JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	21 June and 23 July 2021
DATE OF RULING:	2 August 2021
CASE MAY BE CITED AS:	Shan v Zhang & Ors
MEDIUM NEUTRAL CITATION:	[2021] VSC 452

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PRACTICE & PROCEDURE – Summary judgment on Third Party Notice – Application based on the pleaded case and on evidence – Claim of knowing assistance in breach of fiduciary duties – Sufficiency of knowledge – Third party sole director of Chinese company acting on instruction and direction of ‘supervisor’ and controlling shareholder – Other evidence from which knowledge might be proved – Whether claim for contribution/indemnity a claim in respect of ‘same damage’ – Allegation of unclean hands – Alleged entitlement to be indemnified by defendants – Application refused – Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 – Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l’Industrie en France SA [1992] 4 All ER 161 – Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109 – Annesley v Westpac Banking Corp [2016] VSC 323 applied – BFJ Capital Pty Ltd v Financial Ombudsman Service Ltd (in liq) [2019] VSC 71 – Morgan v Flers Avenue Pty Ltd (1986) 10 ACLR 692 – Morley v Statewide Tobacco Services Ltd (No 2) [1993] 1 VR 423 – Karl SulemanEnterprizes v George [2003] NSWSC 544 cited – Wrongs Act 1958 (Vic), ss 23A, 23B, 24(2) – Civil Procedure Act 2010 (Vic), s 62 – Supreme Court (General Civil Procedure) Rules 2015 (Vic), rr 23.01, 23.02.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Robbins QC with Mr H de Kock	Infinity Solicitors
For the Defendants	Mr I Upjohn QC with Mr S Rubenstein and Mr A Berger	Hiways Lawyers
For the Third Party	Dr M Sharpe	AJH Lawyers

TABLE OF CONTENTS

The applications returnable on 21 June 2021................................................................................ 1

The Pleaded allegations: the ASOC............................................................................................ 4
The Third Party Notices............................................................................................................... 6
The Pleading Application: the principles.................................................................................. 7
The summary judgment application: the principles.............................................................. 10
Section 23B of the Wrongs Act and the equitable contribution claim................................. 11
The pleaded knowledge case against Min Ren....................................................................... 16
The evidence going to the knowledge allegations against Min Ren................................... 19
The ’knowledge’ requirement in the second limb of Barnes v Addy.................................... 22
Min Ren as a director of Jilang: a company incorporated under Chinese Law................. 25
Other matters relied upon to support the knowledge allegations....................................... 30
The indemnity argument as a complete answer to the claim............................................... 32
The unclean hands argument.................................................................................................... 33
Disposition of the pleadings and s 62 CPA applications...................................................... 37
Min Ren’s application to discharge or vary the freezing order........................................... 37

HIS HONOUR:

The applications returnable…

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.

Continue reading Shan v Zhang

Details

AGLC: Shan v Zhang [2021] VSC 452
Case: [2021] VSC 452
Decision Date: 2 August 2021

CaseChat Overview and Summary

In the Supreme Court of Victoria, Shan initiated proceedings against Zhang, seeking a declaration and damages arising from Zhang's alleged breach of fiduciary duties. Zhang subsequently issued a third party notice against a Chinese company, alleging it knowingly assisted in the breach of those duties. The Chinese company applied for summary judgment dismissing Shan's claims against it, arguing that the pleaded case and evidence did not support a finding that it had sufficient knowledge of the alleged breaches to be held liable. The court had to determine whether the knowledge required for liability under the pleaded case could be established and whether the claims for contribution or indemnity were claims in respect of the same damage.

The court examined the pleaded case and the evidence to assess whether the Chinese company had the requisite knowledge to be held liable for knowingly assisting in the breach of fiduciary duties. It considered the role of the company's sole director and whether their actions could be attributed to the company. The court also evaluated whether the claims for contribution or indemnity were claims in respect of the same damage, as this would affect the potential for indemnity. In assessing these issues, the court referred to principles of equity and relevant statutory provisions and case law. Ultimately, the court found that the pleaded case and evidence did not support a finding that the Chinese company had the requisite knowledge to be held liable.

The court held that the Chinese company was not liable for knowingly assisting in the breach of fiduciary duties. Consequently, the application for summary judgment was refused. The court noted that the evidence did not support the inference that the Chinese company had the necessary knowledge to be held liable for the alleged breaches. The court also determined that the claims for contribution or indemnity were not claims in respect of the same damage, which would have affected the potential for indemnity. This conclusion was based on the nature of the claims and the legal principles governing indemnity.

No orders were made as the application for summary judgment was dismissed. The case will proceed to trial, with the Chinese company remaining a party to the proceedings.

Orders