CellOS Software Ltd v Huber

In CellOS Software Ltd v Huber, the plaintiff sought relief against multiple defendants, including Huber, who was a director of CellOS, and several entities he controlled, as well as other individuals. The primary dispute revolved around allegations of breaches of directors’ duties under the Corporations Act 2001 (Cth), including sections 181 to 183, and fiduciary duties. The plaintiff accused Huber of setting up a secondary market in CellOS shares, creating a grey market, and diverting business opportunities. This action also involved the use of offshore corporations and non-disclosure of interests, particularly in relation to related party loans and conversion options. The case drew comparisons to Beam v Stewart, a decision from the Delaware Chancery Court, and dealt with complex issues of equity capital raising under Singaporean law.

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.