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Baker v Hodder

Baker v Hodder

Case [2018] NZSC 78 22 August 2018

Natural Justice & Procedural Fairness

Company Law

Procedural Law

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IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

SC 94/2017
[2018] NZSC 78

BETWEEN	CHRISTOPHER DUNCAN BAKER AND KATHRYN ANN BAKER Appellants
AND	WALLACE DOUGLAS HODDER AND ANN ADELE HODDER First Respondents KADD FARM LIMITED Second Respondent

Hearing:	20 March 2018
Court:	Elias CJ, William Young, Glazebrook, O’Regan and Arnold JJ
Counsel:	J W Maassen and S F Clark for Appellants M E Parker, M R Cowan and J Eckford for First Respondents
Judgment:	22 August 2018

JUDGMENT OF THE COURT

A The appeal is allowed.

BThe order made under s 174 of the Companies Act 1993 against the appellants is quashed.

CThe respondents must pay the appellants costs of $15,000 plus usual disbursements.

DWe quash the costs orders made in the High Court and Court of Appeal. Costs should be re‑determined in those Courts in light of this judgment.

____________________________________________________________________

REASONS
(Given by O’Regan J)

Shareholder dispute

The appellants, Duncan and Kathryn Baker, and the first respondents, Wallace and Ann Hodder, were shareholders in the second respondent, Kadd Farm Ltd (the company). It was a family company: Kathryn Baker is the Hodders’ daughter. The Hodders held 70 per cent of the shares and the Bakers 30 per cent of the shares in the company. All were directors of the company.
The company owned a farm known as Heron Creek. There was disagreement between the Hodders and the Bakers about the sale of Heron Creek.
The proposed sale was a major transaction for the company. Because of that, a special resolution of the shareholders of the company was required under s 129 of the Companies Act 1993. That section prohibits a company from entering into a major transaction unless the transaction is approved by a special resolution or is contingent on such approval. In the present case, a special resolution could be passed only if either or both of the Bakers voted in favour of it. The Bakers agreed to sign a written resolution approving the sale, but only on conditions that were unacceptable to the Hodders. They did not sign a written resolution approving the sale when requested to do so. The Hodders commenced proceedings against the Bakers in the High Court under s 174 of the Companies Act. Under that section, a shareholder may apply for relief where the affairs of a company are being conducted in a way that is oppressive, unfairly discriminatory or unfairly prejudicial to the applicant. The Hodders alleged that the Bakers’ refusal to sign a resolution approving the proposed sale was oppressive and/or unduly prejudicial to the Hodders and to the company.

The proceedings so far

High Court

Ellis J accepted a submission from the Hodders that the matter was urgent and truncated the timetable for the conduct of the proceeding. She granted the Hodders’ application under s 174 and ordered the Bakers to sign a special resolution under s 129 of the Companies Act to authorise the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Baker v Hodder

Details

AGLC: Baker v Hodder [2018] NZSC 78
Case: [2018] NZSC 78
Decision Date: 22 August 2018

CaseChat Overview and Summary

The appeal of the Bakers against the orders made against them by the High Court and upheld by the Court of Appeal was allowed. The Court of Appeal should have heard and determined the appeal as there remained a real dispute about costs, there were issues of fairness arising from the procedure that was adopted in the High Court and there was a proper basis for concern that the decision could affect the ability of the Bakers to pursue a future claim against the Hodders. There were also important company law issues at stake that could affect future transactions. The Court quashed the orders made against the Bakers under s 174 of the Companies Act and awarded costs of $15,000 plus usual disbursements to the Bakers.

Orders