Legal Research
Cases
Industrial Group Ltd v Bakker

Industrial Group Ltd v Bakker

Link copied

Case Copied 11 April 2011 11 min read

Contents

On this page

IN THE COURT OF APPEAL OF NEW ZEALAND

CA263/2010
[2011] NZCA 142

BETWEEN INDUSTRIAL GROUP LIMITED
Appellant

AND JAN DIRK BAKKER
First Respondent

AND PAMELA MARJORIE BAKKER
Second Respondent

Hearing: 30 March 2011

Court: Stevens, Keane and Fogarty JJ

Counsel: G Illingworth QC and G J Thwaite for Appellant
S J Corlett for Respondent

Judgment: 11 April 2011 at 11.30 am

JUDGMENT OF THE COURT

AAppeal allowed.
B The statutory demands are set aside.
CThe appellant is entitled to costs from the respondents in this Court for a standard appeal on a band A basis plus the usual disbursements. The order for costs in the High Court in favour of the respondents is quashed. The appellant is entitled to costs in the High Court together with any disbursements to be approved by the Registrar. If the parties cannot agree on costs in the High Court, they are to be fixed by the Associate Judge.

____________________________________________________________________

REASONS OF THE COURT

(Given by Fogarty J)

Introduction

By a reserved judgment of the High Court (Associate Judge Bell)[1] the appellant, Industrial Group Ltd (IGL), has been ordered to pay AU$1,310,000 to the respondents (Mr and Mrs Bakker), failing which they can apply to put IGL into liquidation. This order arose out of two statutory demands by the respondents based upon their rights as vendors of shares of their business, Adelaide Bag and Packaging Pty Ltd (Adbag), to a wholly owned subsidiary of IGL, Unibag Pty Ltd (Unibag). The decision of the High Court arose out of an application by IGL to set aside these two statutory demands. Associate Judge Bell stayed the decision, so as not to prejudice the appeal.[2]
[1]Industrial Group Ltd v Bakker HC Auckland CIV-2009-404-6432, 12 April 2010.
[2]Industrial Group Ltd v Bakker HC Auckland CIV-2009-404-6432, 31 May 2010.
The share sale agreement followed due diligence conducted between IGL, the Bakkers and other smaller shareholders. It is apparent from the due diligence questionnaire, questions and answers, which are scheduled to the contract, that the consideration for the shares was based on forecasts of future net profits before tax (NPBT). This is reinforced by the fact that the purchase price is subject to adjustment where the company’s NPBT were less than the target NPBT.
The Adbag business performed very poorly after the sale. The target NPBT for the five financial years following the sale totalled $2,742,000. The actual NPBT totals AU$182,126, or 6.6 per cent of the projected NPBT.
Although the agreement provided for some adjustment of price on failure to meet NPBT projections the adjustment in no measure reflected the actual performance. Mr and Mrs Bakker made statutory demands in reliance on the contract. IGL responded with a motion to set aside the demand. It also commenced proceedings in New Zealand seeking to be relieved from liability and pursuing damages against Mr and Mrs Bakker.
There is a standard agreement for sale of shares of a business as a going concern between the vendor shareholders and Unibag. This…

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.

Keep reading for free

Create a free CaseChat account to read Industrial Group Ltd v Bakker and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2011] NZCA 142
Decision Date: 11 April 2011

CaseChat Overview and Summary

Industrial Group Ltd (IGL) appealed against the decision of the High Court to refuse to set aside two statutory demands by Jan Dirk Bakker and Pamela Marjorie Bakker (the Bakkers). The statutory demands were based upon the rights of the Bakkers as vendors of shares of their business, Adelaide Bag and Packaging Pty Ltd (Adbag), to a wholly owned subsidiary of IGL, Unibag Pty Ltd (Unibag). The share sale agreement was made in reliance on forecasts of future net profits before tax. However, the Adbag business performed poorly after the sale. The actual net profits before tax were only 6.6 per cent of the projected net profits before tax. The Bakkers made statutory demands in reliance on the contract, and IGL responded with a motion to set aside the demand. The High Court found that IGL had shown an arguable case that Mr Bakker’s profit forecasts induced it to enter into the Deed of Assumption and that IGL has a claim in damages against the Bakkers for misrepresentation under the law of South Australia. However, the High Court concluded that IGL was not entitled to have the demands set aside as it could not bring itself within the formula of s 290(4)(b) of the Companies Act 1993. The Court of Appeal allowed the appeal and set aside the statutory demands. The Court of Appeal found that IGL appears to have a counterclaim against the Bakkers and that the counterclaim will exceed the amounts specified in the demand. The Court of Appeal held that the approach required by the “appearance” test in s 290 is a review with a low threshold and that the hearing should, in the normal course, be short and to the point, and the judgment likewise.

The legal issues the Court of Appeal was required to decide were whether the new evidence should be admitted and whether IGL appears to have a counterclaim against the Bakkers. The Court of Appeal held that the new evidence should be admitted as fresh evidence and that it could not, with reasonable diligence, have been found before the hearing before Associate Judge Bell. The Court of Appeal also held that IGL appears to have a counterclaim against the Bakkers and that the counterclaim will exceed the amounts specified in the demand. The Court of Appeal held that the approach required by the “appearance” test in s 290 is a review with a low threshold and that the hearing should, in the normal course, be short and to the point, and the judgment likewise.

The final orders of the Court of Appeal were that the statutory demands are set aside, the whole of the High Court judgment, including the costs order, is set aside, and the appellant is entitled to costs from the respondents in this Court for a standard appeal on a band A basis plus the usual disbursements. The appellant is also entitled to costs in the High Court together with disbursements approved by the Registrar. If the parties cannot agree on costs in the High Court, they are to be fixed by the Associate Judge.

Orders