Heartland Seven Investments Limited v Waharoa Industrial Park Limited
[2014] NZHC 202
•19 February 2014
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2014-419-28 [2014] NZHC 202
BETWEEN HEARTLAND SEVEN INVESTMENTS
LIMITED Applicant
AND
WAHAROA INDUSTRIAL PARK LIMITED
First Defendant
ICEPAK NEW ZEALAND LIMITED Second Defendant
Hearing: 19 February 2014 Counsel:
D P Shore and R D Dhanjee for the Applicant
K E Cornege and A J Iles for the First Defendant
K I Bond for the Second DefendantJudgment:
19 February 2014
Reasons:
25 February 2014
REASONS JUDGMENT OF BROWN J
Solicitors: McCaw Lewis Limited, Hamilton Tompkins Wake, Hamilton Harkness Henry, Hamilton
HEARTLAND SEVEN INVESTMENTS LTD v WAHAROA INDUSTRIAL PARK LTD [2014] NZHC 202 [19 February 2014]
Introduction
[1] This dispute involves two factions of shareholders in the company Icepak New Zealand Ltd (“Icepak”). One group of shareholders signed an agreement whereby for a period of six months they agreed not to sell their Icepak shares without the consent of them all.
[2] One such signatory, the defendant (“WIPL”), subsequently agreed to sell half its Icepak holding to persons who are shareholders in Icepak but who are not parties to the agreement. Another signatory, the plaintiff (“Heartland”), brings this proceeding against WIPL alleging breach of contract and seeks an interim injunction.
[3] In accordance with directions of the court, the proceedings have also been served on Icepak and on the two purchasing entities, Grattan Services Ltd (“GIL”) and Intra Services Ltd (“ISL”). At my request Mr Bond made an appearance for Icepak part way through the hearing. After affording him an opportunity to be heard I indicated that I proposed to make an order joining Icepak as a defendant in the proceeding.
[4] Because of the urgency occasioned by the fact that the Annual General Meeting of Icepak was to be held on Saturday 22 February 2014, at the conclusion of the hearing I made the orders which are recorded at the conclusion of this judgment with written reasons to follow. These are my reasons for my decision to issue those orders.
Material facts
[5] Icepak operates a number of coolstore facilities around New Zealand. Both Heartland and WIPL are shareholders in Icepak and there are a total of 28 share parcels.
[6] Some history of Icepak is related in the affidavit of Mr Van Eden who was a founding director of the Icepak group of companies in 1989 but ceased to be a director (and secretary and share registrar) of Icepak in September 2013. In particular he refers to what he describes as Icepak’s success story in growing from a
minor one location coolstore and an insignificant business into a major force controlling and operating seven coolstore locations with an annual turnover in 2013 of $24m. He also describes the significant financial implications as a result of a fire at Icepak’s Tamahere coolstore in April 2008 and the fact that by 2013 Icepak had finally succeeded in putting the effects and costs of the Tamahere fire behind it with a resumption of its expansionary path.
[7] He explains that during late 2013 a struggle became apparent between two factions of Icepak shareholders, one faction wanting to liquidate its shareholding (for the apparent reason of the shares having been restored to a realistic value in excess of $3 per share) and a second faction which realised the further growth potential of Icepak and wanted to carry the company forward to take advantage of that potential.
[8] Mr Van Eden explains that he was aware of that struggle and that he was firmly a member of the second faction whereas Heartland was firmly in the first camp.
[9] Mr Max Toy, a director of Heartland, deposes that Heartland had been concerned for some time about the governance of Icepak, its direction in ownership and an asserted degree of influence of a family related shareholding. Heartland was keen to exit Icepak and suggested a plan for swapping its shareholding for an Icepak asset. Discussions took place from which it became clear that there was a group of shareholders interested in exploring that option. According to Mr Toy the group represented approximately 53 per cent of Icepak’s shareholding.
[10] A document entitled “Letter of Understanding”, dated 15 November 2013, was signed by Heartland, WIPL and four other shareholders of Icepak, namely I Slight & R Wells, G Scown, S Scown and Jamsac Investments Ltd who were referred to collectively in the document as “the Participants”. The Letter of Understanding included the following clauses:
The Participants each agree that from the date of this letter:
(a) They will not sell, transfer or mortgage their shares (or negotiate for such matters) without the consent of all other Participants.
(b) The Participants appoint Heartland Seven Investments Limited (or another person unanimously agreed on) to negotiate with Icepak Group Limited and its shareholders other than the Participants, and to coordinate:
(i) the swap of all of the Participants’ shares in Icepak Group Limited in exchange for Icepak Group Limited transferring the Icepak land and buildings at Waharoa A (aka Waharoa Coolstore); or
(ii) any other restructure option for the Participants shareholding in Icepak that arises from such negotiations.
(c) The participants consent to and authorise Heartland Seven to negotiate and carry out on behalf of the Participants such transactions as arise under (b), and the Participants will each by (sic) bound by those transactions and do all things required to complete those transactions.
(d) Heartland Seven Investments Limited will at all times ensure that the Participants are all kept informed and advised of communications, negotiations and decisions concerning Icepak Group Limited and the Participants’ shareholding in Icepak.
(e) Unless the Participants agreed to extend it, the agreement described in this letter will expire 6 months from the date of this letter, and no Participants will be bound by this letter after that date.
(f) They will be bound by this letter as between each other in addition to the Icepak Group Limited constitution. This letter will bind each Participant when signed, and may be signed in scanned counterparts.
[11] Mr Toy explained that the intention was that the six shareholders would take a united approach and attempt to negotiate the sale of their shares in exchange for one of the buildings owned by Icepak or any other initiative that could achieve an exit for the group at fair value. The importance of having all the Participants aligned with that approach was that the total combined shareholding constituted 52.62 per cent which was strategically beneficial.
[12] Mr Stephen Stark, who is a shareholder of Jamsac Investments Ltd, deposes that prior to the signing of the Letter of Understanding there were numerous discussions among various members of the Participants over a number of weeks and they were all agreed on the best way forward. The group called a meeting on
27 November 2013 by which time all the Participants other than WIPL had signed and returned a counterpart of the Letter of Understanding.
Signature of the Letter of Understanding by Mr Clothier
[13] Mr Toy deposes that he visited Mr Clothier of WIPL at his yard on the way to the meeting of the group on 27 November 2013. He deposes that they discussed the need to stick together and the fact that the legal agreement was to give certainty in negotiations. He states that Mr Clothier acknowledged this and signed a copy of the Letter of Understanding in Mr Toy’s presence.
[14] Mr Clothier deposes that in November 2013 he was approached by Mr Toy who indicated that he had put together a small group of major Icepak shareholders in order to negotiate an arrangement whereby the Waharoa coolstore assets would be split from the other Icepak assets. Mr Clothier states that he was interested in the Toy proposal and indicated his interest accordingly. He then says:
9.Mr Toy then returned the same or next day and offered a one page paper which he asked me to sign. I am reading blind, so Mr Toy needed to show me where to sign. I don’t recall any discussion of terms of the document.
10.Given that I am reading blind, I normally rely on my wife and co- director Rose to read documents to me but in this instance I signed the piece of paper given my understanding of the prior discussion with Mr Toy. Mr Toy never mentioned that the letter of understanding contained a restriction on the sale of WIPL’s Icepak shares.
Purported sale of 200,000 Icepak shares by WIPL
[15] Mr Clothier deposes that on or about 17 December 2013 he met with Mr Wayne Grattan of GIL and Mr and Mrs Van Eden at which time Mr Clothier intimated his desire to sell some of WIPL’s Icepak shares. Mr Van Eden deposes that Mr Grattan and the Van Edens decided that GIL should purchase 100,000 shares from WIPL and that ISL would purchase the other 100,000.
[16] On 18 January 2014 (in his second affidavit Mr Van Eden explains that the reference to 17 January in his (and Mr Clothier’s) earlier affidavits was an error) Mr and Mrs Clothier met with Mr and Mrs Van Eden. The Van Edens brought with them completed share transfer forms and, Mrs Clothier having read the details of the transfer forms to Mr Clothier, the Clothiers agreed to accept the deal. Mr Van Eden provided two cheques, one from GIL and the other from ISL.
[17] Mr Clothier claims that he had no appreciation that the Letter of Understanding which he signed contained a restriction on WIPL selling any of its holding in Icepak. Despite Mr Clothier’s statements in his second affidavit it is not easy to reconcile his stance with the evidence of Mr Toy as to the several communications with Mr Clothier in January 2014 and the fact that a copy of the minutes of the meeting of 27 November 2013 was sent to Mr Clothier. However resolution of those contradictions is a matter for trial.
The mechanism for the transfer of shares in Icepak
[18] Subject to any limitation or restriction on the transfer of shares in a company’s constitution, a share in a company is transferable.1 A share is transferred by entry in the share register in accordance with s 84.2
[19] Company constitutions not infrequently constrain shareholders’ freedom to transfer their shares. One method of doing so is for the constitution to give the directors the power to decline to approve and register a proposed transfer. Such a provision is contained in the constitution of Icepak at paragraph 5.4.1 which states that the Board may within 30 working days of the receipt of a transfer of shares refuse or delay the registration of a transfer in certain specific circumstances. One such circumstance is if the Board considers that to effect the transfer would result in a breach of the law.
[20] On 22 January 2014 Mr Van Eden forwarded the share transfers (to GIL and ISL) to Ms Garland (who had replaced Mr Van Eden as Icepak’s Secretary) and provided her with details as to what was required in order to register the transfers. In his advice to her he remarked that as the sale was to existing shareholders Mr Van Eden would not expect the Board of Icepak to refuse to register the transfers.
[21] There is a substantial dispute between deponents from the two factions as to whether GIL and ISL were aware of the restriction imposed by the Letter of Understanding. Mr Grattan denies knowledge. So does Mr Van Eden although he
admits to having “an inkling of what was going on”. On the other side Mr Toy
1 Companies Act 1993, s 39(1).
2 Section 39(2).
strongly refutes the suggestion that Mr Grattan and Mr Van Eden innocently attempted to purchase the WIPL holding with no knowledge of the likely arrangements which he contends bound WIPL. An interim injunction application is not the environment in which to attempt to resolve such a conflict of evidence. That must await a trial.
The cause of action
[22] The statement of claim dated 28 January 2014 pleads one cause of action namely a breach of contract (the Letter of Understanding) by the purported sale by WIPL of the 200,000 Icepak shares to GIL and ISL.
[23] In addition to a declaration of breach of contract Heartland seeks orders (in summary):
(a) that WIPL withdraw any application for the transfer of shares in
Icepak;
(b) that WIPL takes no further action in breach of the Letter of
Understanding; and/or
(c) specific performance by WIPL of its obligations under the Letter of
Understanding.
[24] No statement of defence has yet been filed. However the notice of opposition includes the following contention:
[WIPL] says it was induced to sign the Letter of Understanding by misrepresentation by or on behalf of [Heartland] and that it is entitled to cancel the agreement as the effect of the misrepresentation was substantially to increase the burden to it under the Letter of Understanding.
[25] The second affidavit of Mr Clothier annexed a letter dated 18 February 2014 giving notice of cancellation of the Letter of Understanding on the grounds of Mr Toy’s alleged misrepresentation as to the content and the terms of the Letter of Understanding.
The scope of the interim orders sought
[26] The interim orders originally sought mirrored those in the statement of claim set out at [23] above.
[27] In the notice of opposition WIPL responded to each of those forms of order. It contends that order (a) seeks to restrain conduct which has already occurred and is in reality a mandatory injunction. WIPL states that it is not in a position to comply with the orders sought as the sale of shares and submission of share transfers has already occurred.
[28] Order (b) is said not to be necessary as WIPL has undertaken not to sell, transfer or mortgage its remaining 200,000 Icepak shares without the consent of the Participants named in the Letter of Understanding pending resolution of the dispute.
[29] The granting of order (c) would in WIPL’s view in effect be the grant of final relief in circumstances where the enforceability of the Letter of Understanding is disputed.
[30] In my view there is substance in those points. However the focus of the Heartland application then moved to the issue of the exercise of the voting rights related to the WIPL Icepak holding. This was foreshadowed in an affidavit of Mr Stark in which he drew attention to the implications of the exercise of the voting rights associated with the various shareholdings and the danger of a change in the structure of the Board of Icepak.
[31] He suggests that not only is it critical that Icepak does not give effect to any transfer but also that the assistance of the Court is required to ensure that WIPL does not defeat the purpose of the Letter of Understanding by either giving a proxy or voting in a manner inconsistent with the intent of the Letter of Understanding.
[32] Mr Stark made the point that, while the Letter of Understanding does not specifically refer to voting rights, in his view it would clearly be inconsistent with the nature and spirit of the Letter of Understanding if a member of the group could vote contrary to what the group was trying to achieve or simply give their proxy
away. The same view was advanced in affidavits sworn by Mr Slight, Mr G Scown and Ms S Scown.
[33] Reflecting that approach, early on the morning of the hearing Heartland filed a memorandum in which it refined the interim orders which it sought as follows:
If the shares in question are deemed to be within the control of WIPL:
(a) That WIPL do all things necessary to retain/obtain its shareholding in Icepak New Zealand in terms of ownership and control as it stood at 15 November 2013.
(b) That WIPL take no further actions in breach of the Agreement dated
15 November 2013, including but not limited to:
(i) That it will not sell, transfer or mortgage their shares (or negotiate for such matters), without the consent of all other participants to the Agreement;
(ii) That the defendant does not breach the Agreement by voting in a manner inconsistent with the Group; and/or
(iii) Does not provide a proxy transferring the effective voting rights of the shares to any party, other than one associated with the Group.
(c) An order of specific performance that the defendant complies with its obligations under the Agreement, including but not limited to doing all things necessary to enter into a limited partnership agreement or any such similar arrangements at the request of the Group.
[34] The critical changes were in (b)(ii) and (iii). A parallel form of order was sought in the event that the shares in question were deemed to be within the control of GIL and ISL.
[35] Clearly the Letter of Understanding does not contain an express term purporting to restrain the manner of exercise of the voting rights of the Participants. However the Heartland position was that such a term was necessarily implicit having regard to the terms of paragraphs (b) and (c). WIPL’s position in response was two fold: first, that the Letter of Understanding did not contain any provision constraining the exercise of a Participant’s voting rights; alternatively, even if the Letter of Understanding was capable of placing a degree of constraint on a
Participant’s voting rights in some situations, such a constraint did not extend to the
exercise of a Participant’s right to vote for directors.
Interim injunction application: principles
[36] Applications for interim injunctions are to be resolved by reference to the well established principles articulated in Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd3 which involve three steps:
(a) Is there a serious question to be tried?
(b)Does the balance of convenience favour the grant or refusal of an interim injunction?
(c) Where does overall justice lie?
Serious question to be tried
[37] The notice of opposition dated 12 February 2014 acknowledged that there is a serious question to be tried on the issue (which was then the apparent focus of the dispute) whether the sale of WIPL’s 200,000 Icepak shares was in breach of the Letter of Understanding. It went on to state that there is real doubt as to the enforceability of the Letter of Understanding and at that point made reference to the alleged misrepresentation quoted above.4
[38] So far as Heartland’s new contention is concerned, namely that the Letter of Understanding placed a constraint on the exercise of voting power by the Participants, Ms Cornege advised that WIPL did not accept that there is a serious question to be tried. In the course of argument WIPL’s position was revised to the extent that it accepted that clause (c) of the Letter of Understanding might raise a serious question as to whether a Participant might be required to vote to approve a transaction qualifying under paragraph (b)(i) or (ii) to the extent that that was
necessary to complete the transaction.
3 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).
4 At [24].
[39] I consider that the concession is properly made that there is a serious question to be tried on the issue whether the Letter of Understanding constrains the sale by the Participants of their shares in Icepak.
[40] I do not accept that there is a serious question to be tried that the Letter of Understanding constrains the exercise by Participants of their voting rights in connection with their Icepak holdings on each and every issue. Accordingly I reject Heartland’s broader contention to that effect.
[41] However I do consider that there is a serious question to be tried on the narrower issue whether it is a necessary implication of paragraphs (b) and (c) of the Letter of Understanding that the Participants would not exercise the voting rights in connection with their Icepak holdings against any transactions within paragraph (b)(i) and (ii).
The balance of convenience
[42] There was a substantial amount of affidavit evidence filed by both sides. Much of it was not directed to the balance of convenience issues but instead outlined the future aspirations of the two factions.
[43] At least in part that volume of evidence directed to the substantive issue was a consequence of Heartland’s submission that this was a case where relief in the nature of final relief should be granted notwithstanding that the application was only one for interim orders. It was contended for Heartland that in appropriate cases a court can issue a mandatory interim injunction which is in effect in the form of specific performance including an order that a term of a contract be performed.5
Inevitably WIPL and Mr Grattan responded in kind.
[44] The type of order which Heartland seeks is not one which I am prepared to entertain on an application for interim relief. In general it is an injustice to grant an
interlocutory injunction if that effectively precludes a defendant from having its
5 Citing ICF Spry The Principles of Equitable Remedies (8th ed, Thomson Reuters, Sydney, 2009)
at 537-538 and Astro Exito Navegacion SA v Southland Enterprises Co Ltd (No 2) [1982] QB
rights determined in a full trial.6 I consider that there would be such a risk in this case. The approach that I take is that any orders made at the interim stage should only interfere with the affairs of Icepak to as less an extent as possible.7
[45] As a preliminary to addressing the balance of convenience considerations I note WIPL’s undertaking concerning the 200,000 Icepak shares which it continues to hold. That undertaking is that WIPL will not sell, transfer or mortgage its remaining
200,000 Icepak shares (or negotiate for such matters) without the consent of the
Participants named in the Letter of Understanding pending resolution of the dispute.
Adequacy of damages for the plaintiff
[46] I address this issue from the perspective of not only Heartland but also of all the Participants in the Letter of Understanding with the exception of WIPL.
[47] The conduct to which the statement of claim relates is the sale of 200,000
Icepak shares by WIPL to GIL and ISL. However in the context of the consideration of the balance of convenience it is the right associated with ownership of the shares that is the focus, namely the voting entitlement. The reason for this is that the balance of voting power between the two factions appears to be quite finely balanced.
[48] The 200,000 shares represent approximately 4.6 per cent of the shares in Icepak. Prior to the WIPL transactions of which complaint is made, the Participants in the Letter of Understanding represented approximately 52.62 per cent of the Icepak shareholding. Mr Toy deposes that the effect of WIPL’s proposed sale to GIL and ISL creates a significant change in effective control of Icepak where the combined shareholding would then drop below 50 per cent.
[49] Mr Grattan acknowledges the arithmetic but denies that the Letter of
Understanding gave the Participants effective control of the company. He acknowledges that the purchase by GIL and ISL (which are related family entities)
6 Cayne v Global Natural Resources plc [1984] 1 All ER 225 (CA) at 238.
7 Trounce v NCF Kaiapoi Ltd (1985) 2 NZCLC 99,422 (HC).
would result in an increase in their combined holding from 40 per cent to 44.5 per cent but observes that that is not a majority of Icepak and says it is incorrect to assert that Mr Grattan will control the company.
[50] It is my view that, having regard to the finely balanced shareholding combinations in Icepak, damages would be unlikely to be an adequate remedy for Heartland and the other Participants (not including WIPL) in the event that there were any significant changes to the Board’s structure or Icepak’s structural arrangements pending the hearing of the substantive claim.
Adequacy of damages for the defendant
[51] Surprisingly Mr Clothier’s affidavit does not engage at all with the balance of convenience issue. The notice of opposition, albeit with reference to order (a) in [23] above, states that if the order was made serious ongoing harm, which cannot be addressed by damages, would be caused to the defendant. However no particularity was provided.
[52] Given that WIPL has already received payment of $600,000 for the shares, I do not see that it would be likely to suffer irreparable loss pending trial by an order that prevented the registration of the transfers. There is the prospect that it might suffer loss as a result of any order which placed a constraint on the voting rights associated with either the Icepak shares it has sold or those which it continues to retain.
[53] If loss was suffered by WIPL as a consequence of an interim order then it has the benefit of an undertaking as to damages from Heartland which, on the basis of the evidence of Mr Toy, I consider is a sufficient undertaking. This is notwithstanding the suggestion in the first affidavit of Mr Van Eden that Heartland would need to liquidate its shareholding in Icepak in order to meet an award of damages. I recognise however that quantification of such damage might not be an easy task.
The status quo
[54] In American Cyanamid8 Lord Diplock said that, all other things being balanced, it is a counsel of prudence to take such measures as are calculated to preserve the status quo. However, as the cases demonstrate, exactly what constitutes the status quo is often difficult to determine. It depends very much on the particular circumstances of the case.
[55] In the present case I consider that the status quo is best reflected in the shareholding arrangements that prevailed subsequent to the execution of the Letter of Understanding and prior to the sale by WIPL of its 200,000 Icepak shares to GIL and ISL.
Effect on third parties
[56] Both the purchasers of the WIPL Icepak holding explained in their affidavits the implications for them of an interim order.
[57] Mr Grattan explains that GIL has obtained finance and structured its arrangements in order to purchase the shares from WIPL. He claims however to be more concerned about the impact on Icepak than on GIL. He says that if relief is granted along the lines of Mr Stark’s affidavit then Heartland will obtain effective control over Icepak, in his opinion by a side wind. To my mind however that is a quarrel with the implications of the Letter of Understanding itself, a question which can only be resolved at the substantive hearing.
[58] Mr Van Eden states that it would be prejudicial for ISL to have the transaction unwound. He also expressed the view that granting an injunction would not be in the best interests of Icepak as a whole.
[59] I do not consider that the position of the two purchasers carries significant weight in the balance of convenience analysis. I consider that both Mr Grattan and Mr Van Eden are likely to have had some foresight of the implications of their
intended share acquisitions. Furthermore any interim order can only apply until the substantive hearing or 15 May 2014, whichever first occurs.
Conclusion on balance of convenience
[60] Having regard to the various factors discussed above it is my conclusion that the balance of convenience favours the granting of interim orders that generally aim to preserve the status quo reflected in the arrangement given effect to by the Letter of Understanding.
Overall justice of the case
[61] The two broad questions already considered are not exhaustive. The Court of Appeal in Klissers directed that judges should finally stand back and consider where the overall justice lies. In my view in the particular circumstances of Icepak, with its two factions of shareholders and the quite finely balanced cumulative holdings, overall justice requires that interim orders should be made pending trial or the expiration of the Letter of Understanding on 15 May 2014 which reflect, as far as possible, the situation reached following the execution of the Letter of Understanding.
The form of orders
[62] That outcome requires that there be an interim injunction restraining Icepak from registering the transfer of the 200,000 Icepak shares from WIPL to GIL and ISL. Any concern about a sale of the balance of WIPL’s holding in Icepak is already satisfactorily addressed by the undertaking given by WIPL referred to above.9
[63] It is necessary however to also address the issue of voting rights in connection with both tranches of the WIPL holding in Icepak. In the case of the
200,000 shares which WIPL retains and has not attempted to sell I consider that it will be sufficient to make an order that the voting rights in connection with those shares shall not be exercised by WIPL against any transaction of a nature within the scope of paragraph (b) of the Letter of Understanding. There will be no further
constraint on the exercise of the votes associated with those 200,000 shares. For the avoidance of doubt the order will not constrain the manner of exercise of those votes on the issue of election of directors.
[64] However I do not consider that it is sufficient to make an interim order confined in that manner in respect of the 200,000 shares which WIPL has purported to sell to GIL and ISL. In theory as a consequence of the order restraining registration of the transfers, WIPL would retain the right to exercise the votes related to those 200,000 shares. However the reality is that in casting those votes WIPL is likely to defer to the views and wishes of GIL and ISL for the reason that WIPL has already received $600,000 from GIL and ISL as the consideration for the sale of those shares.
[65] That reality in my view is reflected in Ms Cornege’s submission that WIPL would regard itself as holding those shares on trust for GIL and ISL. Indeed WIPL’s written submissions stated that the purchasers’ position is that they have beneficial ownership of the shares sold to them and that WIPL is obliged to vote those shares in accordance with the purchasers’ instructions.
[66] In those circumstances in my view it would not be realistic to expect that Mr Clothier would exercise the voting rights in connection with those shares independently of the views of Mr Grattan and Mr Van Eden. Consequently in relation to the 200,000 shares which WIPL has purported to sell there will be an order that those shares are not to be voted by any person for the time being.
[67] As the Letter of Understanding is only for six months duration the interim orders will apply until 15 May 2014 or the decision on the hearing of the substantive matter, whichever first occurs.
[68] At the conclusion of argument but before I made final orders I indicated to counsel the tenor of the orders which I had in contemplation and I offered them the opportunity to comment upon (but not relitigate) them. Ms Cornege suggested to me that the order which effectively freezes the voting rights in connection with the
200,000 shares which WIPL has purported to sell was punitive as far as WIPL is concerned.
[69] That is certainly not the intention of the order. I am confronted with a situation where, if either faction is permitted to vote those shares, then there is a real likelihood that that may affect the status quo as I see it. The rationale behind that order is my perception that the fairest course for both sides is that the voting rights in connection with that tranche of shares should be taken out of play, at least for the time being. Such a course appeals to me as one calculated to achieve the “balance of
the risk of doing an injustice”.10
[70] I make the following orders:
(a) Icepak is joined as the second defendant. I do that for the purpose of making the order restraining the registration of share transfers;
(b)Pending the trial in this proceeding or 15 May 2014, whichever first occurs, the Board of Icepak shall refrain from registering the transfer of 100,000 shares from the defendant to GIL and the transfer of
100,000 shares from the defendant to ISL;
(c) Pending the trial in this proceeding or 15 May 2014, whichever first occurs, neither the defendant nor any other person shall exercise the votes in connection with the 200,000 shares in Icepak which the defendant has purported to sell to GIL and ISL;
(d)Pending the trial in this proceeding or 15 May 2014, whichever first occurs, in the event that the defendant has occasion or opportunity to exercise the votes in connection with the remaining 200,000 shares it holds in Icepak in relation to either of the type of transactions referred to in paragraph (b) of the Letter of Understanding, the defendant shall not exercise those votes in opposition to a unanimous voting position
taken by the other five participants to the Letter of Understanding.
10 See May LJ’s “substantially less elegant” phrase in Cayne v Global Natural Resources, above n 6.
For the avoidance of doubt a vote on the election of directors is not within the scope of the restraint in that previous sentence;
(e) Leave is reserved to the plaintiff, defendant or Icepak to apply further in the event that a question arises as to whether a transaction comes within the type of transaction in paragraph (b) of the Letter of Understanding. That is intended to address the situation of the foreshadowed limited partnership proposition; and
(f) Leave is reserved to the plaintiff, the defendant or Icepak to apply for further directions in the event that there is any relevant significant change in circumstances from that reflected in these reasons for judgment.
[71] Costs are reserved.
Brown J
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