Caringrace Inc v Claridge - [2016] NZHC 1704

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-351 [2016] NZHC 1704

UNDER the Companies Act 1993

IN THE MATTER OF

an application under Section 174

BETWEEN

CARINGRACE INC Plaintiff

AND

CHRISTOPHER AND CAROL ELIZABETH CLARIDGE

First Defendants

AND

CARRICKMORE LIMITED Second Defendant

AND

JISHENG (JASON) SONG Third Party

Hearing: 18 February 2016

Counsel:

E St John for Plaintiff
J E Bayley for First Defendants
No appearance for Second Defendant
E St John for Third Party

Judgment:

26 July 2016

JUDGMENT OF CLARK J

I direct that the delivery time of this judgment is

3:00pm on 26 July 2016

CARINGRACE INC v CLARIDGE [2016] NZHC 1704 [26 July 2016]

Introduction

[1] This judgment deals with three interlocutory applications. The substantive proceeding concerns a dispute between the first defendants, Mr and Mrs Claridge (Claridge), as 50 per cent shareholders of the second defendant (Carrickmore) and the plaintiff (Caringrace) as the other 50 per cent shareholder. Caringrace is a United States holding company specifically formed to hold the shares in Carrickmore. The third party, Mr Song, is the sole director of Caringrace. Mr Song is, with Mr Claridge, a director of Carrickmore.

The background to the proceeding

[2] Mr and Mrs Claridge established Carrickmore in 2001. In 2012 they sold

50 per cent of their shares to Caringrace.

[3] The parties entered into a shareholders’ agreement in order to regulate the relationship between them once the share transfer had been completed. The business of Carrickmore was the manufacture, distribution and marketing of infant, adult, and specialist milk powders. Each shareholder agreed to use best endeavours to promote the interests, reputation and business of Carrickmore.

[4] Also in January 2012 Carrickmore entered into an agency agreement with a company related to Caringrace known as Natramall. Natramall agreed to exclusively purchase Carrickmore’s products and not to purchase competing products. Mr Song owns shares in Natramall. Natramall is involved in the importation of infant milk formula into China and generally the natural health industry.

[5] By late 2014 difficulties in the parties’ relationship had begun to emerge and in early 2015 lawyers’ letters were exchanged. Mr Song was concerned that there had been several instances where the Chief Executive of Carrickmore (Mr Claridge) had failed to respond to issues which he had raised. Those issues included questions relating to the financial statements of the company; not obtaining shareholder approval for salary adjustments or bonus payments; ignoring rules in respect of related party transactions; ignoring or avoiding implementation of resolutions of the

board; not providing information relating to expenses claimed and not disclosing particulars of processing operations as they affected the company.

[6] For their part Mr and Mrs Claridge were increasingly concerned about the use of Carrickmore’s intellectual property. They believed Caringrace, facilitated by Mr Song, failed to keep intellectual property confidential; used intellectual property for the benefit of another; failed to promote the business of Carrickmore by misusing confidential information and failed to ensure Carrickmore acquired and retained new intellectual property. These were…

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.

Continue reading Caringrace Inc v Claridge

Details

AGLC: Caringrace Inc v Claridge [2016] NZHC 1704
Case: [2016] NZHC 1704
Decision Date: 26 July 2016

CaseChat Overview and Summary

The case of Caringrace Inc v Claridge involved a dispute between shareholders of a New Zealand company, Carrickmore Limited. Caringrace, a United States holding company, held 50% of the shares in Carrickmore, with the remaining 50% held by Mr and Mrs Claridge. The dispute centred around allegations of unfair prejudice and breaches of fiduciary duties by the parties. The plaintiff, Caringrace, sought relief under Section 174 of the Companies Act 1993, claiming that the affairs of Carrickmore had been operated in a way that unfairly prejudiced Caringrace. The Claridges counterclaimed that Caringrace and its director, Mr Song, had breached their fiduciary duties and caused damage to Carrickmore. The case involved several interlocutory applications, including a review of an Associate Judge's decision, a strike-out application, and an application to remove Mr Song as a director of Carrickmore. The Court reviewed the Associate Judge's decision to dismiss the application for the appointment of an interim liquidator and found no error in the decision. The Court also dismissed the application to strike out the Claridges' statement of defence, noting that while there was non-compliance with the Court's orders, it was not a clear case for striking out. Finally, the Court dismissed the application to remove Mr Song as a director of Carrickmore, finding that neither the balance of convenience nor overall justice favoured such an order. The Court's decision resulted in the continuation of the Associate Judge's orders, with both parties having a measure of success in the interlocutory applications.

Orders