In the matter of Cheal Industries Pty Ltd - Fitzpatrick v Cheal [2012] NSWSC 261

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Cheal Industries Pty Ltd - Fitzpatrick v Cheal [2012] NSWSC 261 Hearing dates: 7-10 February 2012 Decision date: 21 March 2012 Jurisdiction: Equity Division - Corporations List Before: Ward J Decision: Judgment for the plaintiffs Catchwords: CORPORATIONS - breach of fiduciary duties or statutory duties pursuant to ss 180, 181 and 182 Corporations Act 2001 (Cth) - director of company set up competing company while still director and employee of first company - director appropriated company name of first and goodwill associated with previous trading history of first company (though not registered trade mark, which was at all relevant times property of director or family trust company) - HELD - breach of director's duties and knowing assistance by second and third defendants - CORPORATIONS - oppression - s 232 Corporations Act 2001 (Cth) - whether conduct engaged in by the first defendant in setting up the competing company and diverting the business of the first company to the new company was oppressive - HELD - conduct of "affairs of the company" by the first defendant objectively unfair and oppressive - REMEDIES - equitable compensation - valuation of shares of company - where intangible assets of the company include value associated with a trade mark used but not owned by the company and the value associated with the business name - HELD - value of shares to be calculated according to value of Net Operating Assets plus an amount attributable to goodwill (if any) independent of the trade mark Legislation Cited: Corporations Act 2001 (Cth) Trade Marks Act 1995 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Alcock v Robb (1978) 2 BPR 9625 Angas Law Services Pty Ltd (in liq) v Carabelas (2005) 226 CLR 507 Arthur Young v Tieco International (1995) 182 LSJS 367 Attorney-General (NSW) v Brewery Employees Union (NSW) (1908) 6 CLR 469 Aubanel and Alabaster Ltd v Aubunel (1949) 66 RPC 343 Backoffice Investments v Campbell [2007] NSWSC 161; (2007) 61 ACSR 144; 25 ACLC 302 Banque Commerciale SA (In Liq) v Akhil Holdings Limited [1990] HCA 11; (1990) 169 CLR 279 Betfair Pty Ltd v Racing New South Wales [2010] FCFCA 133; (2010) 189 FCR 356 Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384 Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46; [1966] 3 All ER 721 Bowden Wire Co Ltd v Bowden Brake Co Ltd (1914) 31 RPC 385 Bray v Ford [1896] AC 44 Buckley v Tutty (1971) 125 CLR 353 Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95 Campbell and Another v BackOffice Investments Pty Limited [2009] HCA 25; (2009) 238 CLR 304; (2009) 257 ALR 610, at 654; (2009) 73 ACSR 1 Canadian Aero Service v O'Malley [1974] SCR 592; 40 DLR (3d) 371 Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 Charter Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413 Cook v Deeks [1916] 1 AC 554 Copyright Agency Ltd v Department of Education of New South Wales (1985) 80 FLR 332 Delphic Wholesalers Pty Ltd v Elco Food Co Pty Ltd (1987) 8 IPR 545 Doyle v Australian Securities and Investments Commission (ASIC) [2005] HCA 78; (2005) 227 CLR 18; (2005) 223 ALR 218; (2005) 56 ACSR 159 Drinkwater v Caddyrack Pty Ltd [1997] NSWSC 431 Duke Group Limited (in liq) v Pilmer (1998) 27 ACSR 1 Dwyer v Lippiatt; Dwyer v Backpackers R Us.Com Pty Ltd (2004) 50 ACSR 333 Dynasty Pty Ltd v Coombs (1995) 59 FCR 122 ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1995) 15 ACSR 536 Federal Commissioner of Taxation v Murry [1998] HCA 42; (1998) 193 CLR 605 Fexuto Pty Limited v Bosnjak Holdings [2001] NSWCA 97; (2001) 37 ACSR 672; (2001) 19 ACLC 856 General Electric Co v General Electric Co Ltd [1972] 1 WLR 729; [1972] 2 All ER 507 General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819 Gould v Mount Oxide Mines Limited (in liq) (1916) 22 CLR 490 Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2004] NSWSC 1136 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206 Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722 Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd and Or [2008] NSWSC 144; (2008) 66 ACSR 1 Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452 Mordecai v Mordecai (1988) 12 NSWLR 58 Nocton v Lord Ashburton (1914) AC 932 O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Old v McInnes and Hodgkinson [2011] NSWCA 410 Painaway Australia Pty Ltd v JAKL Group Pty Ltd [2011] NSWSC 205 Pioneer Kabushiki Kaisha v Registrar of Trade Marks (HCA, unreported, Aickin J, 1 November 2011) Phillips v Phillips (1878) 4 QBD 127 Profinance Trust SA v Gladstone [2002] 1 WLR 1024 Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549 Rankine v Rankine (1995) 124 FLR 340 Ratcliffe v Evans (1892) 2 QB 524 Re a Company (No 002612 of 1984) (1986) 2 BCC 99,453 Re Baumler (UK) Ltd [2005] 1 BCLC 92; [2004] All ER (D) 139; [2005] BCC 181 (Ch D) Re Bega Co-operative Society Ltd & Anor v The Milk Authority of the Australian Capital Territory & Anor (Unreported, Federal Court of Australia, 12 May 1992); [1992] FCA 200 Re Bright Pine Mills Limited [1969] VR 1002 Re Hollen Australia Pty Ltd; Holt v Burnside [2009] VSC 95 Re Leas Hotel Co [1902] 1 Ch 332 Re Leeds United Holdings Plc [1997] BCC 131 Re London School of Electronics Ltd [1986] Ch 211 Re Scottish Co-operative Wholesale Society Limited v Meyer [1959] AC 324; [1958] 3 All ER 66 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Shelton v NRMA [2004] FCA 1393; (2004) 51 ACSR 278 Short v Crawley (No 30) [2007] NSWSC 1322 Target Holdings Ltd v Redferns [1996] AC 421 Thomas v HW Thomas Ltd [1984] 1 NZLR 686; (1984) 2 ACLC 610; (1984) 2 NZCLC 99 Vadori v AAV Plumbing Pty Ltd [2010] NSWSC 274 Wayde v New South Wales Rugby League [1985] HCA 68; (1985) 180 CLR 459 WEA Records Pty Ltd v Stereo FM Pty Ltd (1983) 48 ALR 91 Weatherall v Satellite Receiving Systems (Aust) Pty Ltd [1999] FCA 218; (1999) 30 ACSR 698 Webb v Stanfield [1991] 1 Qd R 594 Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 Texts Cited: R P Austin and I M Ramsay, Ford's Principles of Corporations Law (13th ed, 2007) Category: Principal judgment Parties: Simone Leah Fitzpatrick (First Plaintiff) ACN 089 142 870 Pty Ltd (Second Plaintiff) James Mitchell Cheal (First Defendant) Cheal Industries Pty Ltd (Second Defendant) Chilli Surfboards Pty Ltd (Third Defendant) Representation: Counsel M B Evans (Plaintiffs) Ms R Francois (Defendants) Solicitors Lathams Lawyers (Plaintiffs) Brown Wright Stein (Defendants) File Number(s): 09/291052