Li v Wu [2013] FCA 1067

The GEI and SG shareholder agreements continued to operate, but cl 5 was confined to member loans for the relevant project. As between Mr Li and Mr Wu, the February 2008 agreement bound them to treat $5,751,925.37 as Mr Li's member loan to GEI for the purposes of the GEI shareholder agreement, with later loans added and repayments and the liquidation dividend deducted. GEI could not repay the balance, so Mr Wu was liable for his 25% indemnity share, being $976,866.80 plus interest. The reflective loss principle did not preclude recovery because Mr Li sued on an independent indemnity and the evidence did not show that the companies had a corresponding cause of action against Mr Wu. Mr Wu...

Jurisdiction: Australia
Judgment Date: 22 October 2013
Procedural Posture: Civil Proceeding Involving Contract, Misleading and Deceptive Conduct, Indemnity and Equitable Compensation Claims / Reasons for Judgment After Hearing; Parties Directed to File Proposed Orders
Outcome: Mr Li established his indemnity claim against Mr Wu in the amount of $976,866.80 plus interest; he established misleading and deceptive conduct but not loss; his breach of contract claims failed; and his equitable compensation claim was not permitted. Final orders were deferred pending proposed orders from the parties.
Legal Topics: ['shareholder Agreements' 'indemnity Provisions' 'member Loans' 'misleading and Deceptive Conduct' 'breach of Express and Implied Terms' 'fiduciary Duties' 'equitable Compensation' 'reflective Loss']

['contract Law' 'consumer Law' 'equity' 'corporations'] ['shareholder Agreements' 'indemnity Provisions' 'member Loans' 'misleading and Deceptive Conduct' 'breach of Express and Implied Terms' 'fiduciary Duties' 'equitable Compensation' 'reflective Loss']

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Procedural Posture

Civil Proceeding Involving Contract, Misleading and Deceptive Conduct, Indemnity and Equitable Compensation Claims / Reasons for Judgment After Hearing; Parties Directed to File Proposed Orders

Legal Issues

1 ['Whether the GEI and SG shareholder agreements remained in force and effect.' 'Whether Mr Li made member loans to GEI and/or SG and what amounts remained unpaid.' 'Whether GEI and/or SG were unable to repay any member loans.' 'Whether Mr Wu was liable to indemnify Mr Li under cl 5 of the shareholder agreements.' 'Whether any principle, including reflective loss, precluded recovery by Mr Li.' 'Whether Mr Wu engaged in misleading and deceptive conduct by representing that he or his wife contributed approximately $570,000 to the purchase of the De Burgh Street property.' 'Whether the alleged March 2005 agreement was a binding contract and whether Mr Wu breached contractual obligations.' 'Whether Mr Li should be permitted to recover equitable compensation for alleged breaches of fiduciary duty.']

Ratio Decidendi

Court Disposition

Mr Li established his indemnity claim against Mr Wu in the amount of $976,866.80 plus interest; he established misleading and deceptive conduct but not loss; his breach of contract claims failed; and his equitable compensation claim was not permitted. Final orders were deferred pending proposed orders from the parties.

Orders

['The parties confer and file agreed or competing proposed orders reflecting these reasons for judgment, including orders for costs, within 14 days.' 'The matter will be listed thereafter for the making of orders, if agreed, or a further hearing on the orders as necessary.']