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Gavigan v Eichelbaum

Gavigan v Eichelbaum

Case [2017] NZCA 412 19 September 2017

Oppressive Conduct

Misleading and Deceptive Conduct

Shareholders' Rights

Company Law & Corporate Governance

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA237/2016
CA357/2016
[2017] NZCA 412

BETWEEN

ANTHONY JOHN GAVIGAN
First Appellant

JOINT ACTION FUNDING LIMITED
Second Appellant

AND

JOHN REVANS EICHELBAUM
Respondent

Hearing:	15 March 2017 (further submissions 27 and 28 March, 2 and 12 June 2017)
Court:	Kós P, French and Asher JJ
Counsel:	A R Gilchrist and G R Abdale-Weir for Appellants Respondent in person
Judgment:	19 September 2017 at 3.00 pm
Public Version:	6 October 2017 at 3.00pm

JUDGMENT OF THE COURT
(PUBLIC VERSION)

AThe appeal is allowed.
BThe cross-appeal is dismissed.
C[Deleted in public version].
DThe respondent must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós P)

Joint Action Funding Ltd (JAFL), the second appellant, is a litigation-fund manager. It supported a representative action by investors in Feltex Carpets Ltd (Feltex) against various parties involved in Feltex’s initial public offering (IPO). We will call this the Feltex litigation. The first appellant, Mr Gavigan, is a director of and shareholder in JAFL. Mr Eichelbaum, the respondent, is a barrister. He was formerly part of the investors’ legal team in the Feltex litigation. In consideration for his services he agreed to take a 10 per cent shareholding in JAFL. Mr Eichelbaum claims entitlement to share in JAFL’s “Project Management Fees” under an agreement regulating the relationship between JAFL and the claimants in the Feltex litigation, but claims that Mr Gavigan has in effect allocated those fees to himself.
These claims were substantially upheld by Whata J in the judgment on appeal.[1] In a separate judgment on relief he awarded Mr Eichelbaum damages of $71,174.[2]
[1]E v G [2015] NZHC 824 [Substantive judgment].
[2]E v G [2016] NZHC 1214 [Relief judgment] at [29].
Mr Gavigan and JAFL appeal the substantive judgment. Mr Eichelbaum cross-appeals.

Background

Shorn of inessentials the background facts are these.
In June 2004 Feltex issued shares in an IPO. Feltex was liquidated just two years later. Mr Gavigan incorporated JAFL in December 2007 as a litigation-funding vehicle to advance a representative action on behalf of subscribers in the IPO. The Feltex litigation commenced in February 2008. It soon was beset by a raft of interlocutory issues. These engulfed a large portion of the available funds. Mr Gavigan then approached a Mr Hayes. He agreed to underwrite $250,000 of adverse costs risk in return for a 10 per cent shareholding in JAFL.
In mid-2009 Mr Gavigan assembled a new legal team. But he could not afford the fees for a pending interlocutory appeal. In October 2009 Mr Eichelbaum agreed to take a 10-per-cent shareholding in JAFL for the appeal attendances and for his efforts to raise funds for advancing the litigation. The exact terms of their agreement are somewhat opaque, not being reduced to precise written form.
In December 2009 this Court confirmed that Mr Houghton, one of the investors, could advance the investors’ claims in a representative capacity.[3]…

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 Gavigan v Eichelbaum

Details

AGLC: Gavigan v Eichelbaum [2017] NZCA 412
Case: [2017] NZCA 412
Decision Date: 19 September 2017 at 3.00 pm

CaseChat Overview and Summary

The Court of Appeal allowed the appeal by Anthony John Gavigan and Joint Action Funding Limited (JAFL) and dismissed the cross-appeal by John Revans Eichelbaum. The Court found that the High Court judgment was in error with regard to the misleading and deceptive conduct under s 9 of the Fair Trading Act 1986. The Court held that Mr Eichelbaum was not misled or deceived by Mr Gavigan's representations as there was no evidence that Mr Gavigan did not intend to conform to his representations at the time they were made. The Court also found that the High Court judgment erred in concluding that relief should be granted under s 174 of the Companies Act. The Court held that s 174 could not avail Mr Eichelbaum as he was not a shareholder or a beneficially entitled shareholder during the period when the alleged oppressive conduct occurred. The Court dismissed the appeal ground concerning the estoppel defence and the appeal ground concerning the remoteness of costs claimed in respect of the counterclaim. The Court made suppression orders in relation to certain information contained in the High Court judgment until further order.

Orders