Birchfield v Birchfield

Case [2020] NZHC 1516


IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE

CIV-2019-418-29

[2020] NZHC 1516

UNDER the Companies Act 1993

IN THE MATTER

of an application for orders under s 174

BETWEEN

ALLAN JOHN BIRCHFIELD, LEIGH ELLEN BIRCHFIELD, CHRISTOPHER PAUL BIRCHFIELD, PAULETTE MICHELLE BIRCHFIELD and NGAIRE

ELIZABETH BIRCHFIELD, as trustees of the PLC Trust

First Plaintiff

AND

ALLAN JOHN BIRCHFIELD

Second Plaintiff

AND

BIRCHFIELD HOLDINGS LIMITED

First Defendant

continued…
Hearing: 12 June 2020

Appearances:

K G Davenport QC and A M Cameron for Plaintiff

S O Munro and A L Davidson for First to Fourth Defendants
R J Hollyman QC and G K Riach for Fifth to Ninth Defendants

Judgment:

30 June 2020


JUDGMENT OF ASSOCIATE JUDGE LESTER


This judgment was delivered by me on 30 June 2020 at 4.45pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 30 June 2020

BIRCHFIELD v BIRCHFIELD HOLDINGS LIMITED [2020] NZHC 1516 [30 June 2020]

AND

AND

AND

BIRCHFIELD COAL MINES LIMITED

Second Defendant

BIRCHFIELD ENERGY AND RESOURCES LIMITED

Third Defendant

NORTH WEST COAL COMPANY LIMITED

Fourth Defendant

AND

GARY PAUL BIRCHFIELD

Fifth Defendant

AND

KAREN ANNE BIRCHFIELD

Sixth Defendant

AND

EVAN RAYMOND BIRCHFIELD

Seventh Defendant

AND

JOELENE ANNE JAMIESON, KAREN ANNE BIRCHFIELD and STEFFAN

NIGEL JAMIESON, as trustees of the SJC Trust

Eighth Defendants

AND

DONNA JOYCE BIRCHFIELD, EILISH PAULINA BIRCHFIELD and GARY PAUL

BIRCHFIELD, as trustees of the EMB Trust Ninth Defendants

[1]                This proceeding arises from a falling out between siblings who between them own Birchfield Holdings Ltd, the first defendant. In turn, Birchfield Holdings Ltd owns the second, third and fourth defendants.

[2]                The plaintiff, Allan Birchfield (Allan), says his removal as a director of the defendant companies by his siblings is conduct that was oppressive, or unfairly discriminatory, or unfairly prejudicial to  him  in  terms  of  s 174  of  the  Companies Act 1993 (the Act). Allan also complains of other actions of the company and/or his siblings, which I will refer to below.

[3]                Allan seeks to rely on the full flexibility of s 174(2) of the Act and seeks the following orders (assuming he can establish that the conduct he complains about qualifies for relief):

(a)declaring invalid the directors’ and shareholders’ resolutions [removing him as director];

(b)reinstating the second plaintiff as a director of the first to fourth defendants so as to give the first plaintiffs proper representation on the first to fourth defendants;

(c)directing the directors to obtain:

(i)a business plan;

(ii)a full review by a suitably qualified person/company of the companies’ health and safety procedures;

(iii)a review of the companies’ business plan, practices and procedures and a remuneration review of all senior staff; and

(d)to implement such changes as identified in the report(s);

(e)requiring the directors and shareholders or any one of them to pay compensation to the first and/or second plaintiffs (including an account of profits in relation to any inappropriate remuneration/benefits from their positions);

(f)regulating the future conduct of the first defendant’s affairs by…

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AGLC
Birchfield v Birchfield [2020] NZHC 1516
Case
[2020] NZHC 1516
Decision Date

CaseChat Overview and Summary

The High Court of New Zealand was asked to determine an application for summary judgment by the defendants in a proceeding under section 174 of the Companies Act 1993, where the plaintiff, Allan Birchfield, claimed his removal as a director of several defendant companies was oppressive, unfairly discriminatory, or unfairly prejudicial to him. Allan sought various orders, including reinstatement as a director and directions for the defendants to obtain and implement a business plan, review safety procedures, and conduct a remuneration review of senior staff. The defendants argued that Allan's claim should be dismissed as they had offered to buy his shares at fair value, and their relationship had irreconcilably broken down.

The court considered whether the defendants were entitled to summary judgment, focusing on the O'Neill principle, which states that a reasonable offer to buy out a minority shareholder's shares can cure any unfair prejudice. The court found that the relief sought by Allan would require the Birchfield siblings to work together again, which was unlikely given their broken relationship. Additionally, the court found that the scope of the relief sought, which would impose significant management limitations on the Board, was not workable and would likely be rejected if minority oppression was established. Therefore, the court granted the defendants' application for summary judgment, subject to the defendants making a reasonable offer to buy Allan's shares, including addressing the impact of the complained-of conduct on the value of the shares.

The court's decision reflects its reluctance to become involved in management disputes and to require parties who have fallen out to work together. The relief sought by Allan represented a significant departure from the court's hesitancy to interfere in management and required parties who had fallen out to work together, which the court found to be an unlikely prospect. The court's decision also highlights the importance of a reasonable offer to buy out a minority shareholder's shares in resolving disputes under section 174 of the Companies Act 1993.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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