HOWARD DE VRIES Plaintiff AND QUEENSTOWN.COM LIMITED

[2004] NZHC 1225

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2003-425-000086

BETWEEN

HOWARD DE VRIES

Plaintiff

AND

QUEENSTOWN.COM LIMITED

Defendant

Hearing:         18 August 2004

(Heard at Christchurch)

Appearances: J J McCall for Plaintiff

No Appearance by or on behalf of Defendant Judgment:  18 August 2004

ORAL JUDGMENT OF PANCKHURST J

[1]    In this proceeding judgment is sought following a formal proof hearing. In particular the plaintiff, Mr de Vries, seeks an order directing that the defendant company supply information to him being in essence the records of the company largely since its inception. Queenstown.Com Limited was incorporated in October 2000. Its purpose was to develop a web site as a source for prospective customers of photographic images taken at various sites in the Queenstown tourist area. Thereby the company was to secure sales of photographs taken by employees of another company.

[2]    In 2002 a bitter dispute emerged concerning the operation of Queenstown.Com Limited. It was alleged against Mr de Vries that he had set up a rival web site in competition, and using intellectual property which belonged to the defendant company. Eventually that dispute between the shareholders in Queenstown.Com Limited was resolved at least in part at a settlement conference.

HOWARD DE VRIES V QUEENSTOWN.COM LIMITED HC INV CIV-2003-425-000086 [18 August 2004]

The agreement at that settlement conference was to the effect that Mr de Vries, a company and another individual would refrain from using any software which was said to belong to Queenstown.Com Limited and would facilitate an inspection of their hardware and software resources to ensure that the primary obligation was being fulfilled.

[3]    In evidence this morning Mr de Vries has told me that such an inspection followed, albeit the other principal shareholder, Mr Tainui Ward-Holmes, with whom Mr de Vries has been in dispute, is dissatisfied with the outcome of the inspection. In any event soon after the initial dispute was in part resolved on the terms I have indicated, a demand was made on Mr de Vries’ behalf for provision of the books of the company. He by then was shut out of all access to information of that kind. There was no satisfactory response to that initial demand. It was repeated in more formal terms by letters dated 13 and 14 January 2003 written by Mr de Vries’ solicitors. Again there was no satisfactory response.

[4]    In February 2003 an originating application was issued seeking an order pursuant to s178 of the Companies Act that the specified information be provided.  At that stage Mr Tainui Ward-Holmes instructed solicitors to represent the company. Objection was taken on procedural grounds to the  use of an originating application. In due course that issue was dealt with by the filing of a statement of claim. In response to it a statement of defence or defences were filed but never in a form which passed muster. As a consequence there were a number of hearings or conferences with the Master concerning the adequacy of the statement of defence. Along the way the solicitors whom Mr Tainui Ward-Holmes had retained to represent the company sought and obtained leave to withdraw. Eventually the defence of the claim was abandoned but that was a comparatively recent development.

[5]    The information which is sought is described in the prayer for relief as follows:

“(i)The latest version of the defendant’s Quickbooks file in electronic format.

(ii)All minutes of meeting held by the defendant.

(iii)All information regarding shareholder’s advertising.

(iv)All bank statements relating to the bank account operated by the defendant from creation of the bank account.”

[6]    Section 178 of the Companies Act 1993 is the material provision. It  relevantly provides:

“Information for shareholders - (1) A shareholder may at any time make a written request to a company for information held by the company.

(2)  The request must specify the information sought in sufficient detail to enable it to be identified.

(3)   Within 10 working days of receiving a request under subsection (1) of this section, the company must either –

(a)Provide the information; or

(b)Agree to provide the information within a specified period; or

(c)Agree to provide the information within a specified period if the shareholder pays a reasonable charge to the company (which must be specified and explained) to meet the cost of providing the information; or

(d)Refuse to provide the information specifying the reasons for the refusal.

(4)    Without limiting the reasons for which a company may refuse to provide information under this section, a company may refuse to provide information if -

(a)The disclosure of the information would or would be likely to prejudice the commercial position of the company; or

(b)The disclosure of the information would or would be likely to prejudice the commercial position of any other person, whether or not that person supplied the information to the company; or

(c)The request for the information is frivolous or vexatious.”

[7]    I note that in this case there has never been an offer to supply the information and hence there has never been an endeavour to fix terms upon which the information would be supplied or to suggest a sum by way of costs for its provision. In terms of the section I agree with Mr McCall that a shareholder has a statutory entitlement to ask for information of this kind at any time. Any request must be in sufficient detail and I do not think there can be any complaint on that account in this instance.

[8]    I was concerned as to whether the discretion to make an order should not be exercised because, despite abandonment of the defence, the information could amount to a disclosure of information likely to prejudice the commercial position of Queenstown.Com Limited. However that does not appear to be the case. Mr de  Vries has said on oath that so far as he is aware the company is not presently

involved in any meaningful commercial activity. When pressed by me as to why he needed the information he gave three reasons. First was a concern that the assets of the company, such as they are may be, have been used to meet personal expenses of Mr Tainui Ward-Holmes. Second, Mr de Vries indicated that he needed the information in order to provide comfort before it would be appropriate for him to resign as a director of the company. By way of an aside it is perfectly obvious that the sooner this company is restructured, so that it no longer involves directors and shareholders who are at odds, the better.

[9]    The third reason given was that Mr de Vries considers that provision of the financial information and minutes of the company will provide evidence which is relevant to whether intellectual property of Queenstown.Com Limited was misused by himself and others in the first place. On one view of it that issue might be said to be a dead letter given the history to which I have already referred but Mr de Vries has a concern that it is not.

[10]   In the end result in light of Mr de Vries’ evidence on oath and in the absence of effective opposition I am satisfied that in terms of the section it is appropriate to make an order. There shall be an order for production of the information within 14 days, being the items identified in the statement of claim as set out above.

[11]   Mr McCall also sought costs against a non-party, that is against Mr Tainui Ward-Holmes rather than against the company itself. It was pointed out that on a previous occasion an order to pay a disbursement of $260 culminated in the writing out of a company cheque which, on presentation, was not met; but more than that  Mr de Vries considers that his co-shareholder and director has  unreasonably withheld this information, that he has done so in his personal capacity and that the case is an exceptional one which warrants an award of costs against a non-party rather than against a company of which he, of course, is a shareholder and which may not have the resources to meet an order in any event.

[12]   Mr McCall has made submissions about this  aspect in particular directed to the issue whether it is an appropriate case for an award against Mr Ward-Holmes.  I  do not require any further information or submission on that aspect. However

awards against non-parties are comparatively rare and if I am to make one in this case I require some further information from Mr de Vries’ Queenstown solicitors concerning the sum which is sought and the justification for it. Nothing elaborate is required. A page or two which details the costs and anything relevant to them is all that I seek. Accordingly that issue is reserved pending receipt of a memorandum from the Queenstown solicitors.

_________________________________________________________________________________ Solicitors:

Papprill Hadfield & Aldous, Christchurch for Plaintiff (Counsel: J J McCall) cc: Macalister Todd Phillips Bodkins, Queenstown (Counsel: ARJ Bowers) cc: Mr T K Ward-Holmes, 14 Glasgow Street, Queenstown