BCEG International (Australia) Pty Ltd v Xiao [2022] NSWSC 972

Supreme Court New South Wales

Medium Neutral Citation: BCEG International (Australia) Pty Ltd v Xiao [2022] NSWSC 972 Hearing dates: 4 – 22 April 2022 Date of orders: 22 July 2022 Decision date: 22 July 2022 Jurisdiction: Equity - Commercial List Before: Rees J Decision: Judgment for the plaintiff, see orders at [446]. Catchwords: CORPORATIONS – directors and officers – company sues director and de facto director for breach of duty – company borrows US$35m to fund Gold Coast development – development costs over-stated – directors raise false invoices to divert $3.4m to personal project in West Wyalong – sham sub-contracts created to substantiate $23m drawn down on Gold Coast facility – multiple payments to directors' company – unaware of fraud, company enters into contracts for further development in Wagga – $2.05m of Gold Coast facility used to buy Wagga land but by directors' company– negotiations – partial repayment. CIVIL PROCEDURE – pleadings in Commercial List – further questionable transactions emerge during trial – whether plaintiff entitled to additional relief – where evidence establishes matters beyond pleadings – principles at [368]-[376] – given serious nature of allegations, held to pleaded case. DIRECTORS – de facto director – principles at [329]-[333] – not necessary for de facto director to make decisions independently of other directors – directors' duties – whether fiduciary duties modified by inherent conflict of interest in corporate structure – not modified in absence of disclosure of wrongdoing. Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: A v New South Wales (2007) 230 CLR 500; [2007] HCA 10 Alati v Kruger (1955) 94 CLR 216 Alemite Lubrequip Pty Ltd v Adams (1997) 41 NSWLR 45 Armory v Delamirie (1722) 1 Stra 505; (1772) 93 ER 664 Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297; [2011] FCAFC 151 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 Bamford v Bamford [1970] Ch 212; [1968] 2 All ER 655 Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Barnes v Addy (1874) LR 9 Ch App 244 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd & Ors [2008] NSWCA 243 BCEG (Australia) v Xiao (No 2) [2020] NSWSC 1403 BCEG International (Australia) Pty Ltd v Xiao [2020] NSWSC 1234 BCEG International (Australia) Pty Ltd v Xiao [2021] NSWSC 1027 BCEG International (Australia) Pty Ltd v Xiao (No 2) [2022] NSWSC 1102 BCI Finances Pty Ltd (In Liq) v Binetter (No 4) [2016] FCA 1351; (2016) 348 ALR 227 BCI Finances Pty Ltd (in liq) v Binetter [2018] FCAFC 189; (2018) 362 ALR 597 Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384 Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969 Boardman v Phipps [1967] 2 AC 46 Breen v Williams (1996) 186 CLR 71 Briginshaw v Briginshaw (1938) 60 CLR 336 Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445; [2011] VSC 184 Chameleon Mining NL v Murchison Metals Ltd [2010] FCA 1129; (2010) 28 ACLC 10-073 Chan v Zacharia (1984) 154 CLR 178 Civil Service Co-operative Society of Victoria Ltd v Blyth (1914) 17 CLR 601 Clay v Clay (2001) 202 CLR 410; [2001] HCA 9 Club of the Clubs Pty Ltd v King Network Group Pty Ltd (No 2) [2007] NSWSC 574 Commonwealth Dairy Produce Equalisation Committee Ltd v McCabe (1938) 38 SR (NSW) 397 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1; [2000] FCA 1084 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 Dare v Pulham (1982) 148 CLR 658 Deputy Commissioner of Taxation v Austin (1998) 28 ACSR 565 Devaynes v Noble (Clayton's Case) (1816) 1 Mer 572; (1816) 35 ER 781 El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Forkserve Pty Ltd v Jack [2000] NSWSC 1064; (2001) 19 ACLC 299 Furs Ltd v Tomkies (1936) 54 CLR 583 GC NSW Pty Ltd v Galati [2020] NSWCA 326 Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284; [2013] NSWSC 453 GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113 Gould & Birbeck & Bacon v Mount Oxide Mines (1916) 22 CLR 490 Gray v National Crime Authority [2003] NSWSC 111 Grimaldi v Chameleon Mining NL (No 2) (2012) [2012] FCAFC 6; (2012) 87 ACSR 260 Halford v Halford [2022] WASCA 1 Hagan v Waterhouse (1991) 34 NSWLR 308 Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29 Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; [2003] NSWCA 10 Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307; (2016) 339 ALR 659 Hogg v Cramphorn Ltd [1967] Ch 254 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Hourigan v Trustees Executors & Agency Co Ltd (1934) 51 CLR 619 Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 In the matter of ACN 092 745 330 [2017] NSWSC 241 In the matter of Anna Bay Resort Pty Ltd [2022] NSWSC 331 In the matter of French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 In the matter of Swan Services Pty Ltd (in liq) [2016] NSWSC 1724 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 Jones v Dunkel (1959) 101 CLR 298 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 Legione v Hateley (1983) 152 CLR 406 Leotta v Public Transport Commission of New South Wales (1976) 9 ALR 437 Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 Lewis v Wilson (1997) 42 NSWLR 228 Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681; [2014] HKC 368 Lockyer v Macready (1965) 66 SR (NSW) 369 Magill v Magill (2006) 226 CLR 551; [2006] HCA 51 Maguire v Makaronis (1997) 188 CLR 449 Masters v Cameron (1954) 91 CLR 353 McKenzie v McDonald [1927] VLR 134 Mills v Mills (1938) 60 CLR 150 Mistmorn Pty Ltd (in liq) v Yasseen (1996) 21 ACSR 173 Moratic Pty Ltd v Gordon [2007] NSWSC 5 Mualim v Dzelme [2021] NSWCA 199; (2021) 157 ACSR 367 Mudgee v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12; (2022) 398 ALR 658 Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 Nocton v Lord Ashburton [1914] AC 932 North-West Transportation Co Ltd v Beatty (1887) 12 App Cas 589 Nowlan v Marson Transport Pty Limited (2001) 53 NSWLR 116; [2001] NSWCA 346 O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd [2011] FCAFC 166; (2011) 285 ALR 93 Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 Orr v Ford (1989) 167 CLR 316 Parker v McKenna (1874) LR 10 Ch App 96 Permanent Trustee Australia Ltd v FAI General Insurance Company Ltd (in liq) (2003) 214 CLR 514; [2003] HCA 25 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31 Ramsay v BigTinCan Pty Ltd [2014] NSWCA 324; (2014) 101 ACSR 415 Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; [1942] 1 All ER 378 Ripani v Century Legend Pty Ltd [2022] FCA 242 Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286 [2003] NSWCA 71 Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29 Southern Cross Commodities Pty Ltd (in liq) v Ewing (1987) 11 ACLR 818 Simmons v New South Wales Trustee and Guardian [2014] NSWCA 405; (2014) 17 BPR 33,717 Sino-Resource Imp & Exp Co Ltd v Oakland Investment Group Ltd [2018] QSC 98 Skilled Group Ltd v CSR Viridian Pty Ltd [2012] VSC 290 Smithton Ltd v Naggar [2014] EWCA Civ 939; [2015] 1 WLR 189 Swiss Re International SE v Simpson [2018] NSWSC 233; (2018) 354 ALR 607 Taouk v Assure (NSW) Pty Ltd [2017] NSWSC 534 Target Holdings Ltd v Redferns [1996] 1 AC 421 Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 Thomas v Arthur Hughes Pty Ltd [2015] NSWSC 1027; (2015) 107 ACSR 445 United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1 Wallersteiner v Moir (No 2) [1975] QB 373 Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18 Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666 Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 Texts Cited: Wigmore, JH, Wigmore on Evidence (3rd ed., 1940, Little, Brown and Co.) Ritchie's Uniform Civil Procedure NSW (LexisNexis, looseleaf) Heydon, JD and Leeming, MJ, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis) Category: Principal judgment Parties: BCEG International (Australia) Pty Ltd (Plaintiff) Yu Xiao (First Defendant) Yanying Chen (Second Defendant) Interlink Laboratory Pty Ltd (Third Defendant) Interlink Wagga Central Pty Ltd (Fourth Defendant) West Wyalong Marketplace Pty Ltd (Fifth Defendant) Representation: Counsel: Mr DL Williams SC / Mr ND Riordan (Plaintiff) Mr FP Hicks SC / Mr B Le Plastrier (Defendants)