CHEN v HE [2013] NZHC 2033

CHEN v HE [2013] NZHC 2033

Leave to bring the derivative action under s165 is declined because a prudent business person would not commence the proposed litigation: the alleged conduct by the director is unlikely to amount to a breach of fiduciary duty given the absence of unique or confidential information, the company is no longer trading...

Source-derived case information.

Citation
[2013] NZHC 2033
Parties
Plaintiff Respondent: ZHIXIONG CHEN; Applicant Defendant Director: YAO WEI HE; First Respondent Company: NZ PRODUCTS INTERNATIONAL LIMITED; Second Respondent Director: YOUNGZHOU CHEN
Court
High Court
Jurisdiction
New Zealand
Judgment Date
12 July 2013
Procedural Posture
Application for Leave to Bring a Derivative Action Under S165 Companies Act 1993 / Hearing on Application; Judgment Delivered
Outcome
Application for leave to bring proceedings pursuant to s165 of the Companies Act 1993 is dismissed.
Legal Topics
Derivative Action, Leave Under S165 Companies Act 1993, Breach of Fiduciary Duty, Winding Up, Procedural Pleadings
Company Law Equity Insolvency Contract Derivative Action Leave Under S165 Companies Act 1993 Breach of Fiduciary Duty Winding Up +1 more

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Parties

ZHIXIONG CHEN

Plaintiff Respondent

YAO WEI HE

Applicant Defendant Director

NZ PRODUCTS INTERNATIONAL LIMITED

First Respondent Company

YOUNGZHOU CHEN

Second Respondent Director

Procedural Posture

Application for Leave to Bring a Derivative Action Under S165 Companies Act 1993 / Hearing on Application; Judgment Delivered

Legal Issues

  1. 1 Whether leave under s165 should be granted
  2. 2 Whether the director breached fiduciary duties by setting up a competing company and using confidential information
  3. 3 Whether the company is an appropriate candidate for liquidation and whether liquidation is the proper forum for the claims

Ratio Decidendi

Leave to bring the derivative action under s165 is declined because a prudent business person would not commence the proposed litigation: the alleged conduct by the director is unlikely to amount to a breach of fiduciary duty given the absence of unique or confidential information, the company is no longer trading and liquidation is the more appropriate mechanism to determine and pursue the company's claims, and the prospects and funding do not justify the derivative proceedings.

Court Disposition

Application for leave to bring proceedings pursuant to s165 of the Companies Act 1993 is dismissed.

Orders

  • Application for leave pursuant to s165 dismissed
  • Parties to confer on costs; if unable to agree, file memoranda not exceeding four pages within 10 working days of judgment