FEDERAL COURT OF AUSTRALIA
CellOS Software Ltd v Huber [2018] FCA 2069
File number: VID 951 of 2015 Judge: BEACH J Date of judgment: 20 December 2018 Catchwords: CORPORATIONS – securities – share scheme – equity capital raising opportunity – director setting up secondary market in shares – grey market in shares – breach of director’s duties – ss 181 to 183 of the Corporations Act 2001 (Cth) – breach of fiduciary duties – use of off-shore corporations – diversion of business opportunity – action by director to divert direct investment – discussion of Beam v Stewart 833 A 2d 961 (Del Ch, 2003) – limitations on equity capital raising under Singaporean law – ss 2(2), 240(1), 272A, 272B, 274 and 275 of Securities and Futures Act (Singapore, cap 289) – related party transactions – related party loans – non-disclosure of interest – conversion options under loans – uncommerciality of terms – strike price for conversion option less than market value – accessorial liability of other participants Legislation: Companies Act (Singapore, cap 50)
Corporations Act 2001 (Cth) ss 79, 181, 182, 183, 195, 208, 228
Securities and Futures Act (Singapore, cap 289) ss 2(2), 240(1), 272A, 272B, 274, 275
Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations (Singapore)
Cases cited: Beam v Stewart 833 A 2d 961 (Del Ch, 2003)
Furs Ltd v Tomkies (1936) 54 CLR 583
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296
Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609
Howard v Federal Commissioner of Taxation (2014) 253 CLR 83
Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1
Pereira v Director of Public Prosecutions (1988) 82 ALR 217
Prestige Lifting Services Pty Ltd v Williams (2015) 333 ALR 674
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
The Zamora [1921] 1 AC 801
Date of hearing: 11 to 15, 18 to 22 September 2017, 21 to 24 May, 12 and 13 June 2018 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 1058 Counsel for the Applicant: Mr P Crutchfield QC with Dr COH Parkinson Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the First and Fifteenth Respondents: Mr DB Bongiorno (11 to 15, 18 to 22 September 2017) and thereafter these Respondents in person Solicitor for the First and Fifteenth Respondents: Grindal Patrick (11 to 15, 18 to 22 September 2017) Counsel for the Second, to Fourteenth Respondents: The Second to Fourteenth Respondents did not appear Counsel for the Seventeenth and Eighteenth Respondents: Mr D Crennan QC with Mr JDS Barber Solicitor for the Seventeenth and Eighteenth Respondents: Hall & Wilcox Counsel for the Nineteenth Respondent: Mr TI Purdey Solicitor for the Nineteenth…
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- AGLC
- CellOS Software Ltd v Huber [2018] FCA 2069
- Case
- [2018] FCA 2069
- Decision Date
CaseChat Overview and Summary
The court was tasked with determining whether Huber breached his duties as a director and whether the other defendants were complicit in any breaches. Key issues included the requisite actual knowledge of the alleged breaches, the existence of a grey market in shares, and the uncommerciality of terms such as conversion options under loans. The court also had to assess whether the terms of the loans and conversion options were significantly below market value and whether the other defendants could be held accessorially liable. The analysis involved a careful examination of the relationship between the parties, the nature of the transactions, and the compliance with relevant securities laws.
In its decision, the court found that while suspicions were indeed raised about the activities and motives of the defendants, this was not enough to establish actual knowledge or sufficient inference to hold them accessorially liable. The court held that CellOS had successfully made out its case against Huber and the entities he controlled. However, the claims against the other defendants, including the Pecks and Mr Tan, were dismissed, and the proceedings against them were terminated with costs. The decision highlighted the importance of clear evidence in proving breaches of director’s duties and the complexities involved in related party transactions and non-disclosure of interests.
The final orders included dismissing the proceedings against certain respondents with costs and reserving costs for further determination. The court directed the parties to file and serve short minutes of orders to facilitate the next stage of the proceedings. The entry of orders was governed by Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. The proceedings as against the seventeenth to nineteenth respondents be dismissed with costs.
2. The applicant and the first and fifteenth respondents within 28 days of the date of these orders file and serve short minutes of orders to give effect to these reasons and for the further conduct of these proceedings.
3. Costs reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
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