BETWEEN M S DWAN LIMITED Applicant AND THE NEW ZEALAND TRUFFLE COMPANY LIMITED First Respondent AND RUBEN ALBRECHT EINGAERTNER Second Respondent
[2023] NZHC 3889
•22 December 2023
PARTS OF THIS JUDGMENT HAVE BEEN REDACTED TO PRESERVE THE CONFIDENTIAL NATURE OF CERTAIN
INFORMATION
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-409-689
[2023] NZHC 3889
BETWEEN M S DWAN LIMITED
Applicant
AND
THE NEW ZEALAND TRUFFLE COMPANY LIMITED
First Respondent
AND
RUBEN ALBRECHT EINGAERTNER
Second Respondent
Hearing: On the papers and in court on 21 December 2023 Appearances:
S Campbell and L O’Dwyer for the Applicant No appearance for the Respondents
Judgment:
22 December 2023
JUDGMENT OF HARLAND J
Introduction
[1] This judgment determines an application by M S Dwan Ltd (MSD) for an interim injunction against the New Zealand Truffle Company Ltd (NZTC) and Mr Ruben Eingaertner. The application was made on a without notice basis. I have decided to grant the application for the reasons outlined in this judgment upon the conditions set out in it.
M S DWAN LTD v THE NEW ZEALAND TRUFFLE COMPANY LTD [2023] NZHC 3889 [22 December 2023]
[2] The application proceeded under urgency. The papers in respect of it were filed during the morning and early afternoon of 21 December 2023. I requested that counsel appear in front of me to answer certain queries I had arising from the papers filed. That occurred at 3.30 pm on 21 December 2023. I have mentioned this because the matter has been dealt with by me as Duty Judge at a time when the High Court Registry is winding down for the Christmas holiday period.
The reasons for my judgment have been prepared in that context.
[4] The applicant is a horticultural services company. The directors and equal shareholders of MSD are Mr Matthew Dwan and Mrs Catherine Dwan. MSD is a minority shareholder of NZTC.
[5] The first and second respondents are NZTC and Mr Eingaertner. NZTC owns and operates a truffle production business. Mr Eingaertner is the sole director of NZTC. He is also the director and majority shareholder of Ragged Point Ltd (RPL). RPL is a majority shareholder of NZTC.
[6] The application was precipitated by the Board purporting to issue a notice for pre-emptive rights on 18 December 2023 (Monday this week) that requires a response by 12 January 2024. The applicant claims the notice for pre-emptive rights, issued by the second respondent in his role as sole director of NZTC, is invalid as well as his steps to:
(a) accept funding on behalf of NZTC; (b) […];
(c) commit expenditure to lawyers to take action against Mr and Mrs Dwan; and
(d)determine which bills are paid by NZTC and which are not.
[7] The applicant submits that the respondents’ actions are invalid and in breach of the Shareholders’ Agreement, the NZTC’s Constitution and the Companies Act 1993 (the Act).
[8]The applicant seeks relief under:
(a)section 164 of the Act, on the basis that the respondents have proposed to engage in conduct in contravention of its Constitution; and
(b)rule 7.53 of the High Court Rules (HCR) and the inherent jurisdiction of the Court, on the basis that there are serious questions to be tried, the balance of convenience favours the granting of the injunction, and the overall justice lies with the applicant.
The application
[9]MSD applies to the Court for the following without notice:
(a) an order preventing NZTC and Mr Eingaertner, as sole director, from undertaking any further steps on behalf of NZTC pending further order of the Court including:
(i)instructing solicitors;
(ii)incurring further expenditure or liabilities;
(iii)taking part in the pre-emptive process for the sale of shares; and
(iv)registering any sale or transfer of shares.
(b) an order directing the applicant to file a statement of claim commencing proceedings by 26 January 2024, and
(c) that costs are reserved.
[10] The grounds upon which the orders are sought, generally expressed, relate to the contentions that the company is contractually defunct, the Board is purporting to act in breach of the Shareholders’ Agreement and that, as a result, there is a risk to NZTC because it is:
(a) not being properly administered, governed or managed in accordance with the Act or the Shareholders’ Agreement; and
(b) is not conducting business with the proper authority of the Board of Directors.
[11] Mr and Mrs Dwan have each provided an affidavit in support of their application. The Court has also been provided with a copy of NZTC’s Constitution and the Shareholders’ Agreement. Each depose in their affidavits that they are duly authorised to make the application. This is confirmed at para 5 of each affidavit in support.
[12] No statement of claim has yet been filed and the applicant accepts that, under r 7.53(2), it is a requirement for a timeframe to be outlined for this to occur. They nominate 26 January 2024.
[13] In support of the application being made on a without notice basis, the applicant submits:
(a) That it is particularly urgent given the time of the year. The applicant was served with the Notice on 18 December 2023, being four working days before the end of the working year. Shareholders wishing to exercise their pre-emptive rights are required to provide written notice of their acceptance to the board on or prior to 12 January 2023. This date is during the High Court’s Christmas shutdown period.
(b) That requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant because steps are being taken in the sale of shares that if left unchecked may be irremediable.
(c) That the interests of justice require the application to be determined without serving notice of the application.
Undertaking as to damages
[14] Mr Dwan has signed an undertaking as to damages on behalf of MSD. I was concerned that the undertaking, filed as required under r 7.54, did not provide sufficient information to enable the Court to assess the worth of the undertaking.1
[15] An elaboration of the ability of MSD to meet its undertaking as to damages was a matter I raised with counsel. An additional memorandum2 was provided. It outlined the following:
2 M. S. Dwan Limited is the corporate trustee of the Dwan Business Trust. Counsel confirms that the undertaking as to damages has been given in its capacity as trustee of that trust. The assets of the trust are the shares in the New Zealand Truffle Company. Their value to the defendants is best calculated by the notice that the applicant says is invalid.
3 Ragged Point Limited wished to sell shares for $10,000 each. It follows that the 172 shares owned by the applicant is valued by Ragged Point Limited at $1,720,000.
[16] With the provision of this information, I am satisfied that a sufficient undertaking as to damages has been provided.
Factual background
The parties
[17] NZTC was incorporated on 17 September 2020 by Mr and Mrs Dwan. Both were equal shareholders in the initially subscribed share capital of 120 ordinary shares. At some point, their shares were transferred to MSD who holds the shares as trustee of the Dwan Business Trust.
[18] During 2021, Mr and Mrs Dwan determined that NZTC required further capital investment to fund its growth. RPL subscribed for and was issued 48 ordinary shares in NZTC on 1 April 2022. Mr Eingaertner (the second respondent) is a director of RPL and holds an 80 per cent shareholding in it.
1 Park Lane Builds Ltd v Shiva Echo Homes Ltd [2022] NZHC 1438 at [58]; and Nuwave Software Ltd v Objective Corporation Solutions NZ Ltd [2022] NZHC 2511 at [17], citing Cowan v Cowan [2021] NZCA 463 at [12]-[15].
2 Dated 21 December 2023.
[19] Mr and Mrs Dwan were employed as managing directors of NZTC commencing on 1 April 2022. It is contended their roles are akin to that of a CEO, operating the day-to-day management of the company. Even though their employment in these roles is said to have commenced on 1 April 2022, an employment agreement was not provided and signed until December 2022.
[20] Relations between Mr and Mrs Dwan and Mr Eingaertner began to sour around mid-2022. The affidavit filed by Mr Dwan in support of this application outline the details about this. However, Mr and Mrs Dwan continued to be employed as managing directors of NZTC.
[21] On 27 July 2022, three important events occurred. Mrs Dwan resigned as a director of NZTC, Mr Eingaertner was appointed as a director and RPL, MSD and NZTC entered into the Shareholders’ Agreement.
[22] In his affidavit, Mr Dwan deposed Mr Eingaertner was not receptive to Mr and Mrs Dwan’s concerns regarding their ongoing roles and rights within NZTC and would not negotiate. Mr Dwan deposed the Shareholders’ Agreement was therefore on Mr Eingaertner’s terms. It was prepared by Mr Eingaertner’s solicitors.
[23] On 1 December 2022, Mr Dwan resigned as a director of NZTC. Mr Dwan deposed this decision was due to governance concerns, including alleging that Mr Eingaertner:
(a)engaged in bullying and unreasonable behaviour;
(b)failed to adhere to health and safety responsibilities;
(c)exerted pressure on Mr and Mrs Dwan to provide their shares in NZTC as security to guarantee the loan to NZTC from Mr Eingaertner; and
(d)failed to meet governance requirements, including failing to hold quarterly Board meetings and failing to appropriately plan and prepare for NZTC’s capital requirements.
[24] Also on 1 December 2022, and pursuant to cl 7.3 of the Shareholders’ Agreement, Mr and Mrs Dwan exercised their option to appoint an independent director to represent their minority shareholding. They appointed Mr John Peebles. Mr Dwan deposed this was in the hope of encouraging Mr Eingaertner to adhere to governance requirements, smooth over employment relationships, and act as witness to Mr Eingaertner’s “erratic” behaviour.
[25] On 16 July 2023, Mr Peebles resigned as a director of NZTC, leaving Mr Eingaertner as its sole director.
[26] Mr Dwan deposed that, since 17 July 2023, Mr Eingaertner has held himself out as NZTC’s sole director, caused the Companies Office to record him as such, and purported to conduct the business of NZTC’s Board without the authority to do so.
[27] Mr and Mrs Dwan continued to be employed as Managing Directors of NZTC and operated the day-to-day management of the company. Mr Dwan remains employed as Managing Director. However, Mrs Dwan resigned in December 2023 […].
[28] The current shareholding of NZTC is comprised of 1,172 shares, allocated as follows:
(a) 1,000 shares held by RPL (85.32 per cent); and
(b) 172 shares held by MSD (14.68 per cent).
[29] Mr and Mrs Dwan have ongoing concerns about the strategic direction of the business. Mr Dwan deposed these concerns have been exacerbated by recent events, which I turn to now.
The notice for pre-emptive rights
[30] On 12 October 2023, Wynn Williams, as counsel for Mr and Mrs Dwan and MSD, sent a letter to Lane Neave and Tompkins Wake, as counsel for RPL, Mr Eingaertner and NZTC. The letter put the respondents on notice that the Board was
operating without authority given the effect of cls 7.1-7.11 of the Shareholders’ Agreement. […].
[31] Further correspondence was exchanged between the parties and their counsel between this October 2023 letter and the current application, comprising a proposal on behalf of RPL which included inter alia varying the wording of cl 7.1 of the Shareholders’ Agreement, which was declined by the applicant who made a counteroffer, that was also subsequently declined. Notably, the respondents did not substantively address the applicant's claim that Mr Eingaertner's conduct, as the sole director of NZTC, was invalid. The parties reached a stalemate and the liquidation of NZTC appeared imminent.
[32] This option was supported by the Dwans but, for unexpected reasons, despite advancing to the stage of notice being given of a shareholders’ meeting to be held on 8 December 2023 at which it was intended to resolve to liquidate the company, the meeting to do so was cancelled by Mr Eingaertner at the last minute.
[33] On 18 December 2023, MSD was served with a notice of pre-emptive rights issued by Mr Eingaertner on behalf of the Board of Directors of NZTC (the notice). The notice provides that NZTC has received a Transfer Notice of Proposed Sale of Shares given by RPL under cl 8 of the Shareholders’ Agreement, offering 410 (34.98 per cent) ordinary shares in NZTC for sale through the pre-emptive rights process. The asking price is […] per share, amounting to […]. The notice invites shareholders other than RPL, that being MSD, to exercise their pre-emptive rights. Where a notice of acceptance is not provided by 12 January 2023, the offer will be deemed to have been declined. In that instance, the Board intends to offer the shares to […]. Mr Eingaertner is a director of […] and holds a 75.5 per cent shareholding.
Shareholders’ Agreement
[34]The terms of the Shareholders’ Agreement include the following:
(a) clause 3.1.2: NZTC’s primary objectives are to … share the benefits of wealth created by the company amongst the shareholders proportionate to their shareholdings.
(b) clause 7.1: The Board of NZTC will comprise no fewer than two directors and no more than four directors unless the shareholders, by way of special resolution, otherwise agree.
(c) clause 7.2: Each shareholder will have the right to appoint and retain on the Board a director for every 25 per cent of shares held by a shareholder. For example, if a shareholder holds 50 per cent of the shares it shall have the right to appoint two directors to the Board.
(d) clause 7.3: Notwithstanding the provisions of clause 7.2, as long as the Dwan Trust or its Group holds at least 10 per cent of the shares in the company, they shall have the right to appoint a director to the Board.
(e) clause 7.4: A shareholder may not change its appointed director without approval by special resolution of the shareholders.
(f) clause 7.5: Additional directors to those appointed under clauses 7.2 and
7.3 may be appointed or removed by an ordinary resolution of shareholders.
(g) clause 7.11: A quorum for a meeting of the Board shall be two directors who have been appointed by separate shareholders.
(h) clause 11.2: No party may sell, transfer, assign, give, alienate or in any other manner dispose of their shares in the Company to any person except in accordance with the provisions of this Agreement or the Constitution.
[35]Clauses 7.1, 7.11 and 11.2 are particularly pertinent to the application.
Constitution
[36] Clause 8 of NZTC’s Constitution provides for the pre-emptive rights relating to share transfers.
[37] This clause, which Mr Eingaertner issued the pre-emptive notice to the applicant on 18 December 2023, relevantly provides:
(a)Clause 8.1: A shareholder intending to transfer any shares must give a transfer notice in writing to the company. The transfer notice shall state the number, class and asking price of the shares to be offered for sale.
(b)Clause 8.2: The board shall be the agent of the transferor (to the exclusion of the transferor) for the sale of the shares specified in a transfer notice. A transfer notice may not be withdrawn except with the sanction of the board or as provided in this clause 8.
(c)Clause 8.4: The shares specified in a transfer notice must be offered for sale by the board in priority as follows:
(i)8.4.1: first, to the holders of the same class of share (other than the transferor); and
(ii)8.4.2: secondly, to the holders of other classes of share (if any); and
(iii)8.4.3: thirdly, to any other person or persons whom the board is prepared to register as a holder or holders of that class of share.
(d)Clause 8.8: Offers for the sale of shares which have not been accepted in the time and manner set out in the preceding clauses shall be deemed to have been declined.
(e)Clause 8.9: On expiry of the time period for acceptance of all offers, the board shall allocate the shares offered for sale according to acceptances received (including the allocation of additional shares from declined offers). The board shall give notice in writing of the share allocation to all persons who have been allocated shares aforesaid, within 10 working days from the expiry of the time for acceptance of all offers.
(f)Clause 8.10: Except as provided in this clause, the procedure for the offer, acceptance and allocation of shares shall be determined by the board. No irregularity in such process shall affect the validity of the allocation and sale of shares.
[38] I have considered the dispute resolution clause provided at cl 17 of the Shareholders’ Agreement. I raised this issue with counsel at the hearing and counsel’s response was addressed in the subsequent memorandum filed on 21 December 2023.
[39] I agree that cl 17 is silent about urgent interim relief. Counsel identified that cl 9 of sch 1 of the Arbitration Act 1996 makes clear that the Court remains seized of jurisdiction to grant urgent interim relief. That is the nature of the relief sought in this case. However, counsel very properly raised the fact that there are live questions as to whether the dispute resolution clause can apply given that the issues in dispute in this case raise broader issues of company law, including what rights attach to shares and an issue of the interpretation of the constitution.
[40] As well, counsel noted that there is also in these proceedings a live and unresolved policy question as to whether an arbitration agreement “bites on” liquidation proceedings. I note this because of the indication by counsel for the applicant that it is likely to bring a just and equitable petition for winding up the company or a s 175 claim seeking winding up or sale orders. As counsel noted, those issues may not be justiciable by an arbitral tribunal.
[41] I need not determine these points for the purposes of this application, however, it was necessary to deal with them given that the application of cl 17 to this proceeding was a matter I had asked counsel to address.
Should an injunction be made under s 164 of the Companies Act 1993?
[42]Section 164 provides:
164 Injunctions
(1) The court may, on an application under this section, make an order restraining a company that, or a director of a company who, proposes to engage in conduct that would contravene the constitution of the company or this Act from engaging in that conduct.
(2) An application may be made by—
(a)the company; or
(b)a director or shareholder of the company; or
(c)an entitled person.
(3) If the court makes an order under subsection (1), it may also grant such consequential relief as it thinks fit.
(4) An order may not be made under this section in relation to conduct or a course of conduct that has been completed.
(5) The court may, at any time before the final determination of an application under subsection (1), make, as an interim order, any order that it is empowered to make under that subsection.
[43] In JJ International Ltd v Streetsmart Ltd, the High Court held that the s 164 jurisdiction is independent and the Court is not confined to the usual considerations in equity in deciding whether to grant an injunction.3 However, the discretion under s 164 must be exercised for the purposes of the Act. Section 164 gives the Court an entirely prospective power and narrow in scope.4
[44] Keane J accepted Palmer J’s comments in Australian Securities Commission v Mauer-Swisse Securities Ltd that the injunction sought must have “some utility or … some purpose within the contemplation” of the relevant governing statute, and that:5
… where there is an appreciable — that is, not fanciful — risk of particular future contraventions … it would serve a purpose within the contemplation of the … [relevant] Act that the Court grant not only a permanent injunction but, in an appropriate case, an interim injunction restraining such conduct.
[45] Keane J further agreed with Palmer J’s findings that this does not mean that the two usual questions in equity — whether there is a serious issue to be tried and where the balance of convenience lies — are to be ignored, holding that:6
Although the questions whether there is a serious question to be tried and where the balance of convenience lies will not circumscribe the Court’s consideration … the interests of justice will always require that those questions be examined carefully when restrictions are sought to be imposed before the case has been properly examined by the Court …
3 JJ International Ltd v Streetsmart Ltd (2005) 9 NZCLC 263, 784 (HC).
4 Nisbet v M G Bale Trustees Ltd HC Wellington CIV-2007-485-1387, 8 February 2008.
5 JJ International Ltd, above n 3, at [19], citing Australian Securities Commission v Mauer-Swisse Securities Ltd [2002] NSWS3 741, (2002) 42 ACSR 605 at [36].
6 JJ International Ltd, above n 3, at [20], citing Mauer-Swisse Securities Ltd, above n 5p, at [36].
[46] Keane J stated that the balance this formula achieves between statutory and equitable considerations seems to be both right in principle and practical.7
[47] In Wilding v Te Mania Livestock Ltd, the High Court addressed the scope of s 164 in relation to the removal, as opposed to restraint, of a director.8 The Court said:
… I do not consider that s 164 can be read so broadly as to give scope to remove a director because of the risk that he or she would engage in impugned conduct, as it only allows orders “restraining” a director. The word “restrain” means to keep in check under control or within bounds. Given that word its ordinary and actual meaning, it only allows the Court to control future conduct by a director which would breach the Act or the Constitution. It does not give the power to remove the director altogether, which could prevent him or her carrying out even lawful functions.
[48] The applicant submits that an interim injunction under s 164 should be granted because the respondents have proposed to contravene the Constitution by way of the notice. This is because cl 11.2 of the Shareholders’ Agreement provides that no party may sell, transfer, assign, give, alienate or in any other manner dispose of their shares in the company to any person except in accordance with the provisions of the Shareholders’ Agreement or the Constitution.
[49] The applicant’s point is that the notice purports to be in compliance with the provisions of the Constitution but it is not. This is because cl 7.1 of the Shareholders’ Agreement provides that the Board of NZTC will comprise no fewer than two directors and no more than four directors unless the shareholders, by way of special resolution, otherwise agree. Given that there is one director (the second respondent), and given the quorum requirements in cl 7.11 as referred to above, the Board cannot issue the notice referred to.
[50]I accept that, on a plain reading of both the Shareholders’ Agreement (cls 7.1,
7.22 and 11.2), there is an arguable case that the proposed action by NZTC under cl 8 of the Constitution is invalid. This is because cl 8, which deals with the pre-emptive transfer process, is a process to be undertaken by the Board and, on the documents
7 JJ International Ltd, above n 3, at [21].
8 Wilding v Te Mania Livestock Ltd [2015] NZHC 2105 at [29].
provided, it appears that the Board currently lacks the authority and cannot function due to a lack of quorum.
[51] Although s 164 does not enable the notice to be set aside, it does enable an injunction to be issued to prevent its implementation and, in particular, the actions it proposes will follow on 12 January 2024 if MSD does not exercise its pre-emptive rights. I am persuaded an injunction to this effect should follow.
[52] But, in case I am wrong about this, I now address the applicant’s case for an interim injunction under the r 7.53 of the HCR and the Court’s inherent jurisdiction.
Injunction under r 7.53 of the HCR and/or the Court’s inherent jurisdiction
[53]I refer to each of the factors that must be addressed.
Is there a serious question to be tried?
[54] For the same reasons I have articulated above, I am persuaded there is a serious question to be tried. That question is to do with the validity of the actions of the Board in purporting to issue the notice and/or generally act at this time. Effectively, the case for MSD is that the company is defunct.
[55] Where a Board is defunct, it is a common sequence that it cannot bring or defend court proceedings, logically, that is a natural consequence of a lack of authority.
This was confirmed by Osborne J in Powell v K2 Investment Group Ltd.9
[56] Although Mr Campbell submitted that this would have the effect of preventing NZTC from defending legal proceedings, he submitted this is not uncommon, referring to the possibility of a derivative action under s 165 of the Act. It is not necessary or appropriate to express a view about this at this stage of the proceeding.
[57]The proceedings MSD intends to commence are likely to seek:
9 Powell v K2 Investment Group Ltd [2021] NZHC 2253 at [103]-[135], citing Yu v Whitford Properties Ltd [2013] NZHC 3162; and Mitchell & Hobbs (UK) Ltd v Mill [1996] 2 BCLC 102 (QB).
(a) liquidation on the grounds that such a course of action is just and equitable;
(b) liquidation on the grounds that it is a prejudiced shareholder; and
(c) declarations as to the interpretation of the Shareholders’ Agreement.
Where does the balance of convenience lie?
[58] In the context of this application, I agree with counsel for the applicant that this aspect should be described as “the balance of the risk of doing an injustice”.10
[59] On the information provided to me, I am satisfied that this is not a case where damages would be an adequate remedy.
[60] The background to the issuing of the notice is also important and relevant. It has been filed against a background of increasing disharmony between Mr and Mrs Dwan and Mr Eingaertner as outlined above. There has been correspondence between lawyers and discussions about liquidating the company. The correspondence between the lawyers has clearly identified the inability of the company to continue to act through a Board with only one director.
[61] As well, the issuing of the notice on 18 December 2023 with an expiry date on 12 January 2024, during which time it is well known that the courts and solicitors’ offices are on vacation, could be described as cynical.
[62]I am persuaded that the balance of convenience favours MSD.
Interests of justice
[63] The interests of justice in this case follow the balance of convenience. Counsel for MSD outlined what theoretical defences might be available to the respondents. He outlined these in para 65 of his memorandum as follows:
10 Cayne v Global Natural Resources plc [1984] 1 All ER 225 (CA) at 237; Mitre 10 (New Zealand) Ltd v Benchmark Building Supplies Ltd [2003] 3 NZLR 186 (HC) at 191; and Auckland International Airport Ltd v Air New Zealand Ltd (2006) 9 NZCLC 264,179 (HC).
The applicant has also sought to conceive of any possible defence in an endeavour to fulfil their obligation of full and frank disclosure. Those theoretical defences include the following:
(a) That Mr Dwan resignation as director was not valid given clause 7.4 of the Shareholders’ Agreement. However, the response to this is simple. The Shareholders’ Agreement binds the MSD, not Mr and Mrs Dwan. Clause 7.4 effectively prohibited the shareholders from making changes. But it cannot bind Mr and Mrs Dwan as a matter of fundamental contract law; they are not parties. It is also highly doubtful that even if Mr and Mrs Dwan were personally named in the agreement, whether such an agreement could operate to deprive them of a personal right to resign.
(b) That the applicant has ulterior motives given their interests in NZTC and the other proceedings and processes on foot. This may relate to the ERA proceedings on foot. However, Mr and Mrs Dwan are not motivated by ulterior purposes. They are seeking to exit their investment (on terms preferably). If they cannot exit, they wish to liquidate NZTC. The steps that NZTC continues to purport to take is prejudicial to their position. Despite continually alerting the second respondent (by correspondence to RPL) of the issue, and NZTC of the issue, the conduct has continued.
(c) That the application may lead to the liquidation of the company. This is correct. But the company cannot function in its current form. The parties have attempted, unsuccessfully, to resolve.
(d) That the shareholders’ agreement is capable of being interpreted differently than as alleged, or capable of rectification or some such order. The applicant cannot conceptualise that claim, but notes that such an argument is a possibility.
[64] These potential defences do not detract from my assessment that there is a serious question to be tried.
[65] I am satisfied, for the reasons outlined, that it is appropriate to proceed with this application on a without notice basis. I am satisfied that the criteria set out in r
7.23 have been met. Particularly, I consider that requiring the applicant to proceed on notice would cause undue delay or prejudice to it given the time of year and the background, as it has been relayed to me, culminating in the issuing of the notice.
Result
[66] The application for interim injunction is granted, but on the terms outlined below.
[67]I make the following orders:
(a) An order preventing The New Zealand Truffle Company (NZTC) and Mr Ruben Eingaertner as sole director from undertaking any further steps on behalf of NZTC pending further order of the Court including, but not limited to:
(i)taking part in the pre-emptive process for the sale of shares;
(ii)incurring further expenditure or liabilities; and
(iii)registering any sale or transfer of shares.
(b) An order directing the applicant to file a statement of claim commencing proceedings by 26 January 2024; and
(c) A copy of these proceedings, my judgment and my orders are to be served on the respondents by the applicant forthwith.
[68] Although it is inherent in my finding that there is a serious question to be tried that any actions undertaken by the Board with one director would be contrary to the Shareholders’ Agreement and Constitution, I am not persuaded on a without notice basis to make any further orders. The right must be provided for the respondents to challenge the order I have made today on a without notice basis. To that end, I am making an interim injunction only, so that the need for it to continue will be addressed further by the Court on 1 February 2024 at 10.00 am. An hour will need to be allocated for the review. Any further timetable directions can also be made at that time.
[69]Costs are reserved.
Harland J
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