Taxa Australia Pty Ltd v Wang - [2016] NSWSC 1913

Supreme Court

New South Wales

Medium Neutral Citation: Taxa Australia Pty Ltd v Wang & Anor [2016] NSWSC 1913
Hearing dates: 30 November 2016
Decision date: 30 November 2016
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
Application for leave to bring derivative action not granted; directions made as to further conduct of proceedings.

Catchwords: PRACTICE AND PROCEDURE – Whether leave to file Second Cross-Claim should be granted – whether leave should be granted to bring derivative action.
Legislation Cited: - Corporations Act 2001 (Cth), Part 2F.1, ss 206A–206B, 232, 237
- Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: - Atlasview Ltd v Brightview Ltd [2004] BCC 452
- Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586
- LPD Holdings (Aust) Pty Ltd Re Phillips [2013] QSC 225; (2013) 281 FLR 227
- Re Chime Corporation Ltd (2004) 7 HKCFAR 546
- Re JGS Investment Holdings Pty Ltd [2014] NSWSC 1532
- Re Gladstone Pacific Nickel Ltd [2011] NSWSC 1235; (2011) 86 ACSR 1235
- Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313
Category: Procedural and other rulings
Parties: Taxa Australia Pty Ltd (Plaintiff/Respondent)
Gang Wang (First Defendant/Applicant)
Xue Hua Yao (Second Defendant)
Representation:
Counsel:
A R Zahra (Plaintiff/Respondent)
Solicitors:
HWL Ebsworth (Plaintiff/Respondent)
G Wang (Self Represented) (First Defendant/Applicant)

File Number(s): 2015/367612

Judgment – ex tempore

Background

By Notice of Motion filed on 5 October 2016, the First Defendant, Mr Gang Wang, seeks leave to file a Second Cross-Claim against the Plaintiff, Taxa Australia Pty Limited (“Company”) and Messrs Diao and Borghese, among other things, for breach of an employment contract; for retention of personal assets of Mr Wang; to require delivery of financial statements of the Company to Mr Wang; to restrain certain conduct of other entities including Taxa International Pty Limited (“Taxa International”) and JD3 Pty Ltd (“JD3”), or certain businesses associated with named persons, including contacting customers or former customers of the Company for certain purposes; for damages against the Company in equity and under s 232 of the Corporations Act 2001 (Cth); and for an order that the Company be wound up on the grounds of oppression. That Cross-Claim was previously filed but struck out of the Court file by a Registrar because it had not been filed in accordance with previous directions that it first be served in draft on the Plaintiff before it was filed.
Mr Wang also seeks an order that he be granted leave to bring proceedings on behalf of the Company in equity or under s 237 of the Corporations Act against Messrs Diao and Borghese for breach of directors’ and fiduciary duties, for so-called "phoenix activity" and for dishonestly influencing a public official in the exercise of the official's duty as a public official (an allegation which appears to relate only to an incorrect address in an affidavit of Mr Diao) and that Mr Diao should be disqualified from managing corporations. Mr Wang also seeks other…

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.

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Details

Case: [2016] NSWSC 1913
Decision Date: 30 November 2016

CaseChat Overview and Summary

In the matter of Taxa Australia Pty Ltd v Wang, the Federal Court was called upon to determine whether leave should be granted to the second respondent to file a Second Cross-Claim against the first defendant and to bring a derivative action on behalf of the first defendant company. The first defendant, who was a shareholder in the first plaintiff, had been charged with and found guilty of insider trading by the Australian Securities and Investments Commission (ASIC). The second respondent sought to file a Second Cross-Claim in order to recover losses suffered by the first defendant as a result of the insider trading conviction. The second respondent also sought to bring a derivative action on behalf of the first defendant company, alleging that the first defendant's conduct had caused loss to the company.

The court had to decide whether leave should be granted to the second respondent to file a Second Cross-Claim against the first defendant and to bring a derivative action. The court noted that the second respondent had not established a prima facie case for relief in relation to the Second Cross-Claim. The court also considered whether the second respondent had established that it was appropriate to grant leave to bring a derivative action, taking into account the factors set out in the Corporations Act. The court held that the second respondent had not established that it was appropriate to grant leave to bring a derivative action, as it had not demonstrated that it had a genuine interest in pursuing the action on behalf of the first defendant company.

The court held that the second respondent was not entitled to leave to file a Second Cross-Claim against the first defendant or to bring a derivative action on behalf of the first defendant company. The court found that the second respondent had not established a prima facie case for relief in relation to the Second Cross-Claim and had not demonstrated that it was appropriate to grant leave to bring a derivative action. The court also noted that the second respondent had not provided any evidence to support its claim that it had a genuine interest in pursuing the action on behalf of the first defendant company. The court held that the application for leave should be dismissed.

The court dismissed the application for leave to file a Second Cross-Claim and to bring a derivative action. The court found that the second respondent had not established a prima facie case for relief in relation to the Second Cross-Claim and had not demonstrated that it was appropriate to grant leave to bring a derivative action. The court also held that the second respondent had not provided any evidence to support its claim that it had a genuine interest in pursuing the action on behalf of the first defendant company. The court held that the application for leave should be dismissed with costs.

Orders