City Garden Australia Pty Ltd (in administration) as trustee for the Ming Tian City Garden Unit Trust v Meng Dai

The case between City Garden Australia Pty Ltd (in administration) as trustee for the Ming Tian City Garden Unit Trust and Meng Dai was heard in a court in Australia. City Garden Australia, a property developer, was in administration and had engaged in property developments with a related company, which acted as the builder. The dispute arose when one of the directors of City Garden Australia, who was also a director of the builder, appointed his wife as the company's secretary without the knowledge of the other director. This director then obtained loans for the builder in the name of or guaranteed by City Garden Australia, secured over City Garden Australia's property, for purposes other than the developments for which the loans were ostensibly intended. The loans were executed by the common director and his wife.

The court had to determine several legal issues. Firstly, whether the appointment of the secretary was valid, even though the directors did not hold a formal meeting to pass a resolution. Secondly, whether the common director had the authority to borrow money without consulting the other director. Thirdly, whether the lenders were entitled to rely on statutory assumptions that the wife was validly appointed as secretary. Fourthly, whether the common director breached his statutory and fiduciary duties in obtaining the loans without the knowledge of the other director. Lastly, whether the plaintiff's solicitor was in breach of his duty to avoid conflicts of interest when he acted for the lender.

The court found that the appointment of the secretary was not valid as there was no formal meeting held to pass a resolution. However, the court held that the directors passed an informal resolution through a 'meeting of the minds', and the second director was deemed to have ratified the appointment by inaction. The court also found that the common director did not have the authority to borrow money without consulting the other director, but the lenders were entitled to rely on statutory assumptions that the wife was validly appointed as secretary. The court held that the common director breached his statutory and fiduciary duties in obtaining the loans without the knowledge of the other director, and the plaintiff was not entitled to have the transactions set aside. The court further held that the plaintiff's solicitor was in breach of his duty to avoid conflicts of interest, and the claim against the solicitor was not apportionable under the Civil Liability Act 2002 (NSW). The court ordered the common director to compensate the plaintiff for the indebtedness incurred as a result of entering and refinancing the first loan.

The court made an order that the common director compensate the plaintiff for the indebtedness incurred as a result of entering and refinancing the first loan. The court also held that the solicitor was liable to compensate the plaintiff for the same indebtedness. The court further held that the claim against the solicitor was not apportionable under the Civil Liability Act 2002 (NSW). The court did not limit the solicitor's liability under the Professional Standards Scheme as the scheme was not in force when the act or omission giving rise to the cause of action occurred.