Empire Technology Limited v Vital Limited
[2025] NZHC 2272
•12 August 2025
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2025-485-207
[2025] NZHC 2272
UNDER section 290 of the Companies Act 1993 IN THE MATTER OF
an originating application to set aside a statutory demand
BETWEEN
EMPIRE TECHNOLOGY LIMITED
Applicant
AND
VITAL LIMITED
Respondent
Hearing: 25 July 2025 Counsel:
S Holden and D Keogh for Applicant
P Shackleton and E McDowell for Respondent
Judgment:
12 August 2025
JUDGMENT OF GENDALL J
Introduction
[1] The applicant, Empire Technology Limited (Empire), is a privately held investment company. In August 2024, it issued takeover notices to Vital Limited (Vital), a NZX-listed telecommunications infrastructure company. However, Empire says that, after discovering further information indicating reduced revenue and net profit after tax, it withdrew its bid on 15 September 2024. On 13 March 2025, the Takeovers Panel (the Panel) determined that Empire was liable for Vital’s costs in responding to the takeover notices under s 49 of the Takeovers Act 1993, in the sum of $247,036.58. On 20 March 2025, Vital served a statutory demand on Empire for that sum.
EMPIRE TECHNOLOGY LIMITED v VITAL LIMITED [2025] NZHC 2272 [12 August 2025]
[2] Empire now applies for orders that the statutory demand be set aside, or alternatively that time for compliance with the statutory demand be extended until further order of the Court. It also seeks an award of costs for the application.
[3] The basis of Empire’s application is that Vital was aware of, but had not disclosed to the market, the following allegedly material information, in breach of the NZX Listing Rules, the Financial Markets Conduct Act 2013 (FMCA), and/or the Fair Trading Act 1986 (FTA):
(a)A significant reduction in Vital’s adjusted Net Profit After Tax (NPAT) from a forecast of $400,000–$700,000 as at 27 February 2024 to an actual NPAT of $253,000 by August 2024, which was not disclosed until 27 August 2024, after Empire’s takeover notices.
(b)The anticipated loss of significant revenue from key customer Hato Hone St John (St John), who intended to transition to the Public Safety Network. While some risk of losing St John had been disclosed, the expected financial consequences were not. St John accounted for
$3.7 million (approximately 13 per cent) of Vital’s 2024 revenue. (the Information).
[4] Empire maintains the Information was material to the valuation of Vital’s shares and, had it been aware of it, Empire would not have issued the takeover notices. Empire submits too that it was those breaches which induced it to issue the takeover notices, resulting in losses to it of at least $355,461.28. These comprise the
$247,036.58 takeover costs awarded to Vital, and $108,424.70 of costs incurred by Empire in issuing the takeover notices. Empire says that, in light of this genuine counterclaim, which is greater than the prescribed amount in the statutory demand, the issue of the statutory demand by Vital was an abuse of process and improper. It also seeks an award of increased costs on the present application which it says are accordingly warranted.
Background
[5] From 2021 to 2024, Vital made various disclosures to the market through the NZX Market Announcement Platform (MAP). These included its annual reports, audited financial year end statements, forecast financial metrics and various shareholder letters and information about its contract with St John, including:
(a)St John’s contract contribution to Vital’s operating revenue;
(b)St John’s option to renew the contract; and
(c)that St John is expected to transition to the Public Safety Network when it is operational.
[6] On 12 August 2024, during correspondence between the parties about a proposed takeover offer, Vital advised Empire that its annual report would be released in approximately two weeks. It recommended that Empire wait until receipt of that annual report before progressing any takeover steps.
[7] On that same day, Empire sent Vital a non-binding takeover proposal. Under this proposal, Empire was to acquire 50.01 per cent of Vital’s shares at a price of
$0.375 per share. Within that proposal, Empire requested targeted due diligence.
[8] On 19 August 2024, Vital issued a release to the market through MAP titled “Non-Binding Indicative and Incomplete Proposal Received”. It stated the Board’s position was that the proposed price sat well below a level at which it would be prepared to grant access to undertake due diligence. It also confirmed the release of Vital’s annual results on 27 August 2024. Included in the release was also a shareholder letter dated 16 August 2024.
[9] The parties continued to correspond, including on disclosure of non-public commercially sensitive due diligence information. On 19 August 2024, Empire issued its first takeover notice. Vital’s view was that this notice contained unlawful conditions and was invalid. On 23 August 2024, Vital released a shareholder letter.
[10] Having corresponded with the parties over the issues discussed in their correspondence, the Panel convened and on 23 August 2024 released a letter concerning Empire’s compliance with the Takeovers Code (the Code) and the allegations of breaches of the Code by Vital. The Panel stated that it did not consider Vital’s refusal to provide due diligence breached the Code, nor did it appear that Vital’s 16 August 2024 shareholder letter breached the Code. The Panel also said it appeared that Empire had acted “other than in compliance” with the Code and invited it to address the specified compliance concerns by providing undertakings to the Panel.
[11] On 26 August 2024, Empire withdrew the first notice and issued a second takeover notice. One day later, on 27 August 2024, Vital released its 2024 annual report. This included its 2024 financial year audited financial statements.
[12] On 15 September 2024, Empire’s second takeover notice was withdrawn. On 24 September 2024, Vital sent Empire an invoice for aggregate takeover costs for expenses incurred in relation to Empire’s takeover notices.
[13] On 26 November 2024, Vital applied to the Panel to make a determination and order under the Takeovers Act 1993 in respect of Vital’s incurred expenses. In December 2024, Empire filed a claim in the High Court alleging that Vital breached the FTA and the FMCA, and that those breaches induced Empire to issue the two takeovers notices to Vital (the High Court Claim). Empire also asked the Panel to delay its determination of Vital’s claim until the High Court Claim had been completed. The Panel declined that delay request. It released its determination on 13 March 2025, awarding costs to Vital.
[14] Empire has appealed the Panel’s determination, and has also applied for the appeal to be consolidated with the High Court Claim.
Legal principles
[15] Section 290(4) of the Companies Act 1993 (the CA) provides that the court may grant an application to set aside a statutory demand if:
(a)there is a substantial dispute whether or not the debt is owing or is due; or
(b)the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c)the demand ought to be set aside on other grounds.
[16] The general principles that apply to applications to set aside a statutory demand are well-settled:1
(a)The onus is on the applicant seeking to set aside the statutory demand to show that there is arguably a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion that a dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before any statutory demand is issued.
(d)If a counterclaim, cross-demand, or set off is suggested an applicant must establish that this is reasonably arguable in all the circumstances.
(e)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise, unless such evidence is contrary to the available documents or earlier statements made by the parties.
1 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
Submissions
Applicant’s submissions
[17]Mr Holden, for the applicant, submits that:
(a)Vital’s adjusted NPAT downgrade from $400,000–$700,000 as at 27 February 2024 to an actual NPAT of $253,000 by August 2024 was material information, given the NZX Guidance Note provides that deviations from an issuer’s own guidance on actual or forecast earnings of 10 per cent or more are generally regarded as material and should be disclosed promptly and without delay.
(b)The anticipated reduction in revenue from the expected departure of St John was also material information, given it brought in revenues that exceeded 10 per cent or more of Vital’s revenue. He says this information was not generally available to the market, as Vital had not confirmed the issue in its market disclosures and the details of the revenue earned from St John were unknown.
(c)In failing to disclose the NPAT downgrade, Vital engaged in misleading and deceptive conduct in breach of s 9 of the FTA and s 19 of the FMCA, as it was obliged to inform the market and could not simply wait for its annual reports to make this disclosure. As a result, Empire was entitled to seek compensation under s 43 of the FTA and s 494 of the FMCA.
(d)Empire’s quantifiable counterclaim against Vital is at least
$355,461.28, and therefore the statutory demand prescribed amount is less than its counterclaim.
(e)In response to Vital’s opposition, Empire’s counterclaim is not “contingent”. The existence of the counterclaim does not depend on any external event outside Empire’s control. Rather, it is a pleaded claim, it is capable of quantification, and there is an evidential
foundation establishing a real possibility of success. Empire also says it has means to pay the statutory demand in any event as its related company, Empire Capital Ltd, will guarantee any amount it is found to owe. And, given the Panel found it did not have jurisdiction to consider Empire’s claims, Mr Holden maintains that it did not dismiss Empire’s claims. When it is unknown why NZX Regulation Limited declined to investigate Empire’s claims, its decision should not be given any weight. Further, there are no procedural issues with the High Court Claim, with further particulars of loss not required.
Respondent’s submissions
[18]In response, Mr Shackleton, for the respondent, submits that:
(a)As to the reduction in its NPAT, Vital advised Empire on 12 August 2024 that it would be optimal to wait until its 2024 annual report was released before engaging in transaction discussions, and that this was to be published in two weeks’ time. The August 2024 release also confirmed that Vital’s financial statements would be released on 27 August 2024. Yet, despite this, Empire elected not to wait and proceeded to issue both takeover notices.
(b)In terms of losing St John, Vital announced it had lost the PSN tender to NZX on 19 October 2021, and in its 2022 and 2023 annual reports. On 3 July 2023, it also announced to NZX that it had extended its contract with St John. Mr Shackleton says it is not accepted that St John will not renew its contract, with a target company statement dated 4 July 2025 noting Vital’s directors considered it more likely than not that St John will exercise its renewal. It is claimed that the expected financial consequences of losing St John were also disclosed to the market. This is because—given its share of Vital’s revenue had previously been disclosed, and Vital had acknowledged that its revenue was decreasing—a reasonable person would have discerned that the
St John contract’s percentage contribution to Vital’s operating revenue would have decreased.
(c)Vital’s actual results were within or above guidance for three of the four metrics on which Vital provided guidance in February 2024. Therefore it is misleading for Empire to simply pick out the adjusted NPA as the stand-alone material information. Vital’s share price after the withdrawal of the takeover proposal and the release of its FYE financial statements were broadly in line with pre-takeover trading.
(d)Empire’s counterclaim lacks merit. This is demonstrated by the Panel’s findings that Empire’s due diligence and consent conditions in its first takeover notice were potentially non-compliant, and that Empire chose to issue its notices knowing that Vital would release its 2024 annual report in reasonably short order. It is also demonstrated by the Panel declining to conclude that Vital may have committed breaches, and by NZX Regulation Limited declining to take further investigative actions.
(e)Empire’s reliance on the NZX guidance ignores the fact that Vital gave guidance on four metrics, rather than just one. Accordingly, the NZMDT decision relied on by Empire does not support a finding of materiality here.
(f)Empire’s counterclaim is analogous to situations involving third-party contingencies, given it has a highly uncertain claim that relies upon the outcome of the “vigorously denied” High Court Claim. Mr Shackleton notes that to succeed Empire will need to both overcome Vital’s affirmative defences, and to demonstrate that it did not cause or contribute to the alleged losses through its own negligence or its failure to take reasonable care to protect its own interests.
(g)If Empire is able to satisfy the Court that it has an arguable counterclaim, the Court should still exercise its discretion not to set aside the statutory demand. This is because a clear order for costs has
been made, Empire has not sought a stay of the Panel’s decision, and the substance of its allegations, it is claimed, have been dismissed to varying degrees by the Panel and NZX Regulation Limited. Mr Shackleton alleges too that Empire is using its counterclaim both as a de facto appeal, and as a means to avoid a stay pending appeal. He claims it is also designed to subvert the Panel’s jurisdiction to determine costs by having costs effectively determined by way of a High Court hearing.
Analysis
[19] Empire’s contention that it has a substantial counterclaim against Vital which exceeds the amount of the Panel’s costs order brings into consideration s 290(4)(b) of the CA. As noted above, this provides that the Court may grant an application to set aside a statutory demand if it is satisfied that:
… the company appears to have a counterclaim … and the amount specified in the demand less the amount of the counterclaim … is less than the prescribed amount.
(emphasis added)
[20] Authorities are clear that the threshold for the “appearance” test outlined in s 290(4)(b) is a low one. However, a mere assertion that a counterclaim exists is not sufficient for the Court to grant a set aside application. Notwithstanding this, it is not necessary for an applicant to prove the counterclaim. Rather, it is sufficient if evidence is presented of a “reasonably arguable” case.2
[21] Reinforcing this, Osborne J in 144 Trustees Limited v Mike Pero Real Estate Limited identified the following additional principles as relevant to the exercise of the Court’s jurisdiction under s 290(4)(b):3
(a)An applicant must establish that it appears to have a counterclaim, cross-demand or setoff which is reasonably arguable in all the circumstances.
(b)The “appearance” test involves a review of low threshold.
2 DNS Forest Products 2009 Limited v Logic Forest Solutions Limited [2018] NZHC 1214 at [17].
3 144 Trustees Limited v Mike Pero Real Estate Limited [2018] NZHC 3197, (2018) 20 NZCPR 220 at [8].
(c)The hearing relating to a s 290(4)(b) argument is to be short and to the point—it is to be distinguished from a summary judgment application where complex legal issues are not a bar to a remedy.
(d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
[22] With these comments in mind, I turn to consider the arguments advanced to me by both counsel.
Does Empire appear to have a counterclaim?
[23] Empire’s counterclaim here alleges that by failing to disclose the Information, Vital breached its continuous disclosure obligations. Empire says therefore it is entitled to seek a civil liability order against Vital for loss or damage suffered. In addition, Empire maintains it has a similar claim against Vital for misleading and deceptive conduct in breach of s 9 of the FTA and s 19 of the FMCA.
[24]As to continuous disclosure arguments, I accept that the NPAT downgrade from
$400,000–$700,000 to the actual figure of $253,000 was part of the “material information” provided here.4 Disputes arise, however, as to whether Empire was warned by Vital of factors like this. In particular, there are disputes around whether Empire should have waited until Vital’s annual report was disclosed before it made its offer, as this would contain further information. Of possible significance here also is the fact that the NPAT was one of four metrics guidance indicators set out in the 2024 annual report, with the other three remaining within or slightly exceeding Vital’s earlier projections or forecasts. I note those other metrics were EBITDA (earnings before interest, taxes, depreciation and amortisation), revenue, and adjusted free cash flow (EBITDA less capital expenditure). The Panel too, it seems, commented that the argument around the NPAT downgrade did not appear to have much merit, although I wish to highlight that the Panel found such matters were largely outside its jurisdiction.
4 Section 231 of the FMCA defines “material information” as information that a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of quoted financial products of the listed issuer, and which relates to particular products, or particular listed issuer(s), rather than to financial products or listed issuers generally.
[25] Notwithstanding these matters, in my view, they are all ultimately issues for determination by this Court when the High Court Claim is argued, which I do not need to make firm findings on.
[26] There appears to me to be greater merit in the claims around the St John contract. Again, although there is some evidential dispute here, it is arguable that Vital had not made disclosure of the financial repercussions of losing the St John contract, despite the fact St John was both a substantial and key customer of Vital. There seems a clear basis to consider the financial repercussions of losing the contract to be “material information”. Although St John has recently renewed its contract with Vital, it is acknowledged that it will be transitioning to a different provider (PSN). As noted by Mr Holden in his submissions, a future event does not need to be certain to be material, with materiality requiring a weighing of the probability of the event occurring against the anticipated magnitude of the event on the company’s affairs.5
[27] I do not accept there is particular merit in the rather convoluted counter-argument that Vital has raised, namely that, based on other information Vital had previously disclosed, a reasonable person would have been able to figure out that a substantial amount of the company’s income was from the St John contract. Vital’s submissions implicitly acknowledge that the exact share of Empire’s revenue derived from the St John contract could not have been determined from the information publicly available. The additional argument that Vital may have disclosed that St John would be transitioning off its network onto PSN, in my view, may not assist for the low threshold “appearance” test here. Accordingly, the conclusion arises that Vital arguably breached its disclosure obligations in failing to identify how much of its revenue was derived from the St John contract.
[28] In addition to what is a possible breach of the continuous disclosure obligations on the part of Vital, the misleading and deceptive conduct argument in terms of s 9 of the FTA and s 19 of the FMCA may well lie here. However, that is a matter for determination in the High Court Claim.
5 Australian Securities and Investments Commission v GetSwift Ltd [2021] FCA 1384 at [1095] citing Grant-Taylor v Babcock & Brown Ltd (in liq) [2016] FCAFC 60 at [95]–[96].
[29] Furthermore, the suggestion from Vital that Empire’s counterclaim here is “contingent” is, in my view, not sustainable. As this Court determined in Beckett Books Limited v Moving Out 2012 Limited a counterclaim, such as the one alleged here, can be considered under s 290(4)(b) of the Companies Act despite the fact that it has not yet been fully determined.6 Since December 2024 in this case, Empire has commenced and is prosecuting the counterclaim proceeding and its appeal. Empire’s counterclaim is not dependent on any external event outside of its control, and as I see it, this counterclaim needs to be determined.
Should the Court exercise its residual discretion to refuse the application?
[30] As noted by Mr Shackleton, where the necessary jurisdiction to set aside a statutory demand is established under s 290(4)(a) or (b), it will be a rare case where residual discretion will be exercised to refuse the application.7
[31] I accept Empire’s submissions that there are insufficient concerns around ability to pay to warrant maintaining the statutory demand. Counsel for Empire have confirmed that its related company, Empire Capital Ltd, will guarantee any net amount that ultimately Empire is found to owe Vital following either the High Court Claim proceedings or any appeal proceedings. He confirms that Empire Capital Ltd has sufficient net assets to meet any award, and this seems to be accepted on behalf of Vital.
[32] I do not consider this to be a situation analogous to Manchester Securities, where despite the fact that applicant narrowly demonstrated an arguable case for set- off, the application to set aside was declined, primarily because it appeared to be an attempt to relitigate matters already decided.8 As already noted, the arguments Empire is advancing in its High Court Claim have not been dealt with in the Panel’s decision, with the Panel expressly stating it did not have jurisdiction to deal with the allegations of breaches of the NZX Listing Rules, FMCA or FTA. I do not accept that the substance of Empire’s allegations has been dismissed by the Panel and NZX Regulation Ltd. Although NZX Regulation declined to investigate Empire’s
6 Beckett Books Limited v Moving Out 2012 Limited [2015] NZHC 669.
7 Alfex Doors and Windows Ltd v Alutech Windows and Doors Ltd CA38/01, 30 May 2001 at [14].
8 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455.
allegations against Vital, the reason why it did so is unclear. Accordingly, I am not willing to read into that decision or lend it much weight. In my view, this is not a situation which warrants the Court to decline the application despite a counter-claim being made out as reasonably arguable.
[33] As to progress with the High Court Claim, Empire has filed its statement of claim and Vital has filed a statement of defence. Further particulars of the loss claimed appear to have been sought by Vital. This is opposed by Empire on the basis it says these are not required. No application for further particulars, as I understand it, has been brought.
[34] Empire, I am told, has applied to consolidate its High Court Claim with its appeal of the Panel decision, but this has been opposed by Vital. The allocation of a hearing date from this Court is to occur shortly. Those proceedings need to progress to hearing and a conclusion with all reasonable speed.
Result
[35] In conclusion, and for the reasons I have outlined above, I am satisfied that Empire here has done enough to establish that it appears to have a counterclaim against Vital which is reasonably arguable in all the circumstances of this case. In terms of s 290(4)(b) of the CA, it follows that it is appropriate for the statutory demand to be set aside. Empire’s present application therefore succeeds.
[36] An order is made that the statutory demand issued by Vital against Empire is set aside.
Costs
[37] Given that Empire has succeeded in its present application, it is entitled to an order for costs and disbursements against Vital.
[38] Costs are therefore awarded to Empire on a Category 2B basis together with disbursements as fixed by the Registrar.
Gendall J
Solicitors:
Chapman Tripp, Auckland for Applicant Meredith Connell, Auckland for Respondent
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