Gale v Marlborough Country Limited

[2017] NZHC 922

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-3280 [2017] NZHC 922

BETWEEN

JAYNE MARIE GALE, STEPHEN JOHN

GALE, PETER SCOTT MURPHY AND GARY RICHARD MCMASTER Plaintiffs

AND

MARLBOROUGH COUNTRY LIMITED First Defendant

FREDERICK PAUL PEREIRA Second Defendant

Hearing:	8 May 2017
Appearances:	Mr S Barker and Ms J Maltby for Plaintiffs Mr L Ponniah for Defendants
Judgment:	8 May 2017

ORAL JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

GALE & ORS v MARLBOROUGH COUNTRY LIMITED & ANOR [2017] NZHC 922 [8 May 2017]

[1]      The  plaintiffs  have  applied  for  an  order  pursuant  to  s  241(4)(d)  of  the Companies Act 1993, the just and equitable ground, for an order appointing liquidators to the first defendant.  Prior to the commencement of the hearing today it appeared  that  there had  been  proposals  made by the defendants  in  an  effort  to compromise the proceedings and to achieve a resolution which did not involve the appointment of a liquidator.   However, when those proposals were not apparently accepted, counsel for the defendants, Mr Ponniah placed them before the Court for consideration.  However, as I advised Mr Ponniah, there did not seem to be any way in which the Court would intervene in negotiations between the parties.  If the parties themselves could not reach agreement then the proceeding would have to take its course.

[2]      The brief background concerning this matter is that the defendant company was  incorporated in  2005  for the purpose of acquiring a forestry block  at  Port Underwood.  Since its commencement the management of the company has rested in the hands of the second defendant.  For various reasons the objectives for which the company was incorporated were not achieved.   It has proved not possible for the forest to be felled and sold and the cleared land to be sold off for small holding type sections.  The company has been chronically short of money for some years.  It did not have the additional capital necessary to complete the subdivision.   It was dependent upon income from the forestry to enable it to do that.

[3]      For  various  reasons  the  shareholders  in  the  company  have  formed  two informal groups which view each other with antagonism and suspicion.

[4]      The last time when this proceeding was before the Court for substantive intervention was in February of this year when Bell AJ heard applications for the appointment of interim liquidators.  That application was brought as an interlocutory application to the present proceeding.

[5]      The reason why the plaintiffs sought interim liquidators to be appointed was that they had concerns about the adequacy of insurance that had been taken out for the trees.  The forest was insured for some risks but not for wind damage.  In the

event Mr Barker has told me in his submissions, and this was not contested by Mr Ponniah, it was part way through the hearing of the application for appointment of interim liquidators that counsel for the defendants advised that comprehensive insurance including wind damage indemnity had now been placed with an insurance company.  In the light of that development, understandably, the application was not further pursued.  The plaintiff sought costs and Bell AJ reserved the issue of costs in a minute that he issued that day.  His Honour said:

[14]      I reserve costs on this matter.  I do so for these reasons.  Normally, the plaintiffs as the unsuccessful party would expect any order for costs to be made against them.  I have not ordered them because, to a certain extent, the defendants have saved matters by last-minute action, although they kept the plaintiffs in the dark about that to a large extent.  In my judgment a better view may be able to be taken once the liquidation application has been heard and decided on its merits.

[6]      To resume the narrative concerning the company, it appears to have been common ground between both factions of shareholders that even though the immediate cause for applying for appointment of interim liquidators had been resolved there appeared to be agreement between  the parties (based on the evidence which was filed in the substantive liquidation proceeding) that the company’s continued existence would not serve any useful purpose and that the best outcome would be for the land to be sold.   However the terms upon which that outcome would be achieved were the subject of disagreement.

[7]      The plaintiffs were of the view that the sensible way of resolving matters was for  liquidators  to  be  appointed.     The  second  defendant,  and  the  faction  of shareholders with which he was allied, took the view that the preferable course was not to liquidate the company but to manage the sale of the land through the existing management structures.

[8]      The  plaintiffs  say  they  did  not  agree  with  that  proposal  or  to  a  further suggestion that solicitors associated with the defendants ought to carry out the conveyancing incidental to the sale of the property.

[9]      However, the plaintiffs were not at all satisfied with the proposals which would see the second defendant continue in a management role and which also

contemplated that the chartered accountant who had been involved in preparing financial statements for the company over the years, would continue in that role including applying the proceeds of sale for the payment out of the liabilities of the company.  They also preferred that an independent solicitor be appointed to assist in the sale of the property.

[10]   No agreement was therefore possible and notwithstanding the informal exchanges between the parties the fixture for today was confirmed.

[11]     During the hearing today, though, Mr Ponniah for the defendant indicated that the defendants no longer wished to continue their opposition to appointment of liquidators.   It was said that they considered that this would simply incur more expense and lead to possible appeals.

[12]      On that basis, I am satisfied that the appropriate order to make is the order for appointment of liquidators on the just and equitable ground. There will therefore be an order that John Fisk and Marcus McMillan are appointed liquidators.   The order is timed at 2.32 p.m. as at 8 May 2017.

[13]      That leaves the questions of costs relating to the application for appointment of interim liquidators and the costs for the continuation up to today’s date of the substantive liquidation proceeding.

[14]     Mr Ponniah was of the view that the plaintiffs had not been the successful party in the proceedings both at the interim liquidation stage and the substantive stage.  That submission to my mind focuses on semantic considerations rather than issues of substance.

[15]    The plaintiffs have been vindicated on both occasions in bringing their proceedings and the only reason they did not proceed to judgment was that the defendants conceded the relief sought without necessity for the proceedings continuing to that point.

[16]     In regard to the interim liquidator proceedings, Mr Ponniah advanced the surprising argument that notwithstanding that the second defendant had implicitly accepted the need for more comprehensive insurance, and actually took steps to arrange it at the last minute prior to the hearing of the interim liquidator application, the position his clients took when the matter was called before me was that such insurance had never been required.  I cannot agree with that submission.  Plainly the reason why the opposition to the interim liquidators was vacated was because the parties associated with the second defendant accepted that their position had been in error on the insurance point.

[17]     In my view costs relating to the interim liquidation ought to be awarded in favour of the plaintiffs and I so order.

[18]     The next question is the costs for the preparatory steps prior to the hearing today and the hearing itself.  Mr Ponniah, for the plaintiffs, stressed the fact that his clients had been attempting to put forward a compromise which would be acceptable to the plaintiffs that would avoid the need for a liquidation order being made.   I acknowledge that that is so and that it was sensible for attempts to be made to compromise the proceeding before matters reached the point where a liquidation order would be necessary.  The fact of the matter, though, is that the plaintiffs did not accept the compromise proposals that the plaintiffs put forward and pressed on with their application for appointment of liquidators.  In the end the plaintiffs have been vindicated again by the actions of the defendants in withdrawing opposition to the making of the orders at the last minute.  In my view costs should again be paid by the defendant.

[19]     For the plaintiffs, Mr Barker submitted that the block of shareholders who were aligned with Mr Pereira ought to pay the costs of the proceedings, rather than the company.  Mr Barker drew my attention to the fact that in his decision in  In The Matter of Supscaf Ltd at [151] Heath J made such an order in the following terms:1

[151]    The present dispute is between two groups of shareholders. When a company is placed in liquidation at the suit of a creditor it is appropriate for the company to bear the costs of placing the company in liquidation. That is

1 In The Matter of Supscaf Ltd [2006] 3 NZLR 264

not the position when the contest is between shareholders. In my view, the Boughton interests must pay the costs of the Jenkins/Robins interests on the liquidation proceeding.

[20]     I consider that an order of that kind is apt in this case as well and there will be an order that both orders of costs are to be met by the following shareholders:

i)        Frederick Paul Pereira;

ii)       Dominic Chandran;

iii)      You Seo Lian;

iv)      Chuah Kim Seng;

v)       Francis Brigged;

vi)      Marcus Paul Pereira; and vii)     Sonia Pereira.

[21]     The remaining point concerns the quantum of costs in regard to preparation for today’s hearing.  While the hearing came to a somewhat abrupt conclusion on Mr Ponniah advising that the defendants would not continue with their defence, I accept that it would have been necessary for the plaintiffs to fully prepare for the defended hearing.  They were not, of course, to know that the defendants would be withdrawing their opposition at the hearing.  The appropriate order is that costs will be allowed accordingly with no reduction in the preparation component to reflect the

fact that, in the result, the hearing only continued for one half day.

J.P. Doogue

Associate Judge