Australia, May 25 -- New South Wales Land and Environment Court issued text of the following judgement on April 24:

1. BELL CJ: There are three appeals before the Court arising from a detailed judgment of Williams J (the primary judge) following a 15 day hearing, involving allegations of breach of directors' and fiduciary duties owed to Sunnya Pty Ltd (Sunnya) by Ms Yanxia Lu (Ms Lu) and Mr Yinghan He (Mr He) (together, the He Parties), and claims of involvement in and knowing assistance in a fraudulent and dishonest design against various other parties: In the matter of Sunnya Pty Ltd [2024] NSWSC 403 (primary judgment or PJ).

2. Some but not all the alleged breaches were held to have been made out including breaches of fiduciary obligations which her Honour held to have continued to subsist following the He Parties' resignation as directors of Sunnya on 25 November 2022. The He Parties challenge her Honour's findings in this regard and Sunnya challenges her Honour's rejection of a number of claims made by it in relation to conduct of the He Parties while directors of Sunnya. These latter challenges are dealt with in the companion judgment: Sunnya Pty Ltd v He [2025] NSWCA 79.

3. It was not controversial that, as a matter of principle, a director (or senior employee) may not escape his or her fiduciary obligations in relation to a corporate commercial opportunity by resigning where that resignation may fairly be said to have been prompted or influenced by a wish to acquire the corporate opportunity which was being or on the verge of being exploited by the company to whom the fiduciary owed his or her obligations: Canadian Aero Service Ltd v O'Malley [1974] SCR 592; (1973) 40 DLR (3d) 371 (Canadian Aero); Edmonds v Donovan (2005) 12 VR 513; [2005] VSCA 27 at [56]-[58]; Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200 at [55]-[58]; Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383 at [178]; Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193 at [95].

4. The seminal statement is that of the Supreme Court of Canada delivered by Laskin J in Canadian Aero at 607:

"An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired."

5. The primary judge held that the Canadian Aero principle was engaged and conduct prior to the He Parties' resignation as directors of Sunnya informed her Honour's conclusion that their resignations were prompted or influenced by a wish to acquire for themselves maturing corporate opportunities to which they were privy by reason of their position as directors of Sunnya: PJ [804].

6. A separate appeal has been brought by Supermega Market Ltd (Supermega), Megadairy Ltd (Megadairy) and NZFDA Limited (NZ) (NZFDA), together, the NZ Parties, whom her Honour found to be knowingly concerned in the breaches of statutory duties by the He Parties, or liable as knowing recipients or knowing assistants in the breaches of fiduciary duties found to have been committed in accordance with Barnes v Addy (1874) LR 9 Ch App 244 (Barnes v Addy). A number of the NZ Parties' grounds of appeal overlapped with grounds of appeal pursued by the He Parties.

7. Her Honour also made extensive declarations and orders including against Guangzhou Aotea Biological Technology Pte Ltd (GABT) for being knowingly concerned in the alleged breaches of statutory duties by the He Parties and liable as a knowing recipient or knowing assistant in the alleged breaches of fiduciary duties by the He Parties. GABT filed a cross-claim against Sunnya, which was dismissed on 7 December 2023 as it did not appear at the hearing (PJ [41]) and has not appealed from orders 5, 6, 11-14, 17, 20, 34-39 and 68-69 made in relation to it. Sunnya in its appeal seeks further orders inter alia against GABT.

8. GABT was owned as to 95% by Mr He. Mr Yancheng Lu, his brother-in-law, was its General Manager and Executive Director: PJ [6].

9. Orders were also made against the fifth defendant, Sunlife Healthfood Pty Ltd (Sunlife) which also did not appear at the hearing. Ms Yaqing He, the daughter of the He Parties, is the sole director and shareholder of Sunlife, which was the registered owner of the trade marks "Guamis" and "NRIO" in Australia and New Zealand. After the commencement of the proceedings, it transferred those trade marks to NZFDA in late March 2023: PJ [14]. The primary judge declared by order 48 that NZFDA knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu in the period from 31 March 2023 by holding the New Zealand registered NRIO trade mark from that date.

10. Very few of the primary judge's factual findings in a judgment running to almost 300 pages have been challenged on appeal, and her Honour's meticulous analysis of the facts which is available on CaseLaw may be read in conjunction with these reasons, obviating the need for undue and extensive repetition. It is necessary, however, to provide some introductory overview before turning to her Honour's key findings, and introducing and considering the key issues on the He and NZ Parties' appeals.

*Rest of the document can be viewed at: (https://www.caselaw.nsw.gov.au/decision/19660436caf567f032c6ebaf)

Disclaimer: Curated by HT Syndication.