Brown v Gallagher

[2018] NZHC 3451

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000537

[2018] NZHC 3451

UNDER

Part 19 of the High Court Rules and s 165 Companies Act 1993

IN THE MATTER

of an application under s 165 of the

Companies Act 1993 for an order granting leave to Mark Anthony Brown to bring proceedings in the name and on behalf of NuBuild Project Management Limited

BETWEEN

MARK ANTHONY BROWN

Applicant

AND

TIMOTHY GERALD GALLAGHER

First Respondent

AND

DIGITAL MEDIA TECHNOLOGIES LIMITED

Second Respondent

AND

NUBUILD CONSULTANCY AND DESIGN LIMITED

Third Respondent

AND

ST ANDREWS ASSET MANAGEMENT LIMITED

Fourth Respondent

AND

TIMOTHY GERALD GALLAGHER and

JENNY ANN GALLAGHER as trustees of the GALLAGHER FAMILY TRUST

Fifth Respondents

Hearing:	4 December 2018
Appearances:	G K Riach and M K Crimp for the Applicant S T Cottrell for the Respondent
Judgment:	21 December 2018

BROWN v GALLAGHER [2018] NZHC 3451 [21 December 2018]

JUDGMENT OF JUSTICE OSBORNE

(on application for leave to bring a derivative action)

NuBuild Project Management Limited

[1]                  Mark Brown applies for leave to bring a derivative action (under s 165 Companies Act 1993) in the name and on behalf of NuBuild Project Management Ltd (NB Project Management). He appends a draft Statement of Claim to his application.

[2]                  Mr Brown holds 34 shares in NB Project Management. The remaining 66 shares are held by the second respondent, Digital Media Technologies Ltd (Digital), a company of which the first respondent, Timothy Gallagher, and Kerry Bird are the directors and shareholders.

[3]  From incorporation, NB Project Management’s directors were Mr Brown, Mr Gallagher and Mr Bird. Mr Brown pleads1 that the three had agreed at the time of incorporation that it was Mr Brown and Mr Gallagher who would be directors but that, without Mr Brown’s knowledge, Mr Bird was at times registered with the Companies Office as a director despite not having been properly appointed as a director.

[4]                  Mr Brown had his own company, NuBuild Homes Ltd (“NuBuild Homes”), which traded in the home construction industry and came to undertake earthquake repair projects.

The claim relating to the conduct of NB Project Management’s business

[5]Mr Brown pleads:

a)That NB Project Management was incorporated to undertake earthquake repair work in Christchurch, with the work to be primarily undertaken by NuBuild Homes, and that the shareholders of NB Project Management agreed as to how the revenue would be received and distributed, including:

1      Where this judgment refers to a pleading, it is to Mr Brown’s draft pleading as attached to his application.

(i)NuBuild Homes was to receive 90% of the project cost of each project;

(ii)NB Project Management was to receive 10% of the project costs of each project;

(iii)the profit (of NB Project Management on each project) was to be split equally between Messrs Brown, Gallagher and Bird.

[6]                  Mr Brown pleads that NuBuild Homes undertook work for which it invoiced NB Project Management approximately $1,500,000 but that the latter has refused to…