Hodder v Baker - [2016] NZHC 2384

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2016-454-92 [2016] NZHC 2384

UNDER the Companies Act 1993

BETWEEN

WALLACE DOUGLAS HODDER AND ANN ADELE HODDER

Plaintiffs

AND

CHRISTOPHER DUNCAN BAKER AND KATHRYN ANN BAKER

First Defendants

KADD FARM LIMITED Second Defendant

Hearing:
5 October 2016

(Heard at Wellington)

Counsel:

M E Parker for Plaintiffs
J W Maassen and S F Clark for Defendants

Judgment:

6 October 2016

JUDGMENT OF ELLIS J

I direct that the delivery time of this judgment is
5 pm on the 6th day of October 2016

HODDER v BAKER [2016] NZHC 2384 [6 October 2016]

[1] The plaintiffs, Mr and Mrs Hodder, are farmers. They are also the directors of Kadd Farm Ltd (No. 2148469) (“KFL”).1 They have a 70 per cent shareholding in KFL.

[2] KFL was incorporated on 10 July 2008, essentially as a joint venture company between the Hodders and the defendants Mr and Mrs Baker. Mrs Baker is the Hodders’ daughter.

[3] The intention in creating KFL was to purchase a farm property which Mr and Mrs Baker would work and establish and enhance as a farming operation. To that end, in August 2008 KFL acquired a rural property situated at 3361 State Highway 2, Takapau near Waipukurau in the Hawke’s Bay. This property is known as “Heron Creek”.

[4] The shareholdings in KFL since its incorporation have been: (a) Mr Hodder - 4200 shares;
(b) Mrs Hodder - 4200 shares;

(c) Mrs Baker - 1800 shares; and

(d) Mr Baker - 1800 shares.

[5] KFL paid $4.3 million in total for Heron Creek. The acquisition was funded by:

(a) a loan of $1.2 million from the BNZ; and

(b) a loan from Belvue Downs Ltd (BDL) of $3.1 million.

[6] Both loans were secured by way of mortgage over the Heron Creek property.

1 Until recently the defendants were also directors of KFL.

[7] BDL is wholly owned by the Hodder Family Trust. The directors of BDL are Mr and Mrs Hodder, and its 10,000 shares are held jointly by the trustees of the Trust, namely the Hodders and L W Nominees Ltd, a trustee company belonging to the accounting firm, BDO.

[8] On about 1 April 2009, BDL purchased the adjacent 80 hectare property known as Iramutu. Both Heron Creek and Iramutu were leased to Mr Baker’s company, DB Contracting Agriculture Ltd (DBC). DBC was to operate the two properties jointly as a grass supply farm for Mr Baker’s company and also for grazing.

[9] No doubt for a variety of reasons, KFL and the Heron Farm enterprise has been a failure. It has not made money. DBC failed to meet most if not all of its rent obligations under the lease of Heron Creek and now owes a sizeable debt to KFL. KFL has not been able to support repayments on its borrowings, except with the assistance of the BDL and/or the Hodder Family Trust. These entities have contributed over $350,000 to KFL over the past eight…

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 Hodder v Baker

Details

AGLC: Hodder v Baker [2016] NZHC 2384
Case: [2016] NZHC 2384
Decision Date: 6 October 2016

CaseChat Overview and Summary

The plaintiffs, Mr and Mrs Hodder, are farmers and directors of Kadd Farm Ltd (KFL), which holds a farming property called Heron Creek. The defendants, Mr and Mrs Baker, are also shareholders in KFL. The Hodder and Baker families have had a strained relationship since the business failed, with the Bakers owing significant debts to the Hodder entities. The Hodders wanted to sell Heron Creek to the Stewarts for $4 million, but this required the approval of 75% of shareholders, meaning the Bakers had to agree. The Bakers refused to agree to the sale, prompting the Hodders to bring proceedings under s 174 of the Companies Act 1993, seeking an order that the Bakers’ refusal to approve the sale was unfairly prejudicial to them. The Bakers made a number of technical objections to the form of the proceedings and the conduct of the case, but these were rejected. The court found that the Bakers’ refusal to approve the sale was indeed unfairly prejudicial to the Hodders, and ordered the Bakers to sign the necessary resolution to approve the sale. The Bakers’ application for a stay of the decision pending appeal was declined.

Orders