Zong v Lin

The appeal concerned a dispute between shareholders of a company, with the respondents alleging breaches of fiduciary duty by the appellant director and seeking damages for the overvaluation of a boat purchased by the company. The Court of Appeal of New South Wales was required to determine whether the trial judge erred in assessing damages for the boat's overvaluation and whether the appellant had breached his fiduciary duties as a director.

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.