Greymouth Holdings Limited v Jet Trustees Limited

[2012] NZHC 1944

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-5309 [2012] NZHC 1944

BETWEEN  GREYMOUTH HOLDINGS LIMITED First Plaintiff

ANDR M P DUNPHY Second Plaintiff

ANDP H & J A MASFEN Third Plaintiffs

ANDJET TRUSTEES LIMITED First Defendant

ANDK G STURGESS Second Defendant

ANDJOHN STURGESS & ASSOCIATES LIMITED

Third Defendant

ANDGREYMOUTH PETROLEUM HOLDINGS LIMITED

Fourth Defendant

CIV-2011-404-5442

AND BETWEEN            J G STURGESS First Plaintiff

ANDJET TRUSTEES LIMITED Second Plaintiff

ANDR M P DUNPHY First Defendant

ANDP H MASFEN Second Defendant

ANDGREYMOUTH PETROLEUM HOLDINGS LIMITED

Third Defendant

GREYMOUTH HOLDINGS LIMITED V JET TRUSTEES LIMITED HC AK CIV-2011-404-5309 [3 August

2012]

Hearing:         3 August 2012

Counsel:         J A Farmer QC and M D O'Brien for Plaintiffs in 5309 and

Defendants in 5442
MA Corlett and R D Butler for Defendants in 5309 and Plaintiffs in
5442

Judgment:      3 August 2012

ORAL JUDGMENT OF RODNEY HANSEN J

Solicitors:          Bell Gully, P O Box 1291, Wellington 6140 (Email:  [email protected] ) Stafford Klaasen, Auckland

(Email:  [email protected])

Anderson Creagh Lai, P O Box 106-740, Auckland 1143 (Email:  [email protected] )

Copy to:             J A Farmer QC  [email protected]

M A Corlett  [email protected]

Introduction

[1]      These proceedings, which are to be heard together in a trial commencing on

8 October 2012, arise out of serious conflicts between the two principal groups of shareholders in Greymouth Petroleum Holdings Limited (GPHL).  The plaintiffs in

5309 (the Dunphy/Masfen interests) and the plaintiffs in 5442 (the Sturgess interests) each allege oppressive conduct on the part of the other.  The factual background and issues  arising  in  the  proceeding  are  set  out  in  more  detail  in  my  judgment  of

19 December 2011.[1]

[1] Greymouth Holdings Ltd v Jet Trustee Ltd HC Auckland CIV-2011-404-5309.

[2]      There are two applications before me today:

(a)      An application by the Dunphy/Masfen interests for an order fixing the valuation date for an arbitration which is to value the shares in GPHL; and

(b)      An application by the Sturgess interests to join further parties.

Application to fix valuation date

[3]      In April 2012, the Dunphy/Masfen interests applied for orders:

(a)      Staying  those  parts  of  the  two  proceedings  that  relate  to  the determination of the fair market value of the shares in GPHL and other companies in the group; and

(b)That the valuation issue be resolved by way of a valuation arbitration under a shareholder agreement between the parties.

The application was brought under High Court Rule 7.80 which permits the parties to a proceeding to agree to arbitrate their dispute, or any part of it, at any time during

the course of the proceeding.

[4]      The parties subsequently consented to orders that, in terms of the application, the valuation issues be resolved by way of arbitration.   The parties agreed that certain matters would be incorporated in the arbitration agreement, including the following:

(c)       The  date  of  valuation  is  to  be  agreed  by  the  parties.    Failing agreement within 14 days, the Court shall determine the date or dates of valuation.

[5]     The parties have been unable to agree on a date of valuation.   The Dunphy/Masfen interests have pressed for the date to be 31 March 2012.   The Sturgess interests, while not rejecting the position of the Dunphy/Masfen interests, have contended in the course of negotiations for 29 November 2010.   The Dunphy/Masfen  interests  seek  an  order  that  the  sole  valuation  date  should  be

31 March 2012.

[6]      The   Sturgess   interests   argue   that   this   Court   has   no   jurisdiction   in interlocutory proceedings to direct the date at which the shares are to be valued. However, in the event that I were to take a contrary view, Mr Corlett submits that, in addition to the date of 31 March 2012, the shares be valued as at 1 January 2011.

[7]      Mr Corlett’s submission that there is no jurisdiction to make the orders on an interlocutory basis is premised on the basis that the consent order, as it concerns the date of valuation, should be interpreted as meaning that if the parties are unable to agree, the date or dates of valuation should be determined as part of the substantive proceedings.

[8]      I do not accept that is what was intended by the consent order or how the words should be interpreted in their plain meaning.   I am satisfied that what was intended was that if the parties were unable to agree, this Court should determine in advance of trial the date or dates of valuation.  That would not be a determination made as part of the substantive proceeding and would not bind the trial Judge as to the date of valuation should a sale of shares at a fair value be part of the relief granted to either of the parties.

[9]      It seems to me clear that what was intended was that the arbitration should be undertaken for the purpose of providing an efficient and expedited means of establishing the fair value of the shares in anticipation of the possibility that a sale of the shares may be ordered as part of the relief granted.  Unless agreed otherwise, the date of valuation used for the purpose of the arbitration, would not bind the Court in the substantive proceeding.

[10]     On that basis, it remains for me to determine the date or dates that  are appropriate.  There is, as I understand it, no opposition on the part of the Sturgess interests to a valuation as at 31 March 2012.   However, Mr Corlett argues for a valuation also to be carried out as at 1 January 2011 as a date proximate to the time at which the Sturgess interests allege they became subject to acts of oppression by the Dunphy/Masfen interests and also because it is at the date on which GPHL Holdings carries out an annual assessment of its reserves.  Mr Corlett does not accept that it would be appropriate for the valuation to be moved to 31 March 2011, at which date the final accounts of GPHL are prepared, although he acknowledges that the  company’s  results  for  and  position  as  at  31 March  2011  would  have  some relevance to and be utilised for the purpose of the valuation at the earlier date.

[11]     For myself, I would have thought that the logical time at which the earlier valuation should be carried out is 31 March 2011.   That is on the basis that the reserve assessment carried out on 1 January 2011 would apply throughout the calendar  year until  superseded  by the  assessment of 1  January 2012.    In  other respects also I would not have thought that there would be any material change to affect a valuation in the company’s position between 1 January and 31 March 2011. However,  if  it  is  the view of the Sturgess  interests  that  the appropriate date is

1 January 2011, I consider their wishes should be respected.   I have no way of knowing what, if any, the appropriate date for valuation might be.  Conceivably, it could be neither of the dates nominated by the parties.  In the end, I consider that the pragmatic and the just solution is to ensure that a valuation is obtained for those dates which presumptively the parties will respectively contend at trial to be the appropriate date for valuation.

[12]     On that basis, I make an order that the dates for valuation, for the purpose of the order made on 18 May 2012 in terms of paragraph 4(c) of the joint memorandum of counsel is 1 January 2011 and 31 March 2012.

Application for joinder

[13]     The Sturgess interests have applied in the 5442 proceeding for the joinder of John Sturgess & Associates Limited as a third plaintiff and as additional defendants shareholders in GPHL who are not already parties to the proceeding.

[14]     Although initially opposing the application, principally on the grounds of the lateness of the application and the failure to explain the delay, the Dunphy/Masfen interests do not oppose joinder of the new parties, provided that the future conduct of the proceeding is not jeopardised.

[15]     Their  concerns  relate,  first  of  all,  to  the  October  fixture.     There  is understandable anxiety that joinder should not jeopardise the fixture.  That is entirely understandable.  As presently advised, however, there appears to be no reason why joiner should interfere with the fixture taking place as scheduled.

[16]   The Dunphy/Masfen interests have proposed orders that the minority shareholders to be joined as defendants should not be required to file any pleadings in the proceeding, nor that they be required to provide discovery absent a specific order for targeted and limited discovery.

[17]     They are not, of course, obliged to file pleadings and it appears likely that if they choose to do so, the additional defendants would be required to plead only to one allegation in the draft amended statement of claim.

[18]     Mr Corlett has explained candidly that there is no present intention on the part of the Sturgess interests to seek discovery from the additional parties.   That would  arise  only  in  the  event  that  documents,  which  are  to  be  sought  from Mr Dunphy, are not discovered and it is deemed that their non-disclosure warrants what  would  be  an  application  for  particular  discovery  against  the  additional

defendants.  The proposed further discovery concerns correspondence between Mr Dunphy and the minority shareholders prior to 4 February 2011 alerting them to steps proposed to be taken against Mr Sturgess and of any shareholders agreement to which they and the Dunphy/Masfen interests are parties.   There appears to be no reason to fear that this further limited discovery will affect progress towards the substantive hearing.

[19]     Finally, as a condition of joinder, the Dunphy/Masfen interests propose that either the Sturgess interests provide adequate security for costs in favour of the additional defendants or that they be granted leave to bring an application for an order for security for costs on an expedited basis.  The need for the security is said to arise as a result of indications that the Sturgess interests are in financial difficulty.

[20]     I do not consider it appropriate to make the provision of security a condition of  the  grant  of  leave.    Nor  is  it  necessary  at  this  stage  to  grant  leave  for  an application for security to be brought if seen to be appropriate.  I simply note that an application for security is a possible consequence of joinder.  Whether an application is brought or not will be a matter for the added defendants to consider following joinder.    I do  not,  however,  envisage  that  such  an  application  would  have  any material effect on progress towards the substantive hearing.

[21]     On that basis, I make orders in terms of the plaintiffs’ amended application of

10 July 2012.

[22]     Joinder must proceed expedititiously.  The draft third amended statement of claim is to be filed by 5.00 p.m. on 6 August.  Service is to be effected promptly with the parties cooperating to ensure that the minority shareholders resident overseas can be served in New Zealand.

Further directions

[23]     The  proceedings  are  adjourned  for  mention  in  the  Commercial  List  on

10 August.

[24]     Costs in relation to both applications are reserved.