
-.
- -
--
-·--
---
+
-----.- --------:--------~----- ---~"J;·--: -
-- 43 of 61 --
42
..
.
guarantees
"released"
by
Mr.
Schoenemann.
An
inference
from
this
stand
is
that
the
plaintiff
was
at
pains
~o
ensure
that
he
did not
know
that
the
shareholding
had
been
deleted
from
the
final
document
or
that
it
was
other
than
as
contained
originally
in
the
draft
document
exhibit
14
-
Mr.
Schoenemann
50
share·s,
Mrs.
Schoenemann
49
snares
and
the
plaintiff
99
shares
totalling
200.
If
accuracy
was
the
key
however
even
that total
was
wrong.
It
should
have been
198.
The
plaintiff
admitted
that
the
document
showed Mrs.
Schoenemann
as
a
shareholder
holding
shares
at
that
time
but
saiq
in effect that this fact,
along with
the statement
that
he
was
intending
to
run the crocodile
farm,
was
incorrect
.and
was
never
the
intention
(44).
He
said that
"between
Peter
Schoenemann
and
myself
we
were aware
of
it,
there
were
things put
into
the
document
in relation
to these applications
which
varied
with
my
own
personal
resume
in there.
We
were aware
of
it,
it
was
done
specifically to
obtain the
licenses.
We
knew
eventually they
would
alter."
(45).
Yet
his
own
evidence,
when
asked about
the
original
number
of shares
listed
and
whether
it
was wrong
was:-
"I wouldn't
have
-
once
again,
my
equity
is
there,·
I
wouldn't
have
put
any
significance
on
this
anyway,
Peterhandled
all
of
this."
He
denied having
any
discussions with
Mr. Schoenemann
as to
leaving out the shareholding
showing him
as
having only one
out
of
100
shares
(44) and
said
he had no
discussions with
Mr.·
and
-Mrs. Schoenemann about any
of the shareholdings in the draft
document (64). Strangely, he also said in cross examination that
- - --·--- --------------..----~
-_
- -------
-- 44 of 61 --
- -· -43 · -_:_·
··--···-
_
::._
· ·
he had
never
been
told
by
anybody
that
he
held
99
shares
in
the
company
(64),
yet
he
earlier
said
on
two
occasions
that
"his
equity
was
there"
(44,45),
meaning
that
he
held
99
out of
200
or
198
..
Whilst
this
may
be
a
strictly
correct
statement
for
him
to
say
that
he had
never
been
told
of
this,
yet
on one
view
of
his
evidence
he
is
saying
that
he
knew
that
it
was
being
alleged
by
Mr.
and Mrs.
Schoenemann
that
he had
99
shares
to
their
99-
in
total.
Mr.
Smith
first
said
at
5
that
he
"had
it
delivered to
Mr.
Schoenemann",
referring to
the
first
draft
exhibit
14,
yet
shortly
thereafter
dealing
with the
final draft
the next
day
exhibit
13, he
said
"again,
I
handed
it
to
Mr.
Schoenemann"
incorporating the
alterations
on
the
first
draft,
a
matter
corroborated
by
Mr.
Schoenemann
at
96
line
50.
Mr.
Schoenemann
originally said
at
95 "we
received
it
first
from
Mr.
Smith.
I
then passed
it
on
to
Mr.
Entsch"
after
he had
read
it,
and
after
some
changes were
made
to
it
by them.
He
said that
the
plaintiff
asked
him
to leave.the
shareholding out
because
the
plaintiff
did
not
wish
the
department
to
know
that
he
held only
1
share, the
inference being
if
this
evidence
is
accepted
that
the
plaintiff
was
jealous of his reputation
with the department
and
was
anxious
to ensure
that
the best possible
light
be
shown
to the
department
as to the
plaintiff's
major involvement
in the defendant
company
and
his continued expert
management. The
inference
is that
if
the
plaintiff
was shown
to
be minimal
shareholder,
it
might
detract
from
the strength of the submission and
the ultimate
granting of the license
and the "release" of his guarantees.
----- __.....
·- -
...
-- 45 of 61 --
· · · ·
44
·
-·
· -
·-
Mr.
Schoenemann
said
at
96
that
he
crossed out
the
shareholdings
listed
and
at
97 when
he
got the
final
draft
exhibit
13,
he
sent
it
to
the
plaintiff
for
signature
and
delivery
to the
defendant.
The
plaintiff
confirmed
that
he
did
this.
-Mr.
Schoenemann
was
adamant
that
the
initial
shareholding
listed
in exhibit
14 came
from
Mr.
Smith
and
was
wrong
and
that
they
told
him
so.
He
said
(97)
that
when
he
showed
the
document
to
the
plaintiff,
both
the
original
numbers
of shares
and
the
pencil
alterations
to
it.were
included
in
the
document.
In cross
examination
at
105
and
following
he
agreed
he
"received" the
document from
Mr.
Smith, he and
his
wife
looked
at
it,
he
then
showed
it
to the
plaintiff,
made some
comments
regarding the
shareholding,
took
it
back
to
Mr.
Smith
who made
alteration
to
it
and
that
the
plaintiff
had
not
made
any marks on
it.
When
put
to
Mr.
Schoenemann
that there
were no
alterations
to the
document
when
the
plaintiff
saw
it,
he
disagreed (106).
,,
Senior counsel for the
plaintiff
relied
heavily
on
this
evidence
as
indicating that
Mr.
Schoenemann was
fabricating his version.
However,
at
105,
after
a
suggested
chronology
was
put to
Mr.
Schoenemann
to
which he somewhat
blandly agreed, he immediately
gave
the following
significant
answer
after
the
last
question
that
Mr.
Smith
made some
alterations to
it:-
"In pencil?---
He made -
there
was no
further alterations
made,
it
was
typed out
on
that date
and
re-presented the
next day.
The
only
alteration that
was made was
in typingand
leaving out the shareholding".
- . - - -··
--:----
-- 46 of 61 --
. . ·
45-:-_:--~
-~---·:~-
.:::-·
..
·:
-.::..:·::..
C
---
Mrs.
Schoenemann's
evidence
on
this
point
was
not
as
precise
as
most
of her
other
evidence.
She
said
(166)
that
"we
received
a
draft
document
from
Don
Smith,"
which
she
first
saw
with
her
husband.
She
could not
recall
any
handwritten notes
on
it.
She
could
not
recall
the
plaintiff's
income on
the
document
(138) and
this
is
clearly
correct
having
regard
to
the
hand
written sheet
subsequently
stapled to
the
back
of exhibit
14.
which
bears
this
out
and
which
is
not otherwise
in
the
typed
portion of
exhibit
14.
It
was
inserted
in the
final
document,
exhibit
13
page
3.
This
information
could
have
been
supplied
only
by
the
plaintiff,
probably
to
Mr. Schoenemann
after
the
original draft
was
typed
and
Mr.
Schoenemann
probably wrote
it
out
and
attached
it.
Strangely,
all
other
alterations
to
the
text
of
exhibit
14,
apart
form
changes
to
the
word
"schedule"
to
"appendix"
were
made
in
Mr.
Smith's handwriting
in pencil
but the
details
of the
plaintiff's
income which
was
not
in
·the
draft
was
separately
attached
by
handwritten
stapled
annexure
to exhibit
14.
Looking
at
page
2
of exhibit
14
itself,
and
closely
I
examining
the
initial
shareholding
set
out with
essential
alterations
as follows:-
Mr.
Peter.SchoenemannMrs.
Pauline
SchoenemannMr.
Warren Entsch
50
shares
51
49
shares
48
99
shares
1
200 100
it
is clear that
the large
X
in biro
which
Mr. Schoenemann
said
_,
he
did,
was
intended to strike
out the original shareholdings as
listed
as well as the figures in pencil. This
is clear
from
the
broad spread of the cross
itself. It
also appears
that the biro
markings go over the top of the pencil alterations
which must
-- 47 of 61 --
.: .,,
..
46
have
been
inserted
before
the cross
appeared. This
in
my
opinion
corroborates
what
Mr.
Schoenemann
said.
He
clearly
had
access
to
the
document
after
Mr.
Smith
made
the
pencil
alterations.
Mr.
Smith
did not
use
a
biro.
There
are
various
possibilites
arising
from
this.
Mr.
Schoenemann when
questioned
in
cross
examination,
said
that
the
alterations
were
made
by
Mr.
Smith
in pencil
before
he took
the
document
away
from
Mr.
Smith's
office
and
before
he
showed
the
document
to the
plaintiff
which he
-said
at
that
time
contained
both
sets
of figures in
relation
to
the shareholding
ie.
the
original
typed
numbers
totalling
200
and
the pencil
altered
figures
totalling
100.
Either
Mrs. Schoenemann
is
incorrect or
Mr.
Smith
originally
"had
delivered"
to
Mr.
Schoenemann
the
unaltered or
uncorrected
draft
which-Mr. Schoenemann
and Mrs.
Schoenemann
inspected
after
which
Mr.
Schoenemann
went back
to
Mr.
Smith
who made
the
alterations.
Mr.
Schoenemann
then
discussed
the matter
with
the
plaintiff
when
he
crossed out both
sets
of
figures
and annexed
the sheet
from
information given
to
l I
him by
the
plaintiff.
It
is clear that
Mr.
Smith
did not
make
the cross in biro
I
accept
that
Mr. Schoenemann
did
this after
Mr.
Smith had
made
the
pencil alterations to the
document.
The
plaintif
said that
he
had suggested
certain alterations to
Mr. Schoenemann
to the
unlatered
draft exhibit
14.
The only
significant alterations are
those in pencil
which Mr.
Smith
made,
apart
from
the annexed
sheet, so
it
may
be
that the plaintiff told
Mr. Schoenemann
of
them, and Mr. Schoenemann went to
Mr. Smith who made
the
-·---~- - - - --- ----- ._·_______.
-- 48 of 61 --
alterations,
apart
from
the
alterations
to
the sheet
annexed
thereto
regarding the
plaintiff's
annual
income.
Mr.
Schoenemann
then
disucssed
the matter with
the
plaintiff,
raised the
question
of shareholding
with
him
and
was
told
by
the
plaintiff
that
it
would
be
better
not
to
mention
the individual
shareholding
in
the
altered
form
to
ensure
that
it
appeared
that
the
plaintiff
was
a
major
shareholder
in
the
company
and
so
enhance
the
possibility
of the
grant of
a
license
based
upon
his
reputation
and
his
stated intention
to
continue
to
provide
indefinitely his
expert
knowledge and
experience
to
the
defendant.
Despite
the
somewhat
bland
answers
given
by_Mr.
Schoenemann
in cross
exmaination,
and
his
not
altogether
satisfactory
method
of explaining
what
occurred,
and
particularly
having
regard
to
his
demeanour and
manner
of
expression,
I
conclude
on
the
balance
of
probabilities that
Mr.
Schoenemann
is
correct
when
he
stated
that
after
Mr.
Smith had
inserted
pencil
alterations
of
shareholding
on
the
document, he
in fact
showed
it
to
the
plaintiff
who
aske9
that
the shareholdings
be
deleted as
Mr.
I
Schoenemann
and
Mrs. Schoenemann
state.
As a
result,
Mr.
Schoenemann
struck
out
all
of the shareholdings with
a
blue
biro
as he
said in
evidence, returned the
document
to
Mr.
Smith
for
typing along with
annexure
setting
out the
plaintiff's
income,
after
which no
other alterations
were
made
to
it.
I
find that
this
occurred
on
the balance of probabilities.
This does not explain the actual shareholding
set
out in the
document
both originally
and as altered.
As
indicated, the
original shareholding
was
said to total
200 when
the total
would
- . -
':.
- - . - : .
-
--
--- -·· -·-·-------- .
--- ------~~----:-__...._ - -------.:. . - .
-- 49 of 61 --
--··-· ---·-···-
--
.
:4.8
be
198.
The
only explanation
for
this
is
simply
a
typographical
error
committed
by
Mr.
Smith's
staff
in
some
way.
It
is
also
strange
that
the
amended
shareholding
showed
Mr.
Schoenemann
51,
Mrs. Schoenemann
48
and
Mr.
Entsch
1
rather
than
50,
49
and
1
respectively
(in
accordance
with
the
minutes),
and
in
accordance
with
the
indication
given
to
Mr.
Smith on
6
September,
1989
(ex.
4).
It
is
explicable
by
the
rush
in
which
it-was prepared.
It
was
submitted
on
behalf of the
plaintiff
that
this
apparent confusion
further
demonstrated
that
there
could
have
been no
actual directors'
resolution that
shares
were
allocated.
Rath~r _it
was
submitted
that
exhibit
4
pointed
only
to
a
statement
of future intention
which
was
never formally
carried
into
effect
by an
official
directors'
meeting.
It
is difficult
to
see
why
Mr.
and Mrs. Schoenemann would
of
their
own
Yiolition,
delete
any
reference to shareholding
from
the
final
draft
_document
which
was
sent to the
plaintiff
for
examination
and
passing
on
to
the.
department
after
he had
in fact
on
his
own
evidence
inspected the
first
document
in detail
and
had
suggested
that
various
amendments
be
made
to
it.
He
explained
this
only or
the
basis
that
he
was
very rushed
and
very
busy and
that
he
did
not read
it,
an explanation
which
I
do
not accept.
I
have given
due
weight
to the submission
of senior
counsel
for the
plaintiff
with
respect to this
document.
I
have paid
close attention to the evidence of the various witnesses
and
the
manner
in
which the evidence
was
given and
to
all
of the
circumstances of the case.
I
conclude on the balance of
probabilities that the explanations surrounding this
document
. .
-
--
-·---·--· - - - --------- .
.. -
--
--------·-- -
-- 50 of 61 --
_______
49_
---~"'"'··'
---
.-
.-.,~---~---.
--•--···-
-
·-·····-··---
....
given
by
Mr.
and
Mrs
Schoenemann
are
probably
correct.
Again
this
does
not
prove
that
the
meetings
occurred
on
7
September,
1989
or
21
November,
1989.
It
is
necessary
therefore to
come
to
the
events
alleged
to
have
occurred
7
September, 1989.
I
conclude
that
Mr.
Schoenemann
spoke
to
the
plaintiff
about
Tuesday,
5
September, 1989, and
requested
a
meeting
originally
on
6
September,
1989
to
which
the
plaintiff
could
not agree
because
of other
commitments.
It
was
then
arranged
for
an
unspecified
time
on
7
September, 1989.
The
evidence
shows
that
the
plaintiff's
office
was
only
200
metres
away
from
the office
of Seacrest.
It
appears
from
Miss
Laws'
evidence
that
it
was
quite possible
that
the
plaintiff
could
have
slipped out
of
the
office for
a
short
time
notwithstanding
his
other
committments
that
day.
I
have :taken
into
account
precise
evidence
given
by
Mr.
and Mrs.
Schoenemann and Miss
Laugersen as
to
where
in fact
the
meeting
occurred
in
the
office of Seacrest,
who
was
standing
and
who
was
seated.
I
have
also
taken
into
account
the
plaintiff's
inability to recall
matters of
detail
of
significance
throughout
the relationship of these
parties
and
his
admittedly rushed timetable.
In the
result,
I
conclude
on
the balance of
probabilities
that the meeting alleged
by
Mr.
and Mrs. Schoenemann
to
have
occurred on
7
September,
1989
occurred.
I
also
conclude
on
the
balance of probabilities that the precise shareholdings said to
have been
allotted in accordance with the minutes were agreed to
at the meting as well as the appointment of
Mrs. Schoenemann
as
a
director. These were assented to
by
the plaintiff
and Mr.
-- 51 of 61 --
.
50.
·-
Schoenemann
at
the
first
meeting.
Likewise
I
have
taken
into
account
all
of
the
circumstances surrounding
the
meeting
of
21
November, 1989
including matters of personal
detail
recalled
by
Mr.
and
Mrs.
Schoenemann.
In
my
opinion,
the
probabilities
are
that
this
meeting occurred
and
the
resolutions
were
passed
to
which
tne
plaintiff
signified his
assent.
The
probable explanation
is
that
the
plaintiff
left all
of
the
administrative
details
to
Mr.
and Mrs.
Schoenemann.
Also
his
memory
was
vague about
many
important matters
relating
to
the
defendant's
affairs,
he
being very
busy
with
and
preoccupied
by
his
new
position.
These
factors,
along
with the informal
and
friendly
way
in
which
decisions
were
taken, render
it
probable
that
the
plaintiff
has
either
forgotten
or
overlooked
these
matters.
He
does
not
dispute the
fact that
the
Schoenemann's
lent
large
sums
of
money
to
the
defendant but
with
their
financial
difficulties
he
became
concerned
when
he
was
not
released
from
his
guarantees
after
the
license
was
issued
on
22
January,
1990.
Added
to
this is
his
apparent dissapointment
on
l I
behalf of
Mr.
Press, his
employer,
and
the
person
who
was
funding
his
litigation, at
Mr.
Schoenemann's
refusal to
accept the
100%
offer for the defendant.
Some
comfort
exists in the fact that
QIDC
will clearly
release
him from
his guarantee
and
the
Schoenemann's have
undertaken
to
him and
the Court to
indemnify him
in respect of
the
ANZ
Bank
overdraft. Apart from
the lease with
AGC,
t~is
gives
him
all
he ever wanted.
As
senior counsel for the
plaintiff pointed out, monies owing
to
AGC
consitutte the
- - -------· - - - -- . -
__
: ______ -:----- ·-
..
·-
-- 52 of 61 --
...
-·51
defendant's debt.
This should
be
capable
of
speedy
resolution
between
the
parties.
It
is
not
necessary
therefore to
consider
whether
discretionary
grounds
exist
for
the
refusal
of
a
declaration,
having
regard
to
all
of the
circumstances
including the
plaintiff's
willingnes;~
along with
Mr.
Schoenemann
to
mislead
QIDC
and
Queensland
National
Parks
and
Wildlife Service.
The
plaintiff
has
failed
to
make
out
a
case
for
a
declaration
with
respect
to the
share
issues
and
consequentual
relief.
The
question
of
Mrs~
Schoenemann's
appointment
as
a
director
loomed
very
large
in the case.
A
great
deal
of
debate hinged
around
the
meaning and
effect
of Articles
30,
31
and
32
which
provide as
follows:-
. - - ---· - .
"30. Unless otherwise determined
by
resolution of the
Company
the
number
of Directors
shall
be
not
less
than
two
nor
more
than
ten.
The
first
Directors of the
Company
shall
be
appointed
by
the subscribers to
the
Memorandum
and
Articles
of Association
of
this
Company.
The
Directors
at their
first
meeting
shall
appoint
one
_of
their,number as
Chairman.
The
Directors
shall
hold
office ~ntil
they
shall
be
removed by
ordinary
resolution
of the
Company
passed
in
general
meeting
or
until their office shall
ipso facto
become
vacant
pursuant to these Articles or
pursuant
to
the
Code."
"31.
The
Company may
from
time
to
time by
ordinary
resolution
passed
at
a
general
meeting
increase orreduce the
number
of Directors."
"32.
The
Directors shall
have power
at
any
time,
and from
time to
time,
to appoint
any
person
to
be
a
Director,
either
to
fill
a
casual
vacancy
or as
an
addition to
the existing Directors, but so
that the
total
number
of
Directors shall not
at
any
time exceed the
number
fixed
in
accordance with these Articles."
.
- -·---- .
___________
_.._
----·- --- --- -...,.·--
-- 53 of 61 --
I
. - -··-· -
---·-
--
·-·:·.
~
..
-::·.:::·
- .
:~-:-:.
__
-:_·--::..:·
..
-
··-·
-·· -
--·
~--·-
52
It
was
submitted
on
behalf of
the
plaintiff
that
the
basic
principle
was
that
the
appointment
of the
directors
was
always
a
matter
for the
shareholders
in
general
meeting
and
not
a
matter
for the
directors
themselves.
He
submitted
that
the
number
"fixed
in
accordance with
these
Articles"
as
referred
to in
Article
32, meant
the
number
fixed
by
the
shareholders
in
general
meeting-or
in
the
absence
of
a
general
meeting
by
subscribers to
the
memorandum
in
this
case
Mr.
and
Mrs.
Schoenemann
who
appointed themselves
the
first
directors
of
the
company
-
see
exhibit
3.
He
submitted
that Article
32
gives the
directors
the
power
to
appoint
any
person as
a
director
on
two
occasions
(i)
to
fill
a
casual
vacancy
or
(ii)
to
add
to existing
dire_ctors
so
that
the
total
number
of
directors
does
not
exceed
the
number
fixed
in
accordance with
the
Articles.
In
this
case the
Articles
as
such
do
not
fix
a
number
but
pursuant
to the
second
sentence
of Article
30,
the subscribers
appointed
two
directors.
The
submission
was
that
the
actual
directors
as
at
7
September,
1989
was
two.
It
was
submitted
that
, .
if
one
of those
two
directors
vacated
office, Articles
49
and
32
would
allow
the
remaining
director to
appoint
a
replacement.
That has not
happened
here.
It
seems
to
me
that in the
circumstances postulated, the only
power which would
be
exercised
by
the
directors in those circumstances,
would be
"to
fill
a
casual vacancy" but
it
would
not
be
the exercise of the other
power
to appoint
a
person "as an
addition to the existing
directors".
Reliance was placed on the decision of Legoe
Jin
the
' .- . ---::__:_,
------ ..
- - -·---·-·-
__
:_ .. · ...... ·
..
-- ·
___
. - - - -------
--
- _._. ___________ --- _·
________
·--~---~--------"-··--
-- 54 of 61 --
. - -
..
-
···--
--~-·.·
-.---·---------
---·
-·-
-·
-·
··--
..
··-
53
..
_
Supreme
Court
of
South
Australia
of
Woodroofe
Ltd
&
Anor
-v-
McLeod
Ltd
[1984]
10
A.C.L.R.
129
in
which
His
Honour
said
that
the
construction of the
Articles
there
under
consideration
were
supported
by
the
decision of the
High
Court
in
Grant
-v-
John
Grant
&
Sons
Pty.
Ltd.
[1950]
82
C.L.R.
1
at
47
Fullagar
J
and
at
28
by
Williams
J
as agreed
to
by
Kidder
J
at
53.
It
was
submitted
by
counsel
for the
defendant
that
there are
critical
differences
between
this
case
and
Woodroofe
Ltd.
&
Anor
-v-
McLeod
Ltd. In
Woodroofe
Ltd
it
appears
that
the
Articles
did
in
fact
fix
the
number
of
directors
at
5.
See
His Honour's
judgment on
the.4th
page
"Article
94
specified
the
original five
directors."
It
was
submitted
that
in
the current
case
neither-
-
the
Articles
nor the
resolutions
of the
company
via Article
30
have
fixed
the
number
of
directors at
any
particular
number
or
at
any
maximum
or
minimum
other
than "not
less
than
2
nor
more
than
10".
It
was
submitted
that
the exercise of the
power
of the
directors (the
plaintiff
and
Mr. Schoenemann) on
7
September,
1989_was
-within the
limitation
of
their
power
to
appoint
a
person
l I
.as.
an
additional director
under
Article
32.
Articles similar to these
have
received considerable
attention in various
authorities.
In
Blair
Open
Hearth Furnace
Company
-v- Reigart
[1913] 108 L.T
665 Eve
J
held
that
the
express
power
vested in the board
in the
appointment
of
--
additional directors
excluded
any
implied concurrent
power
in the
company
which had by
its
constitution delegated to the
members
of
the board for the time being the sole right to appoint additional
directors. Article
82
there under consideration
was
the
- ------------ - ---------
~
-- 55 of 61 --
-·
·•.·- ~-
··.--------54
equivalent
of
the
first
sentence of the
current
Article
30.
Article
83
allowed appointment
of
first
directors
by
majority of
subscribers
to
the
memorandum
"without
any
meeting
being
called
for
that
purpose."
Article
85
dealt
with
the retirement of
directors. Article
98
provided
as
follows:-
"Any
casual
vacancy
in
the
office
of
director
may
at
all
times
be
filled
up
by
the
board
by
the
appointment
of
a
director.
The
directors
may
from
time
to
time
appoint
additional directors,
so
that
the
total
number
of
directors
shall
not
exceed
the prescribed
maximum."
There
was
no
clause equivalent
to
the
current
Article
31
which
allows
the
company
from
time
to
time
by
ordinary
resolution
passed
at
a
general
meeting
to
increase or
reduce
the
number
of
directors.
That case
does
not
appear
to
have been
disapproved
in
subsequent
decisions
although
it
received
attention
and
was
distinguished.
It
indicates
that
there
is
no
absolute
rule that
directors
must always be
appointed
by
a
general
meeting,
providing of
course
that
the Articles are
clear.
In
Barron
-v- Potter
[1914]
1
CH
895,
Blair
was
distinguished.
Warrington
J
held
that.a
board meeting
of
'.
directors
can be
held under informal circumstances
but
that
the
casual meetings of
two
directors
even
in the
office of the
company
cannot
be
treated
as
a
board meeting
at
the option of
one
against the
will
and
intention of the other.
The
Articles there
in question
gave the board
of directors the
power
of appointing
an
additional director but
owing
to the differences
between
the
directors
no
board meeting could be held. His Honour
held that
the
company
clearly retained the
power
to appoint additional
directors at general meetings
when
the directors otherwise
refused to act.
At 903 he
said:-
.
-·- ------ -----·.
- ---- ----- .....
~-----~- ----·-
•· ..
-- 56 of 61 --
•
-:C-'7-:.--:'
-.
-·
- -
-·-
- -
--
.
--
.. - •
-·
-··
' -
-·-
-
-~
·---
__
5_5_
...
-····
"If
directors
having
certain
powers
are
unable
or
unwilling
to exercise
them
-
are
in fact
a
non-existent
body
for
thepurposes
-
there
must
be
some
power
in the
company
to
do
itself
that
which
under
other
circumstances
would
be
otherwise
done.
The
directors
in
the
present
case
being
unwilling
to
appoint
additional directors
under
the
power
conferred
on them by
the
Articles,
in
my
opinion,
the
company
in
general
meeting has
the
power
to
make
the
appointment."
In
Worcester Corsetry
(Supra)
Lord
Hamworth M.R.
distinguished the
article
dealt
with
by
Eve
Jin
Blair
and
concluded
that
the
power
of
appointing
additional
directors
given
expressly
to the directors
by
the artic·les
under
consideration
was
not
a
power
to
the
total
exclusion of the
powers
of
general
meeting.
He
concluded
that
it
was
not
right to
regard
Article
83
(current
Article
31)
as merely
complementary
to
the
power
in
Article
12
(equivalent to the
rirst
sentence
in
the
current
Article
30). In
his
view
it
allowed
the
company
in
general
meeting
not only
to increase the
number
of
directors
but also to
make
appropriate
appointments.
At
648
-he
said:-
"That
(Article
85)
is
indicative
of
a
temporary
power
vested
in the
directors
which
was
to
be reviewed
and
perhaps
confirmed
at
the general
meeting; .but.
the
Article
itself
does
not
give•any
indication ·that-the
powers
of thecorpora
tars
in general
meeting
...
have been wholly
taken
from
them
and handed
over
to the directors."
Lawrence
L.J.
and
Slesser L.J.
came
to
a
similar
view.
It
was
not held
that
the
directors
did not
have
a
temporary
power
also.
Worcester Corsetry
was
applied
by
the
High
Court (McTiernan,
Williams and
Kitto JJ in Grant -v-
John Grant
&
Sons
Proprietary
Limited).
It
should be noted in the Articles dealt with
by
the
' .;;..
. - -
--·---- ---·-·.
- -:. : -
___
·.:.·. -· - -
~--
-----
-
--
- ·-
_, _____________....
_______
.;
.
.
- - - - - ··-
-- 57 of 61 --
56
.--
.
-·
- . -·---
--
---
-
·-·
--·
- --- -
____
...
'
High
Court,
that
there
was
no
article
conferring
a
power
on
the
directors similar
to
that
contained
in
Article
32
in
the
instant
case.
The
Court
was
concerned
with
Article
86
which
said
that
the
company
might
from
time
to
time
in
general
meeting
by
extraordinary
resolution
increase or
reduce
the
number
of
directurs
and
determine
in
what
rotation
such
increased
or
reduced
number
should
go
out of
office.
By
Article
81
it
was
provided
that
the
directors
would
not
be
less
than
2
nor
more
than
5
in
number.
That
article,
unlike
Article
30
in
the present
case
or
Article
12
in
the Worcester.Corsetry case,
could only
be
changed
by
a
change
to
the
Articles
by
special resolution
whereas
the
current
Article
30
and
Article
12
in
the
Worcester
Corsetry
case
expressly
allowed
the
company
in general
meeting
to
increase
the
maximum
number
of
directors
without
a
change
in the
article.
It
was
held
that
Article
86
required-an extraordinary
resolution
before the
number
of
directors
could
be
increased
from
3
to
5
and
as
this
was
not
done,
the
appointment
of
2
directors
was
held
to
be
void.
See
per
Williams
J
at
28
and
in particular Articles set
out
in the
judgment
of Fullager
J. at
37
and
following.
Latham
,·,
CJ
at
22
referred to
the
Worcester Corsetry case
and
said
that
case
is
also authority for the proposition
that articles
such as
the
current Article
31
gives the
company
in general meeting
the
power
not only to increase or
reduce the
number
of
directors
as
such
but also to
make
appointments.
In
Woodroofe Ltd
-v-
McLeod
Ltd, the
articles
were
as-
follows:-
"93. The company may from time to time in general meeting
increase or decrease the
number
of directors providedhowever
that the number be not reduced to
below three andmay
also determine in what rotation such increased or
- :· ------ - - - - .. -----
- . ---·-------
-- 58 of 61 --
57
----··
·-
--·-··
--------
.-·
.
reduced
number
is
to
go
out of
office".
Until
otherwise
determined
by
the
company
in
general
meeting
the
number
of
directors
shall
be
not
more
than
7
and
or
not
less
than
3
and
they
shall
retire
from
office
as
hereinafter
provided."
Article
105
gave
a
similar
power
to
that
contained
in
the current
Article
32.
It
is
clear
from
the report
that
the
directors
did
not
purport
to
increase the
number
of
directors.
The
directors
merely
sent out to
shareholders
notices
of
a
general
meeting
stating that
4
directors
were
to
be
elected
at
the
forthcoming
general
meeting
the
result
being
that
there
would
then
be
seven
directors
whereas
previously
there
had
only
been
5
in
number.
As
indicated,
Article
94.
specified
the
original
5
directors.
The
number
fixed
by
the
articles
there
were
5.
The
directors
did not
propose
to
seek
a
resolution
from
the shareholders
approving
the
increase
in the
number
of
directors to
7.
The
shareholders
sought
an
order
preventing the
meeting
from
proceeding
and
it
was
held
that
a
shareholders resolution
was
required
each time
it
was
sought
to
alter
the
number
of_directors,
the
number
having
previously
been fixed
by
Article
94.
As
there
had
been
no
such
resolution since incorporation, the correct
number
of
directors
was
five
and any
increase to
7
required
first
of
all
a
resolution
by
the shareholders in general
meeting
before they could then
go
to
make
an appointment as the directors indicated.
That case as
submitted
by
counsel for the defendant
is
also distinguishable
from
the .present case.
Article
30
states that unless otherwise determined by
resolution of the
company
the
number
of directors shall
be not
less than
2
and not
more
than 10.
It
does not indicate
what type
. . - . - - - - - - ~:.
--
- .
..;.
~
-
:..
- - - - .
_...
.
..
- :·
--------...:
~
__:_- - ·- .-.--------- - - - :
________
....:..-----·-----:---·-_ . - ·
...
-- 59 of 61 --
----
-·
•·--
·-·
...
-
-·-·
-·····
-·-··----·-
_58
____
. _ ----· ..
-·.··
·-·-----.
-··
- --------
--
of
resolution
whereas
Article
31
refers
to
an
ordinary
resolution. Article
30
then
refers
to the
appointment
of
first
directors. Article
31
refers to
the
number
and
Article
32
again
confers
a
power
on
the
directors
to
appoint
so
that
the
total
number
of
directors shall
not
at
any
time exceed
the
number
fixed
in
accordance
with these
Articles.
Despite
my
request,
no
authority
was
cited
which
indicated
that
the
nomination
by
the subscribers to the
memorandum
of the
first
directors
amounted
to
a
fixing
of
directors "in
accordance
with
these
Articles",
or
that
such
a
nomination
was
the
equi
valen_t
of
a
general
meeting
of
the
company. The
current
Articles
differ
from
Article
57
of
Table
A
which
has been
excluded. That
Article
provides
that
the
number
of
directors
and
the
names
of the
first
directors shall
be ·-determined
in writing
by
the subscribers to
the
memorandum
of association or
a
the
majority of
them.
It
may
be
that
the
appointment
of the
first
directors in
accordance with
Article
30
might
also
amount
to
a
determination of the
number
of directors in
accordance with the
.,
.,
Articles, but against
this
the directors are
appointed
to
hold
office
only
subject to
the control
of the general
meeting:
Article
30, 33.
The
power confered
by
Article
32
is
probably
a
concurrent
power which
may
be
exercised
by
the directors
from
time
to
time,
but ~ubject to the control of the
company
in general meeting. In
the context in
which the
power
is
confered on
the directors in
Article
32, and the reference to the
number
fixed in accordance
with these Articles,
it
seems
to
me
that the submission ·by
---
------
- . .
...
- - --- ..; . - . - -
..
- - -
.. - ·- ·------·-----~------
...
------ -
-- 60 of 61 --
.....
59
. ·-
counsel
for the
defendant
is
probably
correct
viz
that
the fixing
in
accordance
with the
Articles
is
the
number
of
not
less
than
2
nor
more
than
10,
unless otherwise
determined
by
resolution of
the
company.
It
is
not disputed
that
the
company
may
itself
in
general
meeting
by
ordinary
resolution increase or
reduce
the
number
of
directors:
Article
31
and
also
make
any
appropriate
appointment.
The
point
is
not
entirely clear.
In
view
of the
result
with
regard
to the
share
issues,
this_may
not
now
be
of
much
concern
to
the
parties.
If
the
appointment
was
within the
power,
some
comfo~t
may
_also be
derived
from
the
fact that
all
shareholders
were
present
at
the
meeting
on
7
September,
1989
at
which Mrs.
Schoenemann was
appointed
a
director,
even though
the
defence
admitted
that
no
shareholders-meeting
had
in fact
occurred:
Versteeg
-v-
R.
[1988]
14
A.C.L.R.
1:
H.L.
Bolton (Engineering)
Co.
Ltd.
-v-
Graham
Ltd
[1957]
1 QB
159.
In the
result,
the
plaintiff
has
failed to
make
out
a
case
.,
for
relief
which
in
the circumstances should be
refused.
I
will
now
hear submissions
on
the-question costs
and
also
submissions
concerning
the application for
winding up and
the application for
appointment
of
a
provisional liquidator in
O.S.
22
of
1990.
•.
=-
_________
.:.
_::_·
::.._:_:
..
--
-- - __.__
.,-
--:
...
- -
..
· - ... -
-- 61 of 61 --
Official source: https://www.sclqld.org.au/caselaw/QSC/1990/252