Et-China.com International Holdings Ltd v Cheung

The appeal concerned a dispute between Et-China.com International Holdings Ltd (the appellant) and Mr Cheung (the respondent) regarding the sale of shares in a subsidiary company. The central issue was whether two directors of the appellant had breached their duties in relation to the sale of these shares. The appeal was heard by Bathurst CJ, Bell P, and Leeming JA.

The court was required to determine several legal issues. These included whether the transfer of shares in the subsidiary in 2012 had transferred beneficial ownership, whether the shares were transferred for nil consideration, and whether a subsequent sale of shares in 2013 was at a gross undervalue. The court also considered whether the transfer of shares constituted a sham, whether the beneficial interest passed on registration despite unpaid consideration, and whether the presumption of a resulting trust applied to shares transferred for nil consideration. Furthermore, the court examined the weight to be given to disputed versions of board meeting minutes and the implications of an adverse credit finding on one aspect of a witness's evidence for the entirety of their testimony.

The court reasoned that the beneficial ownership of the shares had not passed in 2012, as there was no intention on the part of the directors to give away company property. The transfer for nil consideration was not a gift, and a plausible explanation supported by context negated any suggestion that the shares were intended to be given away. The court found that the presumption of a resulting trust did not apply to personalty or shares. Regarding the disputed minutes, the court noted that competing versions did not automatically render one false, particularly when the party alleging falsity had not challenged the director who signed the minutes. The court also held that an adverse credit finding on one aspect of a witness's evidence did not necessitate rejecting their entire testimony.

The appeal was dismissed with costs.