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Coupe v Remmington

Coupe v Remmington

Case [2020] NZHC 2122 21 August 2020

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2425

[2020] NZHC 2122

BETWEEN
AARON PETER COUPE

Plaintiff

AND

BRIAN GREGORY REMMINGTON

Defendant

Virtual hearing: 19 August 2020

Appearances:

B D Gray QC and HMZ Lanham for the plaintiff S E Cameron for the defendant

Judgment:

21 August 2020

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 21 August 2020 at 4.00pm.
Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:
B D Gray QC, Auckland
HMZ Lanham, Barrister, Auckland
Cook Morris Quinn – City Branch, Auckland

COUPE v REMMINGTON [2020] NZHC 2122 [21 August 2020]

[1] The plaintiff (“Mr Coupe”) seeks leave under s 165 of the Companies Act 1993 effectively to convert this proceeding against the defendant (“Mr Remmington”) into proceedings in the name and on behalf of Liberte Investments Limited (“Liberte”).

Background

[2] Mr Coupe is the sole shareholder of Greys Avenue Investment Partners Limited (“GAIL”), which owned a commercial property on Auckland’s Greys Avenue. Together with Greys Avenue Partners LLC (“GAP”), on 8 March 2019, the three agreed GAIL would sell the property for $24 million to Liberte, whose minority and majority shareholders respectively are Mr Coupe and GAP as joint venturers, for development as a hotel. This was their second run at the same objective, previously through another vehicle, Ascent Industries No 33 Limited (“Ascent”), along similar lines.

[3] The 8 March 2019 heads of agreement identified Liberte was incorporated to purchase the property, with a 40/60 shareholding split respectively between Mr Coupe and GAP, and for their appointment of one and two directors respectively, for majority decision-making (GAP’s directors voting together). The parties agreed Liberte “will continue development of the hotel”, and its board “will solely control and take responsibility for [Liberte’s] management, administration and communications …, including as to funding, tax, accounting and legal matters”.

[4] The heads of agreement also specified the purchase price was to be funded by a mix of commercial loans in the amount of approximately $19 million from identified financiers, and GAP’s initial shareholder advance of $5.3 million. After repayment of
$19 million to GAIL’s secured creditors, the balance of sale proceeds would be applied “to reduce GAP’s investment to $4 million” and in payment of Ascent’s expenses, and otherwise as capital contributions in accordance with Mr Coupe’s and GAP’s 40/60 shareholding. By a 6 March 2019 side-agreement – between GAIL, Liberte, and GAP
– GAIL directed Liberte to pay the whole of that balance directly to GAP “in satisfaction of [Liberte’s] obligation to pay that part of the purchase price under the Property Agreement”.

[5] In the event, only GAP appointed a director, Mr Remmington;1 on 12 March 2019, GAIL and Liberte entered an unconditional sale and purchase agreement for the Greys Avenue property at a purchase price of $24 million for settlement by 12 April 2019; available financing fell substantially short of requirements; the sale did not settle; and the…

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 Coupe v Remmington

Details

AGLC: Coupe v Remmington [2020] NZHC 2122
Case: [2020] NZHC 2122
Decision Date: 21 August 2020

CaseChat Overview and Summary

The plaintiff, Mr. Coupe, sought leave to convert a proceeding against the defendant, Mr. Remmington, into a proceeding on behalf of Liberte Investments Limited, a company in which Mr. Coupe and GAP are joint venturers. The proceeding would allege Mr. Remmington, a director of Liberte, failed to act in good faith and in Liberte's best interests by acting on the instructions of GAP's owner, failing to seek alternative funding after GAP's owner declined to provide a personal guarantee required by a lender, and participating in the transfer of funds from GAP to another company of which he and GAP's owner were directors. The proceeding would claim damages of between $4 million as the contended loss on settlement and $13 million as the prospective loss on the value of the joint venture hotel.

The court considered whether to grant leave under s 165 of the Companies Act 1993. The court noted that the proposed proceeding was not intended to allege Mr. Remmington's breach of his s 136 duty to not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so. The court found that it was not contested that at the time Liberte entered into the transaction, Mr. Remmington had reasonable foundation to believe it would be able to acquire the property. The court also found that the joint venturers' agreement was not a directive Liberte bore responsibility for funding the property's acquisition. The court concluded that Mr. Remmington had no opportunity to consider if acquisition of the property was in Liberte's best interests. The court found that the costs of the proceeding in relation to the relief likely to be obtained would be a very close-run thing. The court found that no action had been taken by Liberte to obtain relief against Mr. Remmington. The court concluded that a prudent business person in conduct of their own affairs is likely to consider the prospect of establishing Mr. Remmington was in breach of his s 131 duty to Liberte in the ways alleged was slim, and any prospective recovery unlikely to justify the cost of its pursuit.

The court refused Mr. Coupe leave to bring the proceeding in Liberte's name or on its behalf. The court noted that the parties agree determination of the former resolves the latter. The court awarded costs to Mr. Remmington as the successful party. The court reserved costs for determination on short memoranda of no more than five pages if the parties could not otherwise agree.

Orders