Flash Lighting Company Ltd v Australia Kunqian International Energy Co Pty Ltd (No 3)

Flash Lighting Company Ltd sued Australia Kunqian International Energy Co Pty Ltd for the balance of the purchase price of shares in a company that owned a coal mining tenement in Queensland. Australia Kunqian International Energy Co Pty Ltd counterclaimed that it was misled and deceived by a fraudulent report on the coal resources of the tenement. The dispute arose from the sale of shares in a company (U&D) that owned a coal mining tenement in Queensland. The vendors, Flash Lighting Company Ltd (FLC) and ANB, did not receive the full purchase price from the purchaser, Australia Kunqian International Energy Co Pty Ltd (KQ), a wholly owned subsidiary of a Chinese State Owned Entity (Yima). FLC brought proceedings for payment of the balance of the sale price. KQ counterclaimed that it was misled and deceived by a fraudulent report on the coal resources of the tenement produced by a director of ANB. The price of the shares in U&D was to be determined by a Chinese valuer, who used the fraudulent report in reaching the valuation. The court had to decide whether Yima and KQ relied on the fraudulent report in approving the purchase of the shares in U&D at the price determined by the valuer, and whether the provision of the fraudulent report constituted a breach of the share sale agreement. The court also had to consider whether the breach of the share sale agreement led to any loss or damage to KQ.

The court found that the provision of the fraudulent report constituted a breach of the share sale agreement, but it did not lead to any loss or damage to KQ. The court held that KQ was not misled and deceived by the fraudulent report, and therefore, it was not entitled to compensation under the Competition and Consumer Act 2010 (Cth) and the Fair Trading Act 1989 (Qld). The court also found that the director of ANB did not act as the agent of FLC in the sale of its shares in U&D in providing the fraudulent report to Yima and the valuer. The court held that FLC was not bound by the actions of the director of ANB. The court further found that the director of ANB acknowledged receipt of the outstanding purchase price due to FLC, and therefore, FLC was not liable for the misappropriation of the moneys by the director of ANB. The court held that U&D was not entitled to recover the moneys misappropriated from the former wife and former intimate friend of the director of ANB. Finally, the court found that the director of ANB breached his duties as a director of ANB by providing the fraudulent report.

The court ordered that FLC was entitled to the balance of the purchase price of the shares in U&D, and KQ was not entitled to any compensation or damages. The court also ordered that FLC was not liable for the misappropriation of the moneys by the director of ANB, and U&D was not entitled to recover the moneys misappropriated from the former wife and former intimate friend of the director of ANB. The court further ordered that the director of ANB breached his duties as a director of ANB by providing the fraudulent report.