Galante v Orinoco Organics Ltd - [2020] NZHC 3154

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2020-442-21

[2020] NZHC 3154

Under Section 174 of the Companies Act 1993

BETWEEN

DORIT GALANTE

Plaintiff

AND

ORINOCO ORGANICS LTD

First Defendant

GILAD GRINBERG

Second Defendant

Hearing: 16 November 2020

Counsel:

A S Shaw and L C Yong for the Plaintiff

E M Horner and A D Goble for the Second Defendant

Judgment:

30 November 2020

JUDGMENT OF CULL J

Overview

[1] Dorit Galante (Dorit) applies for orders under s 174 of the Companies Act 1993 (the Act) for the liquidation of Orinoco Organics Ltd (the Company) and that her de facto spouse of 20 years, Mr Gilad Grinberg (Gilad), pay market rent for his exclusive occupation since August 2018 of the family home held by the Company (the Property).

[2] Gilad opposes the application, denying that there has been oppressive conduct and claiming that it is neither just nor equitable that the Company be wound up before the resolution of their relationship property matters.

GALANTE v ORINOCO ORGANICS LTD [2020] NZHC 3154 [30 November 2020]

The facts

[3] Dorit and Gilad have been in a de facto relationship for approximately 20 years, until their separation in August 2018 when Dorit left the Property.1 They incorporated the Company in May 2009, with the intention of conducting a business in the line of organic products. Both Dorit and Gilad are co-directors of the Company and equal shareholders holding 50 shares each.

[4] The Company’s major asset is the 5.6 hectare Property, on which is placed the former family home. The Company acquired the Property in 2011, and the parties have occupied it as their family home until their separation in August 2018. The Company owns various chattels and there are alpacas and horses on the Property, as well as equipment and vehicles, including a horse float.

[5] The Company has not actively traded nor had any employees since 2015. The parties have a son who is 17 years old and has lived with Dorit since August 2018. After the separation, Dorit left the Property and sought alternative accommodation for herself and the son (who was 15 years old at the time) and Gilad has remained in sole occupation of the Property since separation.

[6] Dorit and Gilad have interests in property in New York, held by two limited liability companies (109 Norfolk LLC and 509 Grand LLC). The companies respectively own substantial real estate. There is a third New York company, NY Brite Inc, which operated a cleaning company. Dorit claims this is her separate property.

[7] Dorit seeks relief under s 174 of the Act, seeking orders for the sale of the Property, the division of the net proceeds of sale between the shareholders, and the liquidation of the Company. Her claim is that in her capacity as a 50 per cent shareholder of the Company, she is prejudiced, because Gilad has effective control over the Company and its only asset. Her allegations…

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.

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Details

Case: [2020] NZHC 3154
Decision Date: 30 November 2020

CaseChat Overview and Summary

Dorit Galante, a shareholder and director of Orinoco Organics Ltd (the Company), has applied for orders under s 174 of the Companies Act 1993 for the liquidation of the Company, and that her de facto spouse of 20 years, Mr Gilad Grinberg, pay market rent for his exclusive occupation of the family home, held by the Company, since their separation in August 2018. Gilad opposes the application, denying that there has been oppressive conduct and claiming that it is neither just nor equitable that the Company be wound up before the resolution of their relationship property matters. The issues before the Court were whether the affairs of the Company have been conducted in a manner that is oppressive, unfairly discriminatory, or unfairly prejudicial to Dorit; whether it is just and equitable for the Court to make orders under s 174; and if so, what is the appropriate relief to be granted. The Court found that both directors had equal responsibility in respect of the current dysfunction and deadlock between them, such that both parties’ conduct in administering the Company is unjustly detrimental to each of the shareholders and adversely affects each of their interests. The Court considered it would be unjust and inequitable to ignore the wider relationship property context in this case, where the granting of “a blunt and drastic remedy” as described by the Court of Appeal in Thomas v H W Thomas Ltd is ringed with difficulties and disadvantages. The Court declined to make an order for liquidation of the Company and appointed a receiver to conduct the affairs of the Company.

Orders