Berghuis v Berghuis

[2017] NZHC 68

IN THE HIGH COURT OF NEW ZEALAND WHANGANUI REGISTRY

CIV 2016-483-4 [2017] NZHC 68

IN THE MATTER OF

orders under s 174 of the Companies Act

1993

BETWEEN

SANDRA BERGHUIS Plaintiff

AND

TRACEY BERGHUIS First Defendant

SUPERIOR STORES LTD Defendant Company

Hearing:	2 February 2017
Appearances:	C Wilkinson-Smith and N Refoy-Butler for the Plaintiff No appearance for the First Defendant No appearance for the Defendant Company
Judgment:	2 February 2017

JUDGMENT OF MALLON J

Introduction

[1]      Sandra Berghuis applies for orders under s 174 of the Companies Act 1993. The defendants, Tracey Berghuis and Superior Stores Limited (“the company”), have been served with the application but have taken no steps. The known creditors of the company, Horizons Regional Council and Rangitikei District Council, have also been served and have taken no steps.  The application has proceeded before me by way of formal proof.

The facts

[2]      Sandra and Tracey Berghuis are sisters.  Sandra has cerebral palsy and is in a

wheelchair.  She lives in Whanganui and receives an invalid’s benefit.  She grew up

BERGHUIS v BERGHUIS [2017] NZHC 68 [2 February 2017]

in Marton with her parents and her sister, Tracey.   Sandra and Tracey’s parents owned a business, Superior Stores, which operated as a dairy, post office and takeaway store.   The company was set up to operate the business.   The company owned 75 and 77 Station Road from which the business was operated.  The family lived at the back of the store.  They rented out the front of the store and had the same tenant for many years. The tenant paid rent.

[3]      Sandra and Tracey’s father died in 1994 and the company passed to their mother.    In 2011 their mother passed away.   Tracey and Sandra became 50:50 shareholders of the company. Tracey was appointed as director.

[4]      Sandra and Tracey have not had any contact with each other since 2012.  This situation arose following a period when Sandra was unwell and needed Tracey’s assistance to pay her bills and feed her cats.  Sandra says that this did not occur and instead Tracey stole money from her.  Tracey was charged with dishonestly using a document. She pleaded guilty and was sentenced to six months community detention and ordered to pay Sandra reparation of $2,500.   In the course of these events, Tracey came to Sandra’s house and abused her.  Sandra was frightened and called the police. The police served a trespass notice on Tracey.

[5]      In 2013 Sandra learned from solicitors who had previously acted for her parents that the company owed rates to the local and regional district councils for the properties at 75 and 77 Station Road.  The solicitors understood Tracey might still be living at the property and continuing to rent out the other property but did not have details.  The solicitors proposed some options for resolving the matter, including that Sandra initiate the winding up of the company and offer the properties at 75 and

77 Station Road for sale on the open market.

[6]      In October 2015 the solicitors again contacted Sandra.  They advised that the rates remained unpaid and were accumulating.  They were concerned that the rate arrears were absorbing the equity in the property.  They were also concerned that the properties might not be insured.

[7]      As a result of this contact, Sandra became concerned and spoke to an aunt and in turn with a solicitor.  The solicitor wrote to Tracey in November 2015 seeking to discuss possible resolutions to the situation.  The solicitor proposed that a market appraisal be completed and the properties placed on the market as soon as possible. The sale proceeds would be held in a trust account until such time as a division of the proceeds of sale between Sandra and Tracey were finalised.  Any division would need to take into account that Tracey had the use of both properties for several years without  paying any outgoings  and  had  collected  rent  without  accounting to  the company.  It would also need to take into account any loss in property value due to lack of maintenance.  Once the properties were sold and the proceeds distributed, the company should be wound up.   The solicitor advised Tracey that the matter had become urgent due to the unsustainable rates position.  If Tracey was not willing to accept the proposal and cooperate with an orderly sale of the properties, proceedings would be issued.

[8]      The properties have a combined rating valuation of $106,000.   As at 12

October 2015 the rates owing on 75 Station Road were $992.35 (Horizons Regional Council) and $11,094.05 (Rangitikei District Council).  As at 12 October 2015 the rates owing on 77 Station Road were $1,169.81 (Horizons Regional Council) and

$12,305.05 (Rangitikei District Council).

[9]      In these circumstances Sandra is worried that if the rates continue to remain unpaid there will be no equity left in the properties and that the properties will be sold by the councils at a forced sale for non-payment of rates.  She does not know whether Tracey is living at the property and receiving rent  from a tenant.   No shareholder meetings have been called.

[10]    David Petterson consents to appointment of the company as receiver or liquidator.    He  is  an  experienced  practitioner,  practising  as  an  accountant  for

37 years.   He has set out the rates that he will charge.   At the conclusion of the administration  he  proposes  to  make  an  application  under  s 284(1)(e)  of  the Companies Act to fix his remuneration.  He advises that, wherever possible, a person at the most appropriate level will be used to carry out the work in a competent and cost effective manner, the interests of the creditors being paramount.

The statutory provision

[11]     Section 174 of the Companies Act provides as follows:

174     Prejudiced shareholders

(1)       A shareholder or former shareholder of a company, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him or her in that capacity or in any other capacity, may apply to the court for an order under this section.

(2)       If, on an application under this section, the court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order—

(a)      requiring the company or any other person to acquire the

shareholder’s shares; or

(b)      requiring   the   company   or   any   other   person   to   pay compensation to a person; or

(c)      regulating the future conduct of the company’s affairs; or

(d)      altering or adding to the company’s constitution; or

(e)      appointing a receiver of the company; or

(f)       directing the rectification of the records of the company; or

(g)      putting the company into liquidation; or

(h)      setting aside action taken by the company or the board in breach of this Act or the constitution of the company.

(3)       No order may be made against the company or any other person under subsection (2) unless the company or that person is a party to the proceedings in which the application is made.

Assessment

[12]    Section 174 is concerned with conduct of a company which is unjustly detrimental to a member of the company.  Sandra, as a shareholder, has standing to bring the application.  The evidence establishes that the affairs of the company are being conducted in a manner unjustly detrimental to her.   The company is accumulating rate arrears, is not receiving rental and is not holding shareholder meetings.  Sandra is not receiving financial information from the company and does

not know who is occupying the company properties and whether they are paying rent.   On legal advice she has proposed a way of clearing the company’s debts, preserving what equity is left in the properties and dividing that equity in a fair manner.  She has received no response to this proposal and nor to this application.

[13]     I am satisfied it is just and equitable to order relief.  Sandra has endeavoured to resolve the matter short of court ordered relief but has been met with silence.  The value of her interest in the company is at risk of being entirely dissipated.  Initially Sandra had sought the appointment of a receiver to sell the property with the matter to come back to the court for approval of the distribution of the proceeds and then for the company to be wound up.  After reflection and liaison with Mr Petterson, the relief now sought is for Mr Petterson to be appointed as liquidator.  That will allow Mr Petterson to take all the necessary and appropriate actions and to seek further directions from the Court as required.  I accept this is the appropriate course in the circumstances.

Result

[14]     Accordingly I grant relief under s 174 putting the company into liquidation and with Mr Petterson appointed as liquidator.

Mallon J