CellOS Software Ltd v Huber [2018] FCA 2069

CellOS Software Ltd v Huber [2018] FCA 2069

CellOS' CEO and director, Mr Huber, breached his statutory and fiduciary duties by creating and controlling a secondary market for CellOS shares through offshore entities, acquiring shares at a discount from early investors and diverting prospective company investors, thereby generating profits not for CellOS but for himself and his controlled entities; he failed to disclose and procured uncommercial related party loans (LGA, Pized) with advantageous conversion rights, causing detriment to CellOS. The companies used were involved with knowledge of the scheme. Claims against alleged accessories (the Pecks and Mr Tan) failed as actual knowledge of essential facts constituting contraventions...

Jurisdiction
Australia
Judgment Date
20 December 2018
Procedural Posture
Corporations/fiduciary Duties Claim (civil) / Liability Trial—judgment With Further Hearing Required on Relief
Outcome
Claims against Mr Huber and Huber-controlled entities succeed on liability; claims against the seventeenth to nineteenth respondents (the Pecks and Mr Tan) dismissed; further hearing required to determine relief.
Legal Topics
["director's Duties" 'fiduciary Duties' 'breach of Duty' 'accessorial Liability' 'shareholder Rights' 'related Party Transactions' 'diverted Corporate Opportunity']
['corporations Law' 'equity and Trusts' 'commercial Law'] ["director's Duties" 'fiduciary Duties' 'breach of Duty' 'accessorial Liability' 'shareholder Rights' 'related Party Transactions' 'diverted Corporate Opportunity']

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 1 Authorities cited 2 Party arguments 2 Amounts and remedies 1
Sign in to unlock

Procedural Posture

Corporations/fiduciary Duties Claim (civil) / Liability Trial—judgment With Further Hearing Required on Relief

Legal Issues

  1. 1 ['Whether Mr Huber breached statutory and fiduciary duties as CEO/director by diverting equity raising opportunities to himself and controlled entities' 'Whether LGA and Pized loans were entered into without disclosure and on uncommercial terms' 'Whether related entities and parties were knowingly involved in breaches (accessorial liability)' 'Whether Mr and Mrs Peck and Mr Tan were liable as accessories for knowing involvement']

Ratio Decidendi

CellOS' CEO and director, Mr Huber, breached his statutory and fiduciary duties by creating and controlling a secondary market for CellOS shares through offshore entities, acquiring shares at a discount from early investors and diverting prospective company investors, thereby generating profits not for CellOS but for himself and his controlled entities; he failed to disclose and procured uncommercial related party loans (LGA, Pized) with advantageous conversion rights, causing detriment to CellOS. The companies used were involved with knowledge of the scheme. Claims against alleged accessories (the Pecks and Mr Tan) failed as actual knowledge of essential facts constituting contraventions...

Court Disposition

Claims against Mr Huber and Huber-controlled entities succeed on liability; claims against the seventeenth to nineteenth respondents (the Pecks and Mr Tan) dismissed; further hearing required to determine relief.

Orders

  • ['The proceedings as against the seventeenth to nineteenth respondents be dismissed with costs.' 'The applicant and the first and fifteenth respondents within 28 days file and serve short minutes of orders to give effect to these reasons and for the further conduct of the proceedings.' 'Costs reserved.']