Alison Trust Holdings Ltd v NZVIF Investments Ltd

[2016] NZHC 2715

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

COMMERCIAL LIST

CIV-2016-404-002275 [2016] NZHC 2715

UNDER THE

Companies Act 1993

BETWEEN

ALISON TRUST HOLDINGS LIMITED Plaintiff

AND

NZVIF INVESTMENTS LIMITED First Defendant

SIMPSON ASPEN TRUSTEE LIMITED Second Defendant

PUNCHBOWL INVESTMENTS LTD Third Defendant

cont… /2

Hearing:	11 November 2016
Appearances:	G W Hall and L C Sizer for Plaintiff T B Fitzgerald and R D Massey for First to Sixth Defendants
Judgment:	11 November 2016

JUDGMENT OF GILBERT J

This judgment is delivered by me on 11 November 2016 at 4.30 pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Solicitors:

Buddle Findlay, Auckland

Bell Gully, Auckland

ALISON TRUST HOLDINGS LTD v NZVIF INVESTMENTS LTD [2016] NZHC 2715 [11 November 2016]

OPORA HOLDCO LIMITED Fourth Defendant

JOHN JAMES LOUGHLIN Fifth Defendant

JOHN MCDONALD Sixth Defendant

HAVELOCK NORTH FRUIT CO. LTD Seventh Defendant

Introduction

[1]      This is an application for a priority fixture.

Background

[2]      The  plaintiff,  Alison  Trust  Holdings  Ltd  (Alison),  owns  approximately

49.5 per cent of the shares in the seventh defendant, Havelock North Fruit Co. Ltd (the company). The first to sixth defendants (the shareholder group) own the balance of the shares.   Fundamental disputes have arisen between the two shareholding groups as to the future direction and management of the company.

[3]      On 14 June 2016, the parties signed what has been described as a “letter agreement”.    This  recorded  that  the  shareholder  group  would  notify Alison  by

31 August 2016 of a share price at which they would be prepared to sell all of their shares in the company.   Alison was then to have eight weeks to unconditionally accept the offer and settle the purchase.  The letter agreement stated that “the price will have reference to the Shareholder Group’s assessment of likely maximum realisation in a competitive trade sale situation”.   The letter agreement goes on to record that “in the meantime, all parties agree that the business will continue as usual and the Board will be cognoscent (sic) of the process described herein”.

[4]      The shareholder group subsequently advised Alison of the price at which they would be prepared to sell their shares. Alison contends that the price nominated does not accord with the letter agreement.

The proceeding

[5]      The proceeding commenced on 13 September 2016 and has been actively managed since then.  The pleadings are not yet settled but the current claims are set out in the third amended statement of claim:

(a)       First cause of action – a claim pursuant to s 174 of the Companies Act

1993 that the affairs of the company are being conducted in a manner

that is oppressive, unfairly discriminatory or unfairly prejudicial to the plaintiff.

(b)Second  cause  of  action  –  a  claim  based  on  the  letter  agreement seeking a declaration as to value of the company “with reference to the likely maximum realisation in a competitive trade sale situation” and an order requiring the shareholder group to offer to sell their shares to Alison at a price so determined.

(c)      Third cause of action – a claim based on s 149 of the Companies Act seeking an order requiring the shareholder group to offer their shares for sale at the price determined in the first cause of action.

Grounds of the application for priority

[6]      Alison’s  application  for  a  priority  fixture  is  advanced  on  the  following

grounds:

(a)      The order is necessary to secure the just, speedy and inexpensive disposal of the proceeding.

(b)Decisions  outside  the  usual  course  of  business  cannot  be  made because of the “standstill” on significant expenditure allegedly agreed to in the letter agreement.

(c)      There is a prospect that the board of the company will pass resolutions opposed by Alison in circumstances where, if Alison succeeds with its claims, it may become the sole shareholder of the company.

(d)Alison can avoid such resolutions being passed by not attending board meetings because a quorum requires the presence of its appointed director.  However, this would disrupt the orderly governance of the company.

Analysis

[7]      Alison’s first ground is that the order is required to secure the just, speedy and inexpensive determination of the proceeding.  This is simply a re-statement of the objective of the High Court Rules which applies in all cases.  This proceeding is being actively managed on the Commercial List and the Court will endeavour to assist the parties to have it heard as soon as reasonably practicable, taking into account the demands of other court business.  The problem with granting a priority fixture is that it inevitably disadvantages other litigants by delaying the disposition of their proceedings which were filed earlier and are ahead in the queue.   Most litigants want to have their cases disposed of promptly and the Court strives to facilitate this but it has a responsibility to allocate precious hearing time in a manner that is fair and just for all litigants.

[8]      Priority  fixtures  cannot  be  routinely  granted.    Exceptional  circumstances must be demonstrated before it could be appropriate to allow one litigant to gain preference over others in having their case heard.   In Shattock v Devlin, Barker J gave the following examples of circumstances that could justify a priority fixture: compassionate  grounds;  impending  financial  disaster;  the  public  interest;  or  the

interests of children.1

[9]      The second ground advanced is the alleged “standstill” agreement.  I am not persuaded that this is a significant factor that could justify the grant of a priority fixture.  The letter agreement records that “business will continue as usual” which does not suggest a “standstill” in the sense that normal decision-making is paralysed. While there may be disagreements, there is no indication in the evidence that the board is unable to function and continue to govern the affairs of the company.  The directors are all obliged to act appropriately in furthering the company’s interests. The fact that there may be disagreement on significant issues is not of itself unusual. There is no evidence that the disagreement threatens the company’s future prospects.

[10]     While Alison may become the sole shareholder of the company and would prefer the company to be travelling in its desired direction in the meantime, that is

1      Shattock v Devlin (1988) 1 PRNZ 271 (HC) at 278.

also not a sufficient reason to justify a priority fixture.  There can be no assurance at this stage that this will be the outcome.  Alison agreed to the current shareholding and board structure in terms of which it ceded control of the company to the shareholder  group.    The  directors  appointed  by  the  shareholder  group  must  be entitled to protect their investment in the company by making decisions that they consider best for it.   In my view, there is nothing particularly unusual about these circumstances.

[11]     The final ground advanced centres on the suggestion that the board could become deadlocked if Mr Alison chose not to attend board meetings denying it a quorum.  The prospect of a deadlock being engineered in this way does not appeal as a reason to grant Alison priority over other litigants.

[12]     The proceeding is nowhere near ready for hearing.  Discovery has not been completed.   The pleadings are not settled.   Until the issues have been isolated in finalised pleadings, it is not possible to determine what witnesses will be required, including expert witnesses.  For these reasons, the parties are not yet able to suggest appropriate trial directions, nor can they give the Court an accurate estimate of how long the trial will take.  The lack of readiness for trial is a further factor weighing against the grant of the application.

[13]     Two week fixtures for matters such as this are currently being allocated for August/September 2017.   On the basis of the information currently available, the parties are unlikely to be ready for a fixture much before then in any event.

Result

[14]     The application for a priority fixture is dismissed.

[15]     The  defendants  are  entitled  to  costs  on  the  application  calculated  on  a category 2, band B basis.

[16]     I make the following timetable orders by consent:

(a)      The plaintiff is to file and serve its reply to the statement of defence and  its  statement  of  defence  to  the  counterclaims  on  or  before

18 November 2016.

(b)      The shareholder group is to file and serve any reply to the plaintiff’s

statement of defence to the counterclaims on or before 2 December

2016.

(c)      If the parties are unable to agree the scope of discovery a joint memorandum or separate memoranda should be filed setting out the parties’ proposals for discovery.

(d)      The  proceeding  is  to  be  scheduled  for  further  mention  in  the

Commercial List at 9.15 am on 9 December 2016.

M A Gilbert J