Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 9) - [2023] FCA 462

FEDERAL COURT OF AUSTRALIA
Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 9) [2023] FCA 462

File number: VID 1157 of 2017

Judgment of: BEACH J

Date of judgment: 12 May 2023

Catchwords: CORPORATIONS – secret commission payments – relevant payers – joint liability – appropriateness of compound interest – whether any relevant distinction between principal and accessory – ancillary orders

Cases cited:
Bullhead Pty Ltd v Brickmakers Place Pty Ltd (in liq) [No 2] (2019) 58 VR 129

Burdick v Garrick (1870) LR 5 Ch App 233

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [2022] FCA 1404

Fang v Sun (No 2) [2014] NSWSC 1194

Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296

Hagan v Waterhouse (1991) 34 NSWLR 308

Thomas v SMP (International) Pty Ltd (No 6) [2010] NSWSC 1311

Division: General Division

Registry: Victoria

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs: 60

Date of hearing: Determined on the papers

Counsel for the Applicant: Mr M Wise QC and Ms N Hickey

Solicitor for the Applicant: K & L Gates

Counsel for the First and Sixth Respondents: Mr M Tehan

Solicitor for the First and Sixth Respondents: McCluskys Lawyers

Counsel for the Second, Third, Fourth, Fifth, Eighth and Twelfth Respondents: Mr H Austin QC and Mr TP Warner

Solicitor for the Second, Third, Fourth, Fifth, Eighth and Twelfth Respondents: Mills Oakley

ORDERS

VID 1157 of 2017

BETWEEN:
DIRECTED ELECTRONICS OE PTY LTD ACN 130 647 737

Applicant

AND:
OE SOLUTIONS PTY LTD ACN 119 188 019

First Respondent

HANHWA AUS PTY LTD ACN 614 943 092

Second Respondent

HAN HWA HIGHTECH AUSTRALIA PTY LTD ACN 153 718 435 (and others named in the Schedule)

Third Respondent

ORDER MADE BY:

BEACH J

DATE OF ORDER:

12 MAY 2023

THE COURT ORDERS THAT:
1.On or before 1pm on 19 May 2023 the parties are to file and serve minutes of proposed orders to accord with these reasons.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
BEACH J:

These reasons address two issues that have arisen out of my decision published on 24 November 2022 (Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [2022] FCA 1404). Unless otherwise indicated, I will adopt the defined terms and concepts that I used in my principal reasons.
The first issue concerns the appropriate quantification of the secret commission payments and the identity of the particular Hanhwa parties that are liable in respect of the associated claims.
The second issue concerns both the Hanhwa parties and Mr Meneses and relates to the appropriate award of interest on the quantified secret commission payments. Should this be simple interest or compound interest? And if the latter, should the periodic rests triggering compounding be monthly or yearly?
Quantum of secret commissions liability
Now flowing from my principal reasons, the amount…

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.

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Details

Case: [2023] FCA 462
Decision Date: 12 May 2023

CaseChat Overview and Summary

In the case of Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 9), the dispute centred on secret commission payments made by the Hanhwa parties to Directed Electronics. The case was heard by the Federal Court, which was tasked with determining various legal issues including the appropriateness of compound interest, the distinction between principal and accessory liability, and the making of ancillary orders.

The primary legal issues before the court were whether the Hanhwa parties were liable for compound interest on their secret commission payments, and if there was any relevant distinction between principal and accessory liability. The Hanhwa parties argued that they were not liable for compound interest and that there was a relevant distinction between their role and that of the principal. However, the court found that the Hanhwa parties were complicit in the breaches of fiduciary duty and should be held liable for compound interest. The court also held that there was no relevant distinction between the Hanhwa parties and the principal, as they were all parties to the same wrongful conduct.

The court's reasoning was based on the evidence presented, which showed that the Hanhwa parties were aware of the secret commission payments and facilitated them. The court held that it was appropriate for the Hanhwa parties to pay compound interest, as they had knowledge and participated in the breaches of fiduciary duty. The court also found that there was no relevant distinction between the Hanhwa parties and the principal, as they were all parties to the same wrongful conduct. The court ordered that the Hanhwa parties pay compound interest, and that the parties bring in minutes of orders to accord with these reasons.

The final orders of the court were that the parties were to file and serve minutes of proposed orders to accord with the court's reasons, on or before 1pm on 19 May 2023. Entry of orders was dealt with in Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. On or before 1pm on 19 May 2023 the parties are to file and serve minutes of proposed orders to accord with these reasons.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Now accepting that there is merit in some of the Hanhwa parties’ points, they are not sufficient to convince me that I should not make an award of compound interest. Given their knowledge and participation in Mr Meneses’ breaches of fiduciary duty, it is appropriate that they also pay compound interest with yearly rests. They facilitated indeed made the secret commission payments. They incentivised Mr Meneses to engage in the relevant wrongful conduct. I will so order the compounding of interest payable by the Hanhwa parties. Conclusion The parties should bring in minutes of orders to accord with these reasons.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

File number:	VID 1157 of 2017
Judgment of:	BEACH J
Date of judgment:	12 May 2023
Catchwords:	CORPORATIONS – secret commission payments – relevant payers – joint liability – appropriateness of compound interest – whether any relevant distinction between principal and accessory – ancillary orders
Cases cited:	Bullhead Pty Ltd v Brickmakers Place Pty Ltd (in liq) [No 2] (2019) 58 VR 129 Burdick v Garrick (1870) LR 5 Ch App 233 Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [2022] FCA 1404 Fang v Sun (No 2) [2014] NSWSC 1194 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 Hagan v Waterhouse (1991) 34 NSWLR 308 Thomas v SMP (International) Pty Ltd (No 6) [2010] NSWSC 1311
Division:	General Division
Registry:	Victoria
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs:	60
Date of hearing:	Determined on the papers
Counsel for the Applicant:	Mr M Wise QC and Ms N Hickey
Solicitor for the Applicant:	K & L Gates
Counsel for the First and Sixth Respondents:	Mr M Tehan
Solicitor for the First and Sixth Respondents:	McCluskys Lawyers
Counsel for the Second, Third, Fourth, Fifth, Eighth and Twelfth Respondents:	Mr H Austin QC and Mr TP Warner
Solicitor for the Second, Third, Fourth, Fifth, Eighth and Twelfth Respondents:	Mills Oakley

ORDER MADE BY:	BEACH J
DATE OF ORDER:	12 MAY 2023