ET-China.com International Holdings Ltd v Cheung [2019] NSWSC 1874

Supreme Court New South Wales

Medium Neutral Citation: ET-China.com International Holdings Ltd v Cheung [2019] NSWSC 1874 Hearing dates: 14 – 18 October, 20 and 28 November 2019 Decision date: 20 December 2019 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: The plaintiffs have not established a breach of duty by the director defendants; proceedings to be dismissed Catchwords: CORPORATIONS – shares – transfer – where parent company's chief executive officer and founding director convicted of corporate crimes in China and imprisoned – where subsidiaries of company had an indirect interest in travel business conducted in China – where Chinese state owned corporation held the balance of the interest the travel business and contended subsidiaries' interest obtained corruptly – where defendant directors caused shares to be transferred on an allegedly reversible basis so that a Chinese national appeared to control the subsidiary and could use her connections and influence in China to resolve the problem – where first defendant ultimately paid $2 million for the shares – whether shares were transferred for "nil" consideration and as a gift – whether directors subsequently caused a rights issue and special distribution to be effected to disguise these activities

CORPORATIONS – directors and officers – directors duties – whether directors in breach of duties concerning rights issue and special distribution to shareholders

EQUITY – fiduciary duties – whether directors duties said to be breached were fiduciary duties – whether remaining defendants knowingly involved in a breach of those fiduciary duties or knowingly received property through that breach of fiduciary duty Legislation Cited: Bankruptcy Act 1966 (Cth) Companies (Jersey) Law 1991 Convention on the Transfer of Sentenced Persons, opened for signature 21 March 1983, ETS No 112 (entered into force 1 January 2003) Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Foreign Corporations (Application of Laws) Act 1989 (Cth) International Transfer of Prisoners Act 1997 (Cth) Cases Cited: APX Projects Pty Ltd v The Owners - Strata Plan No 64025 [2015] NSWSC 1250 Australian Securities and Investments Commission v Adler (2002) 168 FLR 253; [2002] NSWSC 171 Barnes v Addy (1874) LR 9 Ch App 244 Breen v Williams (1996) 186 CLR 71; [1996] HCA 57 Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129; [1991] 3 SCR 534 Eastmark Holdings Pty Ltd v Kabraji [2013] NSWSC 1763 Evans v McLean (No 2) [1987] WAR 110 Fitzgerald v Penn (1954) 91 CLR 268; [1954] HCA 74 Foss v Harbottle (1843) 2 Hare 461; (1843) 67 ER 189 Hart Security Australia Pty Ltd v Boucousis (2016) 339 ALR 659; [2016] NSWCA 307 Hewett v Court (1983) 149 CLR 639; [1983] HCA 7 Leary v Federal Commissioner of Taxation (1980) 47 FLR 414 Mackreth v Symmons (1808) 15 Ves Jun 329; (1808) 33 ER 778 Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12 Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331; [2005] HCA 54 O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Oates v Consolidated Capital Services Ltd (2009) 76 NSWLR 69; [2009] NSWCA 183 Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 R v Heilbronn (1999) 30 ACSR 488 Ramsay v BigTinCan Pty Ltd [2014] NSWCA 324 Regentcrest plc (in liq) v Cohen [2000] All ER (D) 747; [2001] 2 BCLC 80 Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Tan v The Owners - Strata Plan No 22014 (No 2) [2015] NSWSC 1920 Target Holdings Ltd v Redferns [1996] 1 AC 421 Troulis v Vamvoukakis [1998] NSWCA 237 Virgtel Ltd v Zabusky [2006] 2 Qd R 81; [2006] QSC 066 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 Texts Cited: R P Austin and I M Ramsay, Ford, Austin & Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) T F Bathurst and S Merope "It tolls for thee: Accessorial liability after Bell v Westpac" (2013) 87 Australian Law Journal 831 Category: Principal judgment Parties: ET-China.com International Holdings Ltd (First Plaintiff) Matthew Chik-hui Ng (Second Plaintiff) Freada Kwan Cheung (First Defendant) Vision Capital (Asia) Ltd (Second Defendant) Financial International Holdings Ltd (Third Defendant) Christopher Peter Rose (Fourth Defendant) Marco Marcou (Fifth Defendant) Pyma Pty Ltd (Sixth Defendant) MAP ET-China Holdings Pty Ltd (Seventh Defendant) Representation: Counsel: M S White SC with B D Kaplan (Plaintiffs) J Entwisle (First to Third Defendants) F Corsaro SC with H Pintos-Lopez (Fourth to Seventh Defendants)