Sunnya Pty Ltd v He

The case of *Sunnya Pty Ltd v He* concerned alleged breaches of directors' duties and fiduciary obligations by Mr He and Ms Lu, who caused Sunnya Pty Ltd to engage in fraudulent and unlawful practices, including issuing commercial invoices and conducting under-value sales, to the detriment of Sunnya and the benefit of third parties in which they had an interest. The dispute also involved claims against third parties, including GNT, GABT, Supermega, and Megadairy, for their alleged involvement in these breaches. The matter was heard by Bell CJ, Leeming JA, and Basten AJA.

The court was required to determine whether Mr He and Ms Lu contravened sections 181 and 182 of the *Corporations Act 2001* (Cth) by improperly exercising their powers and using their positions. Additionally, the court had to consider whether the third parties were involved in these contraventions within the meaning of section 79 of the *Corporations Act* and whether they knowingly assisted in the breaches of fiduciary duties owed by Mr He and Ms Lu to Sunnya. The legal issues extended to the interpretation of "improper purpose" under the *Corporations Act*, including whether dishonesty was a necessary element and the circumstances under which an honest belief would be considered rational, as well as the application of the second limb of the rule in *Barnes v Addy* concerning knowing assistance by third parties.

The court found that Mr He and Ms Lu had contravened sections 181(1)(b) and 181(1)(a) and (b) of the *Corporations Act*, and breached their fiduciary duties to Sunnya, in relation to the commercial invoices and under-value sales. It was also declared that GNT was involved in these contraventions and knowingly assisted in the breaches of fiduciary duty. Regarding the Neurio product sales, the court declared that Mr He and Ms Lu breached their fiduciary duties, and that GABT, GNT, Supermega, and Megadairy knowingly assisted in these breaches. Furthermore, GNT was found to have knowingly assisted in breaches of fiduciary duty concerning Neurio/NRIO sales.

The court ordered that Mr He, Ms Lu, and GNT were liable to pay compensation to Sunnya or account for any benefit or gain obtained, at Sunnya's election, for the breaches identified. Similarly, GABT, GNT, Supermega, and Megadairy were ordered to pay equitable compensation or account for benefits received in relation to the Neurio product sales. GNT was also ordered to pay compensation or account for gains in relation to the Neurio/NRIO sales. The court also made orders regarding the costs of the appeal and varied certain orders made by the trial judge.