Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Zong v Lin [2022] NSWCA 136 Hearing dates: 20 July 2022 Date of orders: 2 August 2022 Decision date: 02 August 2022 Before: Gleeson JA at [1]
Leeming JA at [93]
Kirk JA at [94]Decision: (1) Appeal dismissed.
(2) Appellants to pay the respondents’ costs.
Catchwords: DAMAGES – Quantum of compensation – overvalue purchase of boat – competing valuation evidence – whether judge had regard to extraneous material not in evidence – where judge questioned defendant’s expert about “publicly available information” relevant to perception of buyers – where judge’s reasons on the valuation issue unrelated to “publicly available information”
CORPORATIONS – Directors and officers – where real and substantial conflict between duty as director and interest as shareholder – where director paid company’s money to same solicitor retained by company and director in shareholder dispute – whether breach of fiduciary duty
PROCEDURE – whether breach of rule in Browne v Dunn – where affidavit evidence of defendant’s belief that solicitor retained in the ordinary course of company’s affairs and business – where out-of-court representations by the solicitor as to nature of work – where defendant paid company’s money to solicitor – absence of cross-examination of defendant regarding nature of work to which payments related – where fair notice given of plaintiffs’ case on timing of payments to solicitor
CORPORATIONS – Member’s rights and remedies – oppression – compulsory transfer order – transfer of oppressor’s shares to other shareholder without payment in return – where relief in derivative action did not fully address oppression – where defendant failed to contribute promised skill and goodwill to the company – where company did not commence its intended business – where compulsory transfer order in the nature of recission of shareholder agreement
Legislation Cited: Corporations Act 2001 (Cth), ss 232, 233, 237
Uniform Civil Procedure Rules 2005 (NSW), r 42.1, Sch 7
Cases Cited: Browne v Dunn (1893) 6 R 67
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Ellis v Wallsend District Hospital (1989) 17 NSWLR 553
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
House v The King (1936) 55 CLR 419; [1936] HCA 40
International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319; [2009] HCA 49
In the matter of Australian International Yacht Club Pty Limited [2021] NSWSC 586
In the matter of Australian International Yacht Club Pty Limited [2021] NSWSC 636
Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382; [2009] NSWCA 234
Munstermann v Rayward [2017] NSWSC 133
Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343; [2009] NSWSC 342
Quinlan v Fiboze Pty Ltd (1998) 14 ACLR 312
Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153; (2004) 207 ALR 136
Snell v Glatis (No 2) [2020] NSWCA…
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- AGLC
- Zong v Lin [2022] NSWCA 136
- Case
- [2022] NSWCA 136
- Decision Date
CaseChat Overview and Summary
The legal issues before the Court of Appeal included whether the trial judge had improperly considered extraneous material when determining the quantum of damages for the boat's overvaluation, specifically in questioning the defendant's expert about publicly available information. Furthermore, the court had to consider whether the appellant director had breached his fiduciary duty by paying company funds to a solicitor who was also retained by the director personally in a shareholder dispute, creating a real and substantial conflict of interest. The court also considered whether the rule in *Browne v Dunn* had been breached concerning the nature of the work for which company funds were paid to the solicitor. Finally, the court reviewed the trial judge's decision to make a compulsory transfer order of the appellant's shares to the respondents without payment, in the context of oppression claims and the appellant's failure to contribute promised skill and goodwill to the company.
The Court of Appeal found no error in the trial judge's assessment of damages for the boat's overvaluation, noting that the judge's reasoning on this issue was not based on the "publicly available information" that had been questioned. Regarding the fiduciary duty, the court held that the payment of company money to a solicitor involved in a personal dispute with the company constituted a breach of the appellant's fiduciary duty due to the conflict of interest. The court also determined that there was no breach of the rule in *Browne v Dunn* as fair notice of the plaintiffs' case regarding the timing of payments had been given. The compulsory transfer order was upheld as a form of relief for oppression, particularly given the appellant's failure to contribute to the company's intended business and the nature of the shareholder agreement.
The appeal was dismissed, and the appellants were ordered to pay the respondents' costs.
Orders
Orders of the court
(1) Appeal dismissed.
(2) Appellants to pay the respondents’ costs.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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