Galante v Orinoco Organics Limited

[2020] NZHC 3008

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2020-042-021

[2020] NZHC 3008

UNDER

Section 174 of the Companies Act 1993

BETWEEN

DORIT GALANTE

Plaintiff

AND

ORINOCO ORGANICS LIMITED

First Defendant

GILAD GRINBERG

Second Defendant

Hearing:

12 November 2020

Appearances:

A Shaw and L Yong for plaintiff (by AVL from Nelson) No appearance for first defendant

E Horner and A Goble for second defendant

Judgment:

12 November 2020

EX TEMPORE JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                 The second defendant, Mr Gilad Grinberg, and the plaintiff, Ms Dorit Galante, were parties to a long term de facto marriage. They separated in August 2018 at the latest when the plaintiff left the family home at 375 Thorpe/Orinoco Road in Motueka. They have not yet resolved their relationship property issues.

[2]                 The former family home was acquired by the first defendant company, Orinoco Organics Ltd, in which the second defendant and the plaintiff are, and always have been, 50 per cent shareholders and the directors. It was acquired in 2011. As I understand it the parties originally incorporated the company in 2009 to establish and

GALANTE v ORINOCO ORGANICS LIMITED [2020] NZHC 3008 [12 November 2020]

run a horticultural business. The land on which the former family home is situated is apparently around 5.5 hectares.

[3]                 The business which the company was originally incorporated to establish is now moribund, and has been for some years – since about 2015. The only substantial asset owned by the company is the former family home.

[4]                 Personal assets aside, the parties also apparently own substantial property in the United States.

[5]                 In this proceeding the plaintiff, who it will be recalled is the party who left the former family home, seeks relief pursuant to s 174 of the Companies Act 1993. She says that in her capacity as a 50 per cent shareholder of the company she is prejudiced, essentially because the second defendant has effective control over the company and its only asset. There are other allegations too, but it is not necessary to go into these here. She asks the Court to make an order for the sale of the former family home, the division of the net proceeds of sale between the shareholders and the winding up of the company.

[6]                 The plaintiff’s substantive application pursuant to the Companies Act is set down for hearing in Nelson on Monday 16 November 2020, that is to say in three days’ time.

[7]                 The second defendant now applies for a stay of that proceeding. Her application was filed on 30 October 2020, long after the substantive proceeding had been set down for hearing. It was set down at the joint request of the parties.

[8]                 Essentially, what the second defendant says is that it would be unfair for the plaintiff to be permitted to pursue the remedy she is seeking in relation to Orinoco Organics Ltd in isolation from the wider relationship property issues with which the parties need to deal. He says that he had for some considerable time been labouring under the illusion that the parties were of one mind as to this, in the sense that they both wanted to deal with all property issues together, but that since the plaintiff

commenced this proceeding he has come to the realisation that she has a different view of matters and wants to force a sale of the former family home in a vacuum.

[9]                 Whilst the second defendant does not oppose dealing with the company and the former family home, his preference is to purchase the plaintiff’s 50 per cent shareholding, and he says he can only do that when he receives what he expects to receive from the disposal of the parties’ overseas assets.

[10]              On that basis, the second defendant asks the Court to stay this proceeding until Family Court proceedings that he has commenced relatively recently, and which address all relationship property issues, is disposed of.

[11]              The plaintiff for her part takes the position that this is a stalling tactic. She says that the second defendant has been in exclusive possession of the former family home since their separation, has never paid rental, and has acted irresponsibly in terms of ensuring that the company discharges its statutory obligations, and in failing to ensure that the former family home is properly insured and maintained. She says that neither party will be prejudiced if the Court deals with this aspect of their relationship property in the way she proposes, leaving both parties to fend for themselves in terms of accommodation pending the resolution of the wider relationship property issues.

[12]              There is no doubt that the circumstances of this case are such as to trigger s 174 of the Companies Act. The company is deadlocked which means that it cannot discharge its obligations in respect of the filing of returns and matters of that sort. Neither party suggests otherwise.

[13]              It is common ground that the Court has jurisdiction to stay the proceeding, both in its inherent jurisdiction and under r 15.1 of the High Court Rules.

[14]              The leading case is Danone Asia Pacific Holdings Pte Ltd v Fonterra Co- operative Group Ltd1 where Venning J concluded that a stay should only be made in “rare and compelling circumstances” where the “costs, convenience and interests of justice” justify such an order.

1      Danone Asia Pacific Holdings Pte Ltd v Fonterra Co-operative Group Ltd [2014] NZHC 1681.

[15]              Both counsel also referred me to the judgment of Associate Judge Andrew in Zhang v Deng.2 In that case, the Associate Judge applied the Danone principles and concluded that a stay should be granted in relation to proceedings in the High Court pursuant to the Property Law Act 2016. There was a significant overlap between the core issue in that proceeding and one of the core issues in Family Court proceedings between the parties, namely whether one of the parties had a proprietary interest in property. That appears to raise an issue of a different character. Here, there is not the same risk of different outcomes on a core issue. Zhang, therefore, does not appear to me an especially helpful case here.

[16]              As the Court of Appeal made clear in Kerridge v Kerridge,3 Relationship (Property) Act proceedings are one means of resolving the interests of parties in relationship property disputes. The civil law remedies are not ousted simply because such interests arise to be dealt with in the context of a relationship breakdown. As Mr Shaw submitted, in this case, the parties elected to structure their affairs in such a way that the former family home was owned by a company. In those circumstances, neither of the parties appear to me to be in a strong position to complain about the other seeking company law remedies.

[17]              In my assessment, this application for a stay comes too late. The plaintiff’s proceeding was set down months ago – by consent as I have already said. The second defendant’s application comes at the eleventh hour. Coupled with that, it is not at all obvious to me that the second defendant will be prejudiced by the disposal of the plaintiff’s application on Monday of next week. The jurisdiction under s 174 of the Companies Act is broad ranging. The Court’s powers are set out at s 174(2). It seems to me that there is ample scope within that provision for the Judge dealing with the plaintiff’s substantive application to make an order or orders that do not cut across the parties’ need to dispose of all property issues.

[18]              In addition to those considerations I accept the argument advanced on behalf of the plaintiff that the second defendant has sat on his hands to some extent taking advantage of having sole possession of the former family home for a considerable

2      Zhang v Deng [2019] NZHC 2531.

3      Kerridge v Kerridge [2009] NZCA 14 at [52].

period of time and only commenced his Family Court proceeding and sought a stay of this proceeding at the last moment.

[19]              For those reasons, the  view  I  take  is  that  this  matter  must  proceed  on  16 November 2020, and I dismiss the second defendant’s application for a stay accordingly.

[20]              At the joint invitation of the parties I reserve costs on this application. These can be dealt with following the disposal of the substantive hearing.

[21]              The second defendant seeks an order that the plaintiff be available for cross examination at the hearing. I direct that both parties be available.

Associate Judge Johnston

Solicitors:

C & F Legal Ltd, Nelson for plaintiff

Malony Horner Lawyers, Wellington for first and second defendants