Chen v Xu
[2014] NSWSC 334
•25 March 2014
Supreme Court
New South Wales
Medium Neutral Citation: Chen v Xu [2014] NSWSC 334 Hearing dates: Tuesday, 25 March 2014 Decision date: 25 March 2014 Jurisdiction: Equity Division - Duty List Before: Brereton J Decision: (1) Orders made on or about 20 February 2014 in accordance with paras 3 and 4 of the document entitled "Consent Orders" filed in Court and stamped 21 February 2014 be set aside.
(2) Upon the plaintiff by his counsel giving to the Court the usual undertaking as to damages and until further order the defendants be restrained from by themselves, their servants or agents:
(a) Permitting or registering any change in the directors of the second defendant.
(b) Permitting or registering any change in the shareholders or shareholding of the second defendant.
(c) Mortgaging, charging or disposing of any of the assets of the second defendant except in the ordinary course of business.
(3) Until further order the defendants permit access to the plaintiff by his accountant to inspect the books and financial records of the second defendant within seven days and thereafter once every calendar month.
Catchwords: PROCEDURE - setting aside consent orders by consent - inspection of books by way of interim preservation Legislation Cited: (Cth) Corporations Act 2001, s 247A Category: Interlocutory applications Parties: Jie Chen (plaintiff)
Dong Xu (first defendant)
Sunshine Education Development Pty Limited (second defendant)Representation: Counsel:
P Alexander (plaintiff)
V Gray (defendant)
Solicitors:
Johnson Vaughan Solicitors (plaintiff)
Schweizer Kobras (defendants)
File Number(s): 2014/40151
Judgment (ex tempore)
HIS HONOUR: On 17 February 2014 the plaintiff Jie Chen instituted proceedings against the first defendant Dong Xu and the second defendant company Sunshine Education Development Pty Limited, claiming by way of final relief orders setting aside purported transfers of shares by the plaintiff to the first defendant of a 73% shareholding in the second defendant company, and consequentially his reinstatement as a 73% shareholder. By way of interim relief, the plaintiff sought orders restraining the second defendant from changing its director or shareholder or mortgaging or disposing of its assets permitting the plaintiff and his solicitor or accountant to have access to the books and records of the company in the meantime.
The proceedings came before Ball J as duty judge who, on 7 February 2014, made orders that the defendants not permit or register any change in the directors or shareholders of the second defendant; not mortgage, charge or dispose of any of the assets of the second defendant; and give access to the plaintiff's accountant to inspect the books and records of the second defendant within seven days and thereafter by arrangement once every calendar month. Directions were made for the continuation of the proceedings on pleadings and their further conduct.
However, the parties reached a private agreement, pursuant to which, on 20 February 2014, the registrar by consent made orders in accordance with the document entitled consent orders of that day vacating the orders made by Ball J on 7 February, discharging the plaintiff from his undertaking as to damages, ordering that each of the parties bear their own costs of the proceedings, and dismissing the proceedings.
It seems that the agreement which underpinned those consent orders has broken down. It is said that the consent orders can be set aside, on the basis that the underlying contract has been repudiated. That matters not as the parties have agreed that the consent orders should be set aside and they can, of course, be set aside by consent.
It is also agreed that some of the orders made by Ball J by way of interim preservation should be reinstated. The only real dispute is whether the order permitting the plaintiff to have access to the books and records of the second defendant should be reinstated.
First, as it seems to me, that order for access was not, when originally made, merely a one off provision to enable the plaintiffs to be satisfied of the position of the outset. It provided for ongoing access on a monthly basis, and it formed part of an interlocutory regime pursuant to which the plaintiff's interests might be safeguarded pending the hearing and determination of the proceedings.
Secondly, so far as it might be said that the order is supported by (Cth) Corporations Act 2001, s 247A, it appears that the plaintiff was once a 73% shareholder in the company and claims to have wrongly been removed as such a shareholder. It is to vindicate that claim that these proceedings are brought. While it is, I accept, disputable whether she is presently a shareholder within s 247A - because she is not currently registered as such - it is at least arguable that she is.
In circumstances where her cause of action is to set aside the transactions by which she ceased to be a shareholder and reinstate her as such, it is not at all difficult to conclude that she is acting bona fide or in good faith for the purposes of s 247A, were that the governing provision. But in any event, because proceedings are on foot, the Court can grant such relief by way of interim preservation, whether or not the requirements of s 247A are satisfied.
Accordingly, the Court by consent orders that:
(1) The orders made on or about 20 February 2014 in accordance with paras 3 and 4 of the document entitled "Consent Orders" signed by the solicitor for the plaintiff, the solicitor for the first defendant and the solicitor for the second defendant that have been filed in Court and stamped 21 February 2014 be set aside.
(2) Upon the plaintiff by his counsel giving to the Court the usual undertaking as to damages and until further order the defendants be restrained from by themselves, their servants or agents:
(a) Permitting or registering any change in the directors of the second defendant.
(b) Permitting or registering any change in the shareholders or shareholding of the second defendant.
(c) Mortgaging, charging or disposing of any of the assets of the second defendant except in the ordinary course of business.
The Court further orders that:
(3) Until further order the defendants permit access to the plaintiff by his accountant, Mr William Wu, to inspect the books and financial records of the second defendant within seven days and thereafter once every calendar month.
The Court by consent further orders that:
(4) The proceedings continue on pleadings.
(5) The plaintiff file and serve a statement of claim by 1 April 2014.
(6) The defendant file and serve a defence by 29 April 2014.
(7) The proceedings be adjourned to 2 May 2014 at 9 a.m. before the Registrar in Equity.
The Court notes:
(8) The undertaking to the Court of Mrs Yong Rong Tong by her counsel to submit to and be jointly liable for and in respect of the above undertaking as to damages and any costs orders that may be made against the plaintiff.
The Court further orders that:
(9) The said Mrs Yong Rong Tong file and serve an affidavit by 8 April 2014 to the effect that she accepts responsibility and liability in accordance with the said undertaking and setting out her assets and liabilities in Australia.
(10) There be liberty to apply on three days notice.
(11) The costs of today will be costs in the proceedings.
**********
Decision last updated: 03 September 2014
0
0
1