Innes-Jones v Innes-Jones

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-0493

[2018] NZHC 1889

BETWEEN

EVAN DUNCAN INNES-JONES

Plaintiff

AND

REX ARTHUR INNES-JONES

First Defendant

SAILOR’S CORNER LIMITED
Second Defendant

IJAY PROPERTIES LIMITED

Third Defendant

Hearing:

18 July 2018

Appearances:

J D Turner for Plaintiff

A E Hansen for Defendants

Judgment:

27 July 2018

JUDGMENT OF JAGOSE J

This judgment is delivered by me on 27 July 2018 at 4.00pm pursuant to r 11.5 of the High Court Rules.

.....................................................

Registrar / Deputy Registrar

Solicitors:

McVeagh Fleming, Albany Heimsath Alexander, Auckland

INNES-JONES v INNES-JONES & ORS [2018] NZHC 1889 [27 July 2018]

Introduction

[1]                   Evan Innes-Jones and Rex Innes-Jones are brothers. They are the shareholders of both Sailors’ Corner Limited – a marine chandlery business operating from premises on Westhaven Drive and Beaumont Street in Auckland – and Ijay Properties Limited, which owns the Beaumont Street premises (on a groundlease from Viaduct Harbour Holdings Limited) and leases them to Sailors’ Corner. Evan holds 35,000 shares, and Rex 45,000 shares, in each company. The shareholdings reflect the brothers’ initial capital contributions: Evan, $35,000, and Rex, $45,000.

[2]                   In this proceeding, Evan complains Rex is conducting the companies’ affairs in a manner unfairly prejudicial to Evan as shareholder. Evan seeks relief under        s 174(2) of the Companies Act 1993 by way of Rex’s acquisition of Evan’s shares, or Rex’s payment of compensation to Evan, or the companies’ liquidation. Rex denies there is anything unfairly prejudicial to Evan in Rex’s conduct of the companies’ affairs, which are conducted in the companies’ best interests.

Background

[3]                   Both men worked in the Sailors’ Corner business: Rex as managing director, and Evan as company secretary (while maintaining other business interests). From its inception in 1983, Sailors’ Corner presented itself as a ‘one-stop shop’ for boat owners. Blessed by its proximity to Westhaven Marina, and its initial local monopoly, the business prospered, with an annual turnover of over $5m by the 1990s. The Sailors’ Corner workforce included Rex’s wife and their sons, and Evan’s wife and their daughter. Rex’s family members mostly worked full-time as employees in the business; Evan’s family members mostly worked as casual employees when required.

[4]                   Evan and Rex originally were each directors in both Sailors’ Corner and Ijay Properties. They were remunerated at agreed hourly rates, in a manner intended transparently to reflect their input into the business consistently with other managers. But their wages periodically were ‘topped up’ from operating surpluses to double their earnings over the preceding period, and then supplemented by any profit share. The ‘top up’ and profit share were made available to Evan and Rex as a ‘bonus’, which each would apportion between himself and his family. They used their ownership of

Ijay Properties also to extract surplus from the business as rental or other emoluments to their personal benefits from the business. Both wives initially were paid salaries, but that reverted also to hourly rates in later straightened…