Sorak Thai Pty Ltd v Sopharak

Sorak Thai Pty Ltd sued Sopharak, alleging that the defendant breached fiduciary duties as the sole director of the plaintiff company by selling it to a second company, which was essentially the alter ego of the defendant, for a minimal consideration. The plaintiff also alleged that the second company was liable for knowing receipt of the proceeds of the breach of fiduciary duty under the rule in Barnes v Addy. The dispute was heard in the Federal Court of Australia.

The central legal issues before the court were whether the defendant breached the fiduciary duties under the Corporations Act 2001 (Cth) by selling the plaintiff company for minimal consideration, and whether the defendant could be relieved from liability under section 1318 of the Act. Additionally, the court had to determine if the company's constitution operated to retrospectively ratify the breach of fiduciary duty, and whether the second company was liable for knowing receipt of the proceeds of the breach.

The court held that the defendant breached their fiduciary duties by selling the plaintiff company to the second company, which was essentially the alter ego of the defendant, for minimal consideration. The court found that the constitution of the plaintiff company did not operate to retrospectively ratify the breach of fiduciary duty. Furthermore, the court held that the defendant should not be relieved of liability under section 1318 of the Corporations Act 2001 (Cth). The court found that the second company was not liable for knowing receipt of the proceeds of the breach of fiduciary duty, and that a remedy of constructive trust was not appropriate in the circumstances.

The court ordered that the defendant be personally liable to the plaintiff for the breach of fiduciary duty, and that the defendant indemnify the plaintiff for the loss incurred. The court also ordered that the second company be liable to the plaintiff for the loss incurred, and that the second company indemnify the plaintiff for the loss incurred.