Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293

Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293

The directors and general manager (Ms Xie and Mr Zhang) breached their fiduciary and statutory duties (including ss 180–182 Corporations Act) by diverting business opportunities from Firmtech to companies which they controlled, without disclosure or informed consent, during the period when they were officers responsible for Firmtech’s business. Aluminum and Logikal, as entities knowingly involved via their controllers, are jointly liable as accessories (Barnes v Addy). Oppression was established by this diversion. Account of profits or equitable compensation is only recoverable for diversion of specific identified projects contracted before cessation of joint operations, not the entirety...

Parties
First Plaintiff: Firmtech Aluminium Pty Ltd; Second Plaintiff (principal Proceeding), First Defendant (lansvale Proceeding): Zhaohui Xu; First Defendant (principal Proceeding), First Plaintiff (panania Proceeding): Xiaoyan Xie; Second Defendant (principal Proceeding), First Plaintiff (lansvale Proceeding): Jiamin Zhang; Third Defendant: Firmtech Aluminum Pty Ltd; Fourth Defendant: Logikal Façade Solutions Pty Ltd; First Defendant (panania and Lansvale Proceedings): Auschn Conveyancing & Associates Pty Ltd; Third Defendant (lansvale Proceeding): Firmtech Holdings Pty Ltd; Fourth Defendant (lansvale Proceeding): Hui Gao; Fifth Defendant (lansvale Proceeding): Firmtech Aluminium Windows and Doors Pty Ltd; Second Defendant (panania Proceeding): Auschn Global Group Pty Ltd
Jurisdiction
Australia
Judgment Date
17 October 2024
Procedural Posture
Principal Judgment (equity Corporations List) / Post Trial Judgment (final Orders Yet to Be Settled, Short Minutes Invited)
Outcome
Judgment for Plaintiff (Firmtech/Xu) in Principal Proceeding on breach of duty/account of profits for specific identified projects; cross-claim by Mr Xu on Panania Property succeeds; all relief in Panania and Lansvale Proceedings for Xie/Zhang/Holdings dismissed; further orders to be settled by short minutes.
Legal Topics
Directors’ Duties, Fiduciary Duties, Oppression Remedy, Accessorial Liability, Constructive Trust, Account of Profits, Equitable Compensation, Contracts—express and Implied Terms, Barnes V Addy Accessory Liability
Corporations Law Equity Contracts Remedies Directors’ Duties Fiduciary Duties Oppression Remedy Accessorial Liability +5 more

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Parties

Firmtech Aluminium Pty Ltd

First Plaintiff

Zhaohui Xu

Second Plaintiff (principal Proceeding), First Defendant (lansvale Proceeding)

Xiaoyan Xie

First Defendant (principal Proceeding), First Plaintiff (panania Proceeding)

Jiamin Zhang

Second Defendant (principal Proceeding), First Plaintiff (lansvale Proceeding)

Firmtech Aluminum Pty Ltd

Third Defendant

Logikal Façade Solutions Pty Ltd

Fourth Defendant

Auschn Conveyancing & Associates Pty Ltd

First Defendant (panania and Lansvale Proceedings)

Firmtech Holdings Pty Ltd

Third Defendant (lansvale Proceeding)

Hui Gao

Fourth Defendant (lansvale Proceeding)

Firmtech Aluminium Windows and Doors Pty Ltd

Fifth Defendant (lansvale Proceeding)

Auschn Global Group Pty Ltd

Second Defendant (panania Proceeding)

Procedural Posture

Principal Judgment (equity Corporations List) / Post Trial Judgment (final Orders Yet to Be Settled, Short Minutes Invited)

Legal Issues

  1. 1 Whether directors and general manager breached statutory and fiduciary duties to Firmtech by diverting business opportunities
  2. 2 Whether third parties (Aluminum and Logikal) were accessories to breaches of duty
  3. 3 Whether the conduct of Ms Xie and Mr Zhang was oppressive to Mr Xu under s 232 of Corporations Act

Ratio Decidendi

The directors and general manager (Ms Xie and Mr Zhang) breached their fiduciary and statutory duties (including ss 180–182 Corporations Act) by diverting business opportunities from Firmtech to companies which they controlled, without disclosure or informed consent, during the period when they were officers responsible for Firmtech’s business. Aluminum and Logikal, as entities knowingly involved via their controllers, are jointly liable as accessories (Barnes v Addy). Oppression was established by this diversion. Account of profits or equitable compensation is only recoverable for diversion of specific identified projects contracted before cessation of joint operations, not the entirety...

Court Disposition

Judgment for Plaintiff (Firmtech/Xu) in Principal Proceeding on breach of duty/account of profits for specific identified projects; cross-claim by Mr Xu on Panania Property succeeds; all relief in Panania and Lansvale Proceedings for Xie/Zhang/Holdings dismissed; further orders to be settled by short minutes.

Orders

  • Direct parties to bring in short minutes of order, by 5pm on 31 October 2024, to give effect to reasons for judgment.
  • If orders not agreed, parties to exchange draft orders and submissions (5 pages) by 31 October 2024, for listing at 9.15am on 6 November 2024 or as arranged.