Birchfield v Birchfield Holdings Ltd - [2021] NZCA 428

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IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA404/2020
[2021] NZCA 428

BETWEEN

ALLAN JOHN BIRCHFIELD, LEIGH ELLEN BIRCHFIELD, CHRISTOPHER PAUL BIRCHFIELD, PAULETTE MICHELLE BIRCHFIELD AND NGAIRE ELIZABETH BIRCHFIELD AS TRUSTEES OF THE PLC TRUST
First Appellant

ALLAN JOHN BIRCHFIELD
Second Appellant

AND

BIRCHFIELD HOLDINGS LIMITED
First Respondent

BIRCHFIELD COAL MINES LIMITED
Second Respondent

BIRCHFIELD ENERGY AND RESOURCES LIMITED
Third Respondent

NORTH WEST COAL COMPANY LIMITED
Fourth Respondent

GARY PAUL BIRCHFIELD
Fifth Respondent

KAREN ANNE BIRCHFIELD
Sixth Respondent

EVAN RAYMOND BIRCHFIELD
Seventh Respondent

JOELENE ANNA JAMIESON, KAREN ANNE BIRCHFIELD AND STEFFAN NIGEL JAMIESON AS TRUSTEES OF THE SJC TRUST
Eighth Respondents

DONNA JOYCE BIRCHFIELD, ELISH PAULING BIRCHFIELD AND GARY PAUL BIRCHFIELD AS TRUSTEES OF THE EMB TRUST
Ninth Respondents

Hearing:	8 June 2021
Court:	French, Gilbert and Goddard JJ
Counsel:	K G Davenport QC and A M Cameron for Appellants No appearance for First to Fourth Respondents R J Hollyman QC and G K Riach for Fifth to Ninth Respondents
Judgment:	2 September 2021 at 3.00 pm

JUDGMENT OF THE COURT

ALeave is granted to adduce in evidence the financial statements for BHL exhibited by Ms Butterworth, and the audited versions of those financial statements exhibited by Mr Noone. The application for leave to adduce further evidence on appeal is otherwise dismissed.
BThe respondents must, within 10 working days, file a memorandum of counsel that either:
(a)confirms that an adjusted offer has been made in accordance with [85] of this judgment, and attaches that offer; or
(b)advises that no such offer has been made.

C If a memorandum confirming the making of an adjusted offer is filed:

(a)the appeal is dismissed with effect from the date 20 working days after the date of that memorandum; and
(b)the appellants must pay costs to the respondents for a standard appeal on a band A basis, with usual disbursements.

DIf a memorandum confirming the making of an adjusted offer is not filed within 10 working days, we direct the Registrar to arrange a telephone conference with the parties.

____________________________________________________________________

Table of contents

Para no

Differences within a family company

Buy-out offers

Summary judgment granted in the High Court

Background

The differences between the siblings
Proposals by PLC Trust to sell its shares in BHL
The buy-out offers

The proceedings

Application by defendant for summary judgment in s 174 proceedings

Application to adduce further evidence on appeal

Is the appellants’ claim incapable of succeeding in light of the offer(s) made?

The timing of the offers
Compensation for effect of conduct on value of company
Lack of strategic plan and other management/strategy issues
Remuneration and firewood business
Exclusion from participation in the company
Failure of offer to address other proceedings
Access to information/discovery before valuer appointed
Personal guarantees and securities
The costs of the proceedings

Summary

Next steps

Costs

Result

REASONS OF THE COURT

(Given by Goddard J)

Differences within a family company

The Birchfield family have…

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.

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Details

Case: [2021] NZCA 428
Decision Date: 2 September 2021 at 3.00 pm

CaseChat Overview and Summary

In the appeal of Birchfield v Birchfield Holdings Ltd, the Court of Appeal was required to determine whether a summary judgment application should have been successful, in circumstances where the defendant had made a buy-out offer to the plaintiff. The appeal concerned the breakdown of relationships between members of the Birchfield family, who had extensive coal mining interests on the West Coast of the South Island. The family’s coal mining business was carried on through Birchfield Holdings Ltd (BHL) and its subsidiaries. Allan Birchfield, his sister Karen and his brothers Gary and Evan each hold, either directly or through a family trust, 25 per cent of the shares in BHL. Allan Birchfield’s family trust, the PLC Trust (the first appellant), owns 25 per cent of the shares in BHL. Following a breakdown in the relationship between Allan Birchfield and the other directors, he was removed as a director of the companies in April 2019. In September 2019 Allan Birchfield and the PLC Trust issued proceedings in the High Court under s 174 of the Companies Act 1993, claiming that the affairs of the companies were being conducted in a manner that was oppressive, unfairly discriminatory or unfairly prejudicial to them. They sought wide-ranging orders reinstating Allan Birchfield as a director of the companies and regulating the future conduct of BHL’s business. The respondents made an offer to buy the PLC Trust’s shares in BHL at fair value, to be assessed in accordance with BHL’s constitution. After the filing of the proceedings further, more detailed, buy-out offers were made. None was accepted. The respondents say that the buy-out offers they have made remove any unfair prejudice there might otherwise be as a result of the exclusion of Allan Birchfield from the management of the companies. They say the offers provide the appellants with all the relief they might possibly obtain in their proceedings, if successful. On that basis, they applied for summary judgment. The respondents’ summary judgment application was successful. The Associate Judge considered that there was no realistic prospect of a court granting the extensive relief sought by the appellants. At most, if the claims were made out, the court would require the respondents to buy out the PLC Trust. In those circumstances, the respondents’ buy-out offers provided a complete answer to the claim. Allan Birchfield was not obliged to accept the offer. But if he did not do so, then the proceedings would be at an end. The appellants appeal to this Court against the entry of summary judgment. The Court of Appeal considered that the August 2020 offer, with the costs adjustment, was capable of fully addressing any arguable claims of unfair prejudice. Such an offer would need to be open for acceptance for a reasonable period — the Court considered 20 working days would be sufficient. However although the respondents had indicated that they were willing to make an adjusted offer, that offer had not yet been made. The Court asked Ms Davenport whether the appellants’ position was that no buy-out offer would be accepted. If so, there would be no point in providing the appellants with an opportunity to consider the adjusted offer. Ms Davenport advised that she did not have instructions on this point. She submitted that if the Court were minded to dismiss the appeal on the basis of the adjusted offer, the appellants should have a reasonable opportunity to consider that offer. The Court concluded that if an adjusted offer on the basis set out in the judgment is made, the appeal should be dismissed. If such an offer is not made, a telephone conference will be convened to make directions in relation to the filing of further submissions about whether the August 2020 offer, without any adjustment, cured any arguable unfair prejudice.

Orders