Chen v Liu - [2015] NSWSC 161

Supreme Court

New South Wales

Medium Neutral Citation: Chen v Liu [2015] NSWSC 161
Hearing dates: 4 March 2015 and 5 March 2015
Decision date: 05 March 2015
Jurisdiction: Equity Division
Before: McDougall J
Decision:
Conditional relief to be given under s 1322(4) Corporations Act; parties to bring in draft orders.

Catchwords: REMEDIES – statutory remedies – Corporations Act 2001 – section 1322(4) orders – where association incorporated under the Associations Incorporation Act 2009 (NSW) – where association at deadlock between two factions vying for control – where neither side’s evidence satisfactory – orders on the just and equitable ground – where each faction seeks relief under section 1322(4) – whether relief to be granted on condition that the association hold an extraordinary general meeting for the purpose of electing the committee and its office bearers – costs – whether parties entitled to recoup legal costs from accounts of the association
CORPORATIONS – associations – applicability of Corporations Act 2001 to associations –fiduciary duties of office bearers – whether expending association funds on litigation to determine control of the association amounts to breach of fiduciary duties
Legislation Cited: Associations Incorporation Act 2009 (NSW)
Associations Incorporation Regulation 2010 (NSW)
Corporations Act 2001 (Cth)
Corporations (Ancillary Provisions) Act 2001 (Cth)
Cases Cited: Resource Equities v Carr [2009] NSWSC 1385
Carr v Resource Equities Limited [2010] ACSR 247
Category: Principal judgment
Parties: Weijie Chen (First Plaintiff)
Hong Xie (Second Plaintiff)
Yan Liu (First Defendant)
Yugan Chen (Second Defendant)
Hailun Meng (Third Defendant)
Australia Fuzhou Community Alliance Incorporated (Fourth Defendant)
Representation:
Counsel:
I J King (Plaintiffs)
S A Lees (First, Second and Third Defendants)
Solicitors:
Ralph Doughty (Plaintiffs)
Machiao Lawyers (First, Second and Third Defendants)

File Number(s): 2014/263622

Judgment (EX TEMPORE – REVISED 5 MARCH 2015)

HIS HONOUR: The fourth defendant, the Australian Fuzhou Community Alliance Incorporated (the Alliance), is an incorporated association. It was formed for the laudable purpose of enabling people born in Fuzhou or the province of Fujian in the People’s Republic of China, or relatives or friends of such persons, who live in Australia to have some form of social association. Another laudable objective was to promote cultural and business ties between this country and people from that region of China.
Unfortunately, the affairs of the Alliance have been conducted in a way that displays either total ignorance of or contempt for the requirements of the law. There appear to be two rival factions, each of which wishes to control, and claims to control, the affairs of the Alliance. One of those factions is represented by the natural plaintiffs, Mr W J Chen and Mr Hong Xie. The other faction is represented by the first three defendants, Mr Yan Liu, Mr Y G Chen and Mr Hailun Meng.
The Alliance was incorporated under the Associations Incorporation Act 2009 (NSW) (the Act) on 17 September 2012. In the events that have happened, it is common ground that the only effective constitution of the Alliance is, and has always been, the model…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Chen v Liu

Details

AGLC: Chen v Liu [2015] NSWSC 161
Case: [2015] NSWSC 161
Decision Date: 05 March 2015

CaseChat Overview and Summary

In the case of Chen v Liu, the plaintiff, Chen, and the defendant, Liu, were members of an association incorporated under the Associations Incorporation Act 2009 (NSW). The association had become deadlocked between two factions, each seeking control. The plaintiff sought relief under section 1322(4) of the Corporations Act 2001, requesting that an extraordinary general meeting be held for the election of the committee and its office bearers. The defendant, Liu, sought a similar relief, arguing that the plaintiff had acted contrary to the association’s constitution.

The central legal issue before the court was whether the association should be compelled to hold an extraordinary general meeting to resolve the deadlock, and if so, whether the parties were entitled to recoup their legal costs from the association’s accounts. Additionally, the court had to consider whether the expenditure of association funds on litigation constituted a breach of fiduciary duties by the office bearers.

The court determined that it was appropriate to grant relief under section 1322(4) of the Corporations Act 2001 on the just and equitable ground. However, the court held that the relief should be granted on the condition that the association would hold an extraordinary general meeting to elect the committee and its office bearers. The court further found that the parties were not entitled to recoup their legal costs from the association’s accounts, as there was no clear statutory provision or common law precedent that allowed for such a recovery. The court also held that the expenditure of association funds on litigation did not constitute a breach of fiduciary duties by the office bearers, as the litigation was undertaken in good faith to resolve the deadlock within the association.

The court ordered that the association would hold an extraordinary general meeting to elect the committee and its office bearers. The court further ordered that neither party was entitled to recoup their legal costs from the association’s accounts.

Orders