Jellick v Perrett
[2025] NZHC 929
•15 April 2025
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2025-488-000001
[2025] NZHC 929
BETWEEN PAUL GREGORY JELLICK and
JELLICK TRUSTEE LIMITED as Trustees
of the Jellick Trust Applicants
AND
JANETTE MARIE PERRETT NEIL FRANCIS PERRETT CARLA ROSE PERRETT
Respondents
Hearing: 6 March 2025; 13 March 2025 (further submissions); and
3 April 2025 (further affidavit)
Appearances:
R Bowden for the Applicants J Hooper for the Respondents
Judgment:
15 April 2025
JUDGMENT OF WALKER J
This judgment was delivered by me on 15 April 2025 at 4 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors:
MWIS, Whangārei Edmonds Judd, Te Awamutu
JELLICK v PERRETT [2025] NZHC 929 [15 April 2025]
[1] The parties are shareholders in J & P Farms Limited, owner of a 320-hectare farming property at Mangamuka (the Farm). The Farm operates as a dairy farm with some support stock.
[2] The applicants, Paul Jellick and Jellick Trustee Limited (of which Mr Jellick is the sole shareholder and director) own 78 per cent of the shares in J & P Farms in their capacity as trustees of the Jellick Trust. Mr Jellick also holds one per cent in his personal capacity. The respondents, Jeanette and Neil Perrett own 21 per cent of the shares and their daughter, Carla Perrett, owns one per cent of the shareholding.
[3] The relationship between shareholders is governed by a Shareholder Agreement. It is common ground that Mrs Perrett and her daughter operate the Farm in return for weekly drawings.
[4] To say that the relationship between shareholders has soured is a gross understatement. The level of acrimony between them reflects an irretrievable breakdown. At its core, the conflict arises from divergent philosophical approaches to farming.
[5] The Shareholder Agreement has a prescriptive dispute resolution mechanism. The applicants have triggered that process. Due to non-agreement, appointment of an arbitrator was in the hands of the Arbitration and Mediation Institute of New Zealand. Counsel advised that the appointment of Mr John Walton was notified to them during the hearing. Following the hearing, counsel informed the Court that the arbitration had commenced and an interim award delivered. I return to that development below.
[6] The applicants want an orderly exit from the arrangements between the parties and compensation for alleged mismanagement of the Farm. It is apparent that the only practical resolution is a parting of ways. Clause 29 of the Shareholder Agreement provides a mechanism to bring the arrangement to an end in a structured fashion after a probation period. But, for present purposes, their primary interest is removing the respondents from the management of the Farm pending determination of the substantive issues in an arbitration.
[7] This judgment is limited to the application for removal of the respondents from the Farm’s operations as an interim measure. The application is styled as an application for interim orders (interlocutory mandatory injunction) under sch 1, arts 9, 17A and 17B of the Arbitration Act 1996 (the Act) and r 7.53 of the High Court Rules 2016. However, at the hearing, Mr Bowden, for the applicants, sought only interim measures under the Act. This meant it became unnecessary to resolve the extent to which, if any, the Court retains the power to grant injunctive relief that is not prescribed by sch 1 of the Act.1
The Orders sought
[8] The orders originally sought were for removal of the respondents as operators pending further order of the Court or arbitral tribunal (then yet to be convened) and restraining the respondents from taking any steps likely to cause current or imminent harm to the business operated by J & P Farms Limited or the arbitral process itself.2
[9] The orders sought at the hearing were amended (the significant change identified below in italics):
(a)The respondents be removed as operators of the farm.
(b)The removal of the respondents be on an interim basis pending further order of this Court or the arbitral tribunal to be convened.
(c)The respondents shall, if they wish to do so, continue to milk any cows that require milking through to the end of the season (31 May 2025). They shall be paid the sum of $1,150 per week in accordance with sch A of the Shareholder Agreement until 31 May 2025.
1 See Safe Kids in Daily Supervision Ltd v McNeill [2012] 1 NZLR 714 in which the Court held that the general High Court jurisdiction no longer applies; Worldwide Holidays Limited v Liu [2018] NZHC 3443 in which the Court held that its jurisdiction to grant interim relief at least where a third party is involved, will be broader than the Act provides; Foundation Village Limited v Growing Spaces Limited [2023] NZHC 2638 in which the Court held that the granting of an interim injunction is limited to what is prescribed in sch 1 of the Act which excludes any general or residual powers to grant injunctive relief given to courts in a domestic system which are not listed in Sch 1.
2 Notice of Application for Interim Orders (Interlocutory Mandatory Injunction) dated 19 December 2024.
(d)With the exception of collecting the cows from the nominated paddock, milking and returning them to the nominated paddock, the respondents shall not be required to work outside of the cowshed and its confines and are directed not to do so.
(e)The applicants shall be the operator of the farm and shall have control of all matters pertaining to the farm except the milking of the cows.
(f)The farm shall, at all times, be operated in accordance with the instructions of Mr Tafi Manjala, AgFirst, Whangārei (farm consultant) which shall be given in accordance with cl 7(1)(g) of the Shareholder Agreement. The parties shall follow his directions.
(g)The parties are ordered not to take any steps which are likely to cause current or imminent harm to the business operated [and] owned by J & P Farms Limited or the arbitral process itself.
(h)Either party having the right to return to court on 24 hours’ notice.
[10] The respondents oppose any interim orders. They contend that the status quo should be preserved and that they should continue to operate the Farm. They argue, among other things, that they are not taking any steps likely to cause current or imminent harm to the Farm or business or to prejudice the arbitral proceedings once instituted. They maintain that the orders in the application are not required to preserve assets; damages are an adequate remedy; the harm caused to them should orders be granted would outweigh any likely harm caused to the applicants if not granted; and finally, that there is no reasonable possibility that the applicants will succeed on the merits of their case.
[11] The respondents also argue that the terms of a previous mediated agreement reached between the parties required them to return to mediation or conciliation in the event of any dispute or difference arising between them as to the terms of the mediated agreement or the matters covered by the mediation, before resorting to arbitration or other court action. They contend that the applicants’ objective in this proceeding is to avoid or pre-empt the consequences provided in cl 29 of the Shareholder Agreement.
Events after the hearing
[12] After the hearing and before delivery of judgment, Mr Bowden sought leave to adduce further evidence from Mr Jellick to update the Court of developments in respect of the arbitration. Mr Hooper, for the respondents, did not have formal instructions to oppose this further evidence but indicated it is unnecessary and of questionable relevance. He submitted that should the Court consider it useful, the respondents may wish to adduce responsive evidence. He signalled that disclosure of the interim award or matters arising during the arbitration may breach the confidentiality requirement of s 14A of the Act which provides that arbitral proceedings must be conducted in private.3
[13] I consider that three matters referred to in Mr Jellick’s further evidence are relevant and constitute fresh updating information, while the rump of that evidence should not be admitted and therefore, I put it to one side.
[14]The three matters are:
(a)The respondents have served notice of termination under cl 29 of the Shareholder Agreement.
(b)The arbitrator is seized of the dispute and has issued an interim award ordering sale of the Farm by auction and retention of the sale proceeds in a solicitor’s trust account. However, he has not been asked to consider the issue already referred to this Court.
(c)Mr Manjala appears to no longer be willing to continue on-farm supervision.
[15] There is no reason why responsive evidence is needed in respect of these three matters.
3 The limits on prohibition on disclosure of confidential information in s 14C of the Act provides that a party to arbitration may disclose confidential information in defined circumstances including where disclosure is necessary for the making and prosecution of an application to a court under the Act and the disclosure is no more than what is reasonably required to serve any of the purposes listed.
Preliminary evidential matters
[16] The respondents challenged various aspects of the evidence filed in support of interim relief.
[17] Large tracts of Mr Jellick’s affidavit were challenged on the grounds that they comprised speculation, submission, opinion evidence and inadmissible hearsay. The affidavit evidence of Mr Manjala was challenged on the grounds of non-compliance with the expert witness requirements in sch 4 of the High Court Rules 2016 and contained unqualified opinion material.
[18] In view of the limited hearing time, I indicated my intention to address those challenges in my substantive judgment only if material to my determination. I observed on a preliminary basis that some evidential challenges had heft, while others were not likely sustainable. Mr Bowden did not address these challenges before or at the hearing. I gave leave for him to file a responsive memorandum (allowing time for a further response from Mr Hooper).4 Mr Bowden’s rebuttal is that the objections are rote, unsupported and “a triumph of form over substance”. In particular, he maintained that hearsay evidence is permitted in the interlocutory context under s 20 of the Evidence Act 2006. He also submitted that s 24 of the Evidence Act can be relied on in respect of the challenge to Mr Manjala’s evidence because he communicated what he saw and observed, all of which is substantially helpful to the Court.
[19] Mr Hooper was critical of the inclusion of documents in the common bundle where these documents had been referred to but not exhibited to the applicants’ affidavit. He submitted that this material should not be read.5 Mr Bowden’s explanation for the inclusions was that the documents were common between the parties and that the common bundle complied with r 7.39 of the High Court Rules. That approach is procedurally irregular and the way the situation unfolded was unsatisfactory. In the end however, I am not satisfied that the respondents suffered prejudice by inclusion of these documents given their nature and familiarity with
4 Through administrative oversight Mr Bowden’s memorandum did not reach me until 2 April 2025.
5 Respondents’ counsel challenged this material before the hearing in a memorandum dated 3 March 2025.
them.6 More materially, those documents have not proved critical to the conclusion I have reached on this application.
[20] The applicants sought leave for the late filing of a reply affidavit from the farm consultant, Mr Manjala. Mr Hooper sensibly did not object strongly to the filing although he suggested it comprised unnecessary repetitive evidence. I granted leave on the basis that the respondents’ challenge to earlier affidavit evidence of Mr Manjala applied equally to this evidence, where relevant.
[21] Finally, on preliminary procedural matters, Mr Jellick’s affidavit refers to a video of a confrontation with the respondents on the Farm. Through some technical shortcoming, the video was not embedded in the affidavit which was filed and served. Mr Hooper advised that, despite request of the applicants’ solicitors it was never provided to the respondents. This was apparently news to Mr Bowden, but it meant that Mr Hooper and the respondents would be seeing the video for the first time in Court.7
[22] This too was an unsatisfactory situation. I determined that it was unnecessary to view the video because the level of dysfunction between the parties — essentially akin to a state of war — was already palpably clear from the other material before the Court, and attributing responsibility for the physical altercations which erupted served no useful purpose.
Background
[23] The affidavits filed by Mr Jellick and Mr Manjala in support of the application and by Mrs Perrett and her daughter in opposition, set up other factual contests which are not able to be resolved in the context of interlocutory argument. There is little about the running of the farm on which the protagonists agree. Many of those matters, although important to the parties, are not core to the determination of the subset of the dispute before this Court. The summary of the background below is therefore shorn
6 The categories of documents comprised correspondence between solicitors, AgFirst Farm Reports and Fonterra documents, all of which were copied to the respondents contemporaneously.
7 Mr Bowden advised that he had not been made aware of the omission to provide the video in advance to respondents’ counsel.
of those peripheral factual disputes. To the extent that other background becomes material to specific issues, it is set out later in this judgment.
[24] Mr Jellick has owned farms for over 40 years. He was a trustee of the Kotare Station Trust which purchased the Farm in 2015. For various personal and lifestyle reasons, Mr Jellick tried to sell the Farm a few years after purchase, engaging a real estate agent to find an equity partner.
[25] Mrs Perrett has also farmed for about five decades. She transitioned to what she describes as a more holistic farming model in 2006. In 2017, she self-published a book titled You have been given a gift: dairy farming with organics, homeopathy and passion. Her daughter, Carla, has followed in her mother’s farming footsteps and is also an adherent of the holistic style of farming.
[26] The respondents first saw the Farm in 2020. Mrs Perrett’s evidence is that she discussed her farming philosophies with Mr Jellick at that time, giving him a copy of her book. They didn’t progress any arrangements with Mr Jellick at that stage but came back in 2022 to look again at the Farm. Discussions began about a share farming arrangement in early 2023. From Mr Jellick’s perspective, he was looking for someone who could enter into an equity partnership to run the Farm and also purchase the homestead block on the farm so that he could reduce debt. The respondents were interested in such an arrangement with a view to ultimately purchasing the Farm itself.
[27] Mr Jellick intended to complete the subdivision of four blocks of the Farm property totalling approximately 15 hectares (then removing them from the arrangement on the issue of title) to access capital for development, while each party would put in stock for the operation. Mr Jellick saw himself carrying out casual maintenance and development including re-grassing, with the Perretts running the farm for stipulated weekly remuneration.8
[28]In April 2023, Carla and her partner purchased the farmhouse at the Farm.9
8 The remuneration was described as drawings.
9 To avoid confusion through the shared surname I will refer to Mrs Perrett’s daughter by her first name.
[29] On 10 May 2023, J & P Farms Limited was incorporated with the Jellick Trust settled a short time later.
[30] On or around 25 May 2023, the respondents moved their herd onto the Farm by agreement, bringing with them approximately 62 silage bales left over from their previous engagement at another farm. The reason according to the respondents was that their sharemilking contract with a third party was coming to an end on 31 May 2023. Mr Jellick’s recall is different. He deposes that Carla asked him whether they could move those cows as they were starving after access to all the grass on their existing farm had been removed. Mr Jellick describes the cows as being in poor condition on 25 May 2023 when they arrived. Mrs Perrett maintains that their herd was in good condition as of 12 April 2023.10 It is conceivable that both narratives are reconcilable given the five-week interval.
[31] Mr Jellick contends that the respondents’ cows were let loose on the good level of pasture cover intended to get the Farm through the winter, eating their way through 15 paddocks, approximately twice the area had they been properly managed.
Although concerned, Mr Jellick let matters lie at that point.11
[32] The respondents contend that, once on the Farm, they started to appreciate that it was severely run down, missing many basic facilities such as adequate fencing and lacking water access in some paddocks.
[33] The parties were negotiating the Shareholder Agreement at this stage. Both parties were legally represented. The respondents say that during the negotiations Mr Jellick repeatedly said that they could manage the Farm their way and that he intended to spend most of his time on his boat.
[34] On 22 June 2023, Mrs Perrett threatened not to sign the draft Shareholder Agreement. In an email to the applicants’ solicitors, she stated “[i]f we do not feel
10 In support of this representation Mrs Perrett referenced a PGG Wrightson livestock valuation report but there is nothing on the face of the letter from PGG Wrightson which indicates the condition of the herd to an inexpert eye.
11 Mr Jellick’s evidence about the respondents’ exit from their previous farm was challenged by the respondents as hearsay and speculation. I uphold that challenge and strike out paragraph [69] of Mr Jellick’s first affidavit dated 6 December 2024.
Paul has everyone’s interest, including soil and animal health at the forefront we will not be signing on Thursday.” Mr Jellick’s evidence is that this threat left him in a “no win” situation as he no longer had stock to put back on the Farm if the deal did not proceed, having sold off his own cows at an undervalue throughout June in order not to use up resources needed for the respondents’ herd.
[35] On 28 June 2023, AgFirst, a local farming consultancy, produced a feed budget and farm working plan for the purposes of the final negotiation. Mr Jellick describes this farm plan as standard and conventional with inputs such as palm kernel expeller (PKE), silage, cropping, pasture renewal and conventional farm fertilisers, pesticides and herbicides. The plan, when first provided, included a budgeted feed purchase of 90 tonnes of PKE.
[36] One of the many factual contests is about the pasture condition when the respondents moved their herd onto the Farm before preparation of the AgFirst report. Mr Jellick produced photographs of what appear, to the inexpert eye, to be well-grassed areas. These were taken shortly before the respondents’ herd was moved onto the Farm. The respondents point to the conclusion in the AgFirst report that pasture density and fencing was inadequate as of 28 June 2023. Given that this report was prepared after the respondents’ herd was moved onto the Farm, Mr Jellick’s position and corroborative photographic evidence is more persuasive.
[37] The respondents’ evidence is that no feed budget or farm working plan was finalised prior to or at the time of the final negotiation of the Shareholder Agreement and that they made their objections to feeding PKE known. Mr Jellick’s evidence is that at the final meeting between the shareholders there was agreement to reduce the budgeted purchase of PKE to 30 tonnes to meet objections by the Perretts and that this was recorded in an amended Farm Report dated 29 June 2023.12 He says that immediately after executing the Shareholder Agreement, and out of the earshot of the solicitors, Mrs Perrett was dismissive of the AgFirst Report describing the advisors as “pen pushing university geeks”. Mrs Perrett denies having this conversation with Mr Jellick.
12 The amended Farm report records a feed budget of 40 tonnes of PKE, however there appears to be consensus among parties that the figure agreed was 30 tonnes.
[38] The parties signed the Shareholder Agreement on 29 June 2023. The respondents advanced $669,950 to J & P Farms Limited by way of cash, their herd and farm equipment. Mr Jellick withdrew the cash to pay off his personal debt. At that stage it appears that there were some 358 cattle on the farm, of which 120 were milking cows.
[39] Mr Jellick and his partner travelled overseas shortly after signing, returning to the Farm in late July/early August 2023. Not long after, the relationship between Mr Jellick and the respondents sharply deteriorated.
[40] The factual disputes arising between the parties can be distilled to the following:
(a)Failure to follow AgFirst advice: Mr Jellick and Mr Manjala depose that the respondents have refused to adhere to recommended grazing practices, feeding schedules and general farm management strategies.
(b)Temporary cessation of Fonterra supply: On or around 2 October 2023 the milking herd’s somatic cell count began to rise dramatically as the herd was suffering from a staphylococcal infection. The Farm temporarily ceased supply to Fonterra, partially resuming on 18 October 2023 and fully resuming by 7 November 2023. Mr Jellick blames the outbreak on actions taken by the respondents which they deny. A veterinarian reported that there was no clear cause.
(c)Sufficiency of feed for and condition of the milking herd: Mr Jellick contends that the respondents’ refusal to feed PKE as directed by the feed plan has led to underfed cows and poor milk production. He also contends that the respondents purchased poor quality silage which the cows refuse to eat, which was further compounded by the keeping of non-dairy stock on the dairy platform (reducing the availability of resource to the milking cows). He maintains that the poor condition of the herd (as identified by Fonterra) and placement of the Farm on
“farm-watch”13 risks the Fonterra supply contract and banking covenants.14
(d)Grazing management: Mr Jellick alleges that the respondents have mismanaged grazing by, among other things, not break-feeding, allowing cows to over-graze and refusing to graze on back paddocks. He maintains this has led to pasture damage which will take recovery time (and application of lime and fertiliser plus seeding the Farm with high performing annual grasses). He contends there has been no re-grassing to date and very little weed control, with the respondents actively trying to prevent Mr Jellick from undertaking this action.
(e)Financial mismanagement: Mr Jellick deposes that the Farm is not meeting its production targets, is incurring unnecessary expenses and losing income.
(f)Maintenance and infrastructure issues: It is alleged that water systems and electric fencing have not been maintained leading to operational inefficiency.
(g)Confrontational approach: Mr Jellick deposes that the working environment on the Farm is unsafe for him and his partner due to the confrontational tactics of the respondents.
[41] The respondents argue that the evidence shows a viable and productive business under their management despite external challenges. They contend that the “empty” (not in-calf) rate for the 2023/24 season was at the national average (indicating healthy cows) and the production levels achieved (on smaller effective pasture area) are better than before they took over.15
13 “Farm-watch” is the term used for a farm being placed under monitoring by Fonterra.
14 The respondents challenged paragraph [117] of Mr Jellick’s affidavit on the basis it comprised a statement of subjective belief without supporting grounds. I decline to strike out this paragraph insofar as it refers to a condition of lending.
15 There is evidence that the total effective area of the dairy farm operation was reduced from 206 hectares to 160 hectares since the 2019/20 season.
[42] There is evidence that the Farm produced the following milk solids between the 2019/20 and 2023/2024 seasons:
(a) 2019/2020 – 23,435 kilograms (b) 2020/2021 – 35,066 kilograms (c) 2021/2022 – 29,688 kilograms
(d) 2022/2023 – no records on file
(e) 2023/2024 – 36,475 kilograms
[43] As of 1 February 2025, production of milk solids for the 2024/2025 season is at 34,295 kilograms.
[44] A mediation took place on 26 October 2023, resulting in a mediated agreement. Mrs Perrett deposes that the mediated agreement varied the Shareholder Agreement. As relevant, the mediated agreement provided that Mr Manjala would be engaged as the farm consultant in terms of cl 7.1(g) of the Shareholder Agreement. As already noted, it also provided that the parties would return to mediation in good faith in the event of any dispute or difference arising between them as to the terms of the mediation agreement or of any other point arising in relation to matters covered by the mediation.
[45] I pause to note that, after the hearing, the respondents did not argue that there was no jurisdiction to make interim orders in view of the dispute resolution provisions in the Shareholder Agreement and mediated agreement.
[46] While there is no pleaded claim that the respondents breached the mediated agreement, it appears that matters did not improve.
[47] On 1 March 2024, the applicants gave notice of termination of the Shareholder Agreement through their solicitors.
[48] On 15 March 2024, the respondents responded denying the validity of the termination notice and refusing to accept it.
[49] The parties convened a meeting by video-call on 10 April 2024, with their solicitors present. There was no resolution.
[50] On 14 May 2024, there was a confrontation on the farm between Mr Jellick, his partner and the respondents which was filmed by Mr Jellick’s partner.16
[51] On 9 August 2024, Mr Jellick emailed the respondents stating that they were to stand down from farm operations and that he would be taking control. The respondents responded through their solicitors denying any right to take over the farm management.
[52] On 28 August 2024, there was another confrontation between the parties when Mr Jellick and his partner attempted to move the herd from the subdivision block contending there was no right to graze the herd on that block. Mrs Perrett’s young grandson was allegedly assaulted. Police were called.
[53] On 4 October 2024, Fonterra sent a formal warning regarding the body condition scores of the milk herd. A few weeks later the Fonterra representative attended with a feed plan to bring those scores up to the Fonterra metrics.
[54] On 13 November 2024, the applicants revived their purported termination of the Shareholder Agreement and invoked the arbitration provisions.
[55] Despite the indication of arbitration, no arbitrator was nominated. The respondents rely on this delay as one of the grounds opposing interim relief.
[56] On 24 December 2024, the applicants informally served this application for interim measures and advised they intend to nominate an arbitrator.
16 The applicants sought to produce video of this incident. For reasons already discussed above [21]–[22] I did not permit the video to be played at the hearing.
[57] On 7 January 2025, the applicants purported to rely on cl 9.1 of the Shareholder Agreement to issue a number of directives as majority shareholder. They gave notice of a proposed directors meeting.
[58] The respondents requested disclosure of documents for the five farming seasons before the Shareholder Agreement commenced, including Fonterra production reports/records, shed inspection reports, grading reports/information, fertiliser history and soil tests and purchased feed reports/records. The applicants disputed the relevance of the requested documents.
[59] Mrs Perrett refused to attend the proposed directors’ meeting and set out her reasons.
[60] On 3 February 2025, the applicants’ solicitors wrote to the respondents asserting termination of the Shareholder Agreement and providing minutes of the directors’ meeting the applicants held at which they passed a resolution to remove Mrs Perrett as director.
[61] On 20 February 2025, the applicants applied for leave to file an originating application and for orders under s 174 of the Companies Act 1993 for the sale of the Farm and liquidation of the company. That application was subsequently withdrawn as procedurally non-compliant.
[62] On 15 March 2024, the respondents’ solicitors rejected the termination. They contended that the respondents had complied with the farm plans and directives of AgFirst, were not responsible for the high somatic cell count levels and intend to continue to farm in the same manner. They further contended that any motion to ratify the termination and/or cancellation and remove the respondents was invalid as there was no quorum. They did not accept the cancellations. They refused to leave the Farm.
The Shareholder Agreement
[63] As noted, the parties to the Shareholder Agreement are Mr Jellick and Jellick Trustee Limited as trustees of the Jellick Trust on the one hand, and
Mrs Perrett, her husband and their daughter Carla, on the other. J & P Farms Limited is also a named party although the overall thrust of the Shareholder Agreement only governs the relationship between shareholders. It defines Shareholder 1 as Mr Jellick and the Jellick Trust together, and Shareholder 2 as the Perretts collectively.
[64] The background recitals record that the shareholders incorporated J & P Farms Limited to establish and thereafter operate a business on the terms set out in the Shareholder Agreement.
[65] The agreement defines the Farm. It records that the agreement has effect from the settlement date on which the company purchased the property from the trustees of the Kotare Station Trust. I understand this was shortly after the Shareholder Agreement was entered into.
[66] Clause 2 provides, among other things, that the Shareholder Agreement governs each party’s rights and obligations as shareholders of the company at all times unless the shareholders unanimously agree otherwise in writing.
[67] The provisions of the Shareholder Agreement relevant to the present matters read as follows:
6.DIRECTORS
6.1Until determined otherwise in terms of this agreement the Company shall be controlled and managed by a board of at least two directors (“Board”):
a.PAUL GREGORY JELLICK shall have the right to appoint and remove one (1) of the directors for so long as that Shareholder holds shares in the Company.
b.JELLICK TRUSTEE LIMITED as trustee of THE JELLICK TRUST shall have the right to appoint and remove one (1) of the directors for so long as that Shareholder holds shares in the Company.
c.JANETTE MARIE PERRETT, NEIL FRANCIS PERRETT and CARLA ROSE PERRETT shall have the right to appoint and remove one (1) of the directors for so long as that Shareholder holds share in the Company.
6.2For the purposes of this clause the reference to “shares in the Company” shall mean ordinary shares and not shares of another class or redeemable preference shares which may be issued thereafter.
7.CONDUCT OF THE COMPANY’S AFFAIRS
7.1The Shareholders shall exercise all voting rights and other powers of control available to them in relation to the Company so as to procure that at all times, unless the Shareholders unanimously agree otherwise, the following shall occur:
a.The Business shall consist of operating a livestock and dairy farming operation (or such other business as agreed from time to time) and shall initially be conducted based on the costings, cashflows, projections, and strategic plans prepared by or for the Company by Jeff Burson of Future Accounting or such other mutually agreed expert. Such information will form part of this Agreement. The Shareholders agree that the Company shall be managed and operated based on the principles contained therein.
b.The Company shall keep proper books of account and each Shareholder shall be supplied with monthly management accounts and operating statistics and such other trading and financial information in such form as the Shareholders agree is required to keep the Shareholders properly informed about the Business.
c.The Company shall procure that any company that becomes a subsidiary of the Company at any time during the term of this agreement shall adopt a new constitution only in a form approved by the Shareholders.
d.The Company shall engage Jeff Burson of Future Accounting (or such other accountant mutually agreed) to prepare financial budgets based upon projected revenue and expenditure for each successive twelve-month period. The budgets shall be revised monthly at Board meetings and the directors shall endeavour to adhere as closely as possible to those budgets.
e.The financial year of the Company shall end on 31 May in each year or such other date as shall be determined by the Shareholders.
f.At the end of each financial year a profit and loss account, balance sheet, and cashflow statement in respect of the Company shall be prepared in accordance with generally accepted accounting principles.
g.The Company shall procure and engage AgFirst Northland (or such other farm consultant mutually agreed) (“Farm Consultant”) to provide advice on the conduct and operation of the farming activities/business including but not limited to those key services identified by them and attached as “Farm Consultant – Key Services”. In the event of a disagreement between the Shareholders they agree to follow the advice of the Farm Consultant unless they mutually agree otherwise.
Prior to the commencement of each Company farming year the Farm Consultant, after consultation with the Company Accountant, shall provide to the Company a farming plan that will be adopted by the Company subject to any mutually agreed amendments which will then be implemented in the coming year.
h.The Constitution shall not be amended (if applicable).
i.The shares issued shall not be altered (for the purposes of this agreement the Shareholders acknowledge that the initial shares issued in the Company were one thousand (1,000) ordinary shares of $1.00 each.
7.2The Shareholders shall each make available all such information in their possession as may be reasonably required to enable proper accounts to be prepared for the Company.
…
9.INITIAL DIRECTORS AND BOARD MEETINGS
9.1Initial Appointments
PAUL GREGORY JELLICK as a Shareholder confirms as its initial director of the Company PAUL GREGORY JELLICK.
JELLICK TRUSTEE LIMITED as trustee of THE JELLICK
TRUST as a Shareholder confirms as its initial director of the Company PAUL GREGORY JELLICK.
JANETTE MARIE PERRETT, NEIL FRANICS PERRETT
and CARLA ROSE PERRETT as Shareholders confirm as its initial director of the Company JANETTE MARIE PERRETT.
9.2The Board shall meet on such regular occasions as shall be agreed.
9.3Each director appointed by each Shareholder shall each have one (1) vote (e.g. Paul has been appointed by two separate Shareholders so Paul has two (2) votes). The chairperson of
directors (if any) shall not have a casting vote. In the event of there not being a majority on any issue the status quo shall be maintained.
9.4The Board’s responsibilities shall include, but is not limited to:
a.The operations and overseeing the accounts of the Company;
b.The employment of staff and the terms and conditions on which the Company employs staff; and
c.All other managerial matters pertaining to the Company.
9.5The Directors shall arrange for minutes of all directors meetings to be taken.
9.6Until unanimously agreed otherwise in terms of this agreement no remuneration for services will be payable to the directors.
9.7The quorum necessary for the transaction of the business of the Directors shall be two (2) with at least one (1) director from each Shareholder being present.
…
12.MANAGEMENT
12.1It is agreed that the Board of Directors shall manage the Company.
12.2A resolution of all of the Directors shall be required in respect of the following:
a.Any expenditure which exceeds by 10% or more the figure prescribed in the budget for that expenditure.
b.Entry into, varying or terminating of any contract or arrangement (whether legal binding or not) with any of the Directors or any Shareholder or with any associate of any Director or Shareholder.
c.The provision of any guarantee by the Company.
d.Changing of the business objectives of the Company in any material respect.
e.Any extension of the Company’s borrowings.
f.The winding up of the Company.
g.Entry into any abnormal or unusual transaction which relates to or adversely effects the Company’s business and which is of a material nature.
h.The commencement of any legal or arbitration proceedings other than routine debt collection and the enforcement of related contractual rights.
i.The sale of all or part of the property or the purchase of additional land.
…
14.TERMINATION
14.1This agreement continues until termination by agreement between the parties or unless earlier terminated by operation of any of the provisions of clause 14.2 provided that any such termination shall not affect any subsisting rights under this agreement.
14.2Notwithstanding any delay or previous neglect or waiver of the right to exercise such election and without prejudice to any of the rights of the parties this agreement will also terminate in respect of a relevant party (“Relevant Party”) (but not the remaining parties) at the election of any party if any of the events set forth below occur respectively in relation not a Relevant Party:
a.Default is made by a Relevant Party in performance or observance of any obligation on its part arising under this agreement and such default is incapable of being remedied, or, if capable of being remedied, such default continues unremedied for twenty (20) working days after written notice of such default has been given to the defaulting party by another party;
b.If a Relevant Party commits an act of bankruptcy or makes any assignment, arrangement or composition with its creditors (including entry by the party into a deed of company arrangement under Part 15A of the Companies Act 1993);
c.Any of the conditions necessary to render a Relevant Party liable to be wound up exists;
d.A Relevant Part is or becomes unable to pay its debts as they fall due or is deemed or is unable to pay such debts as that term is defined in section 287 of the Companies Act 1993 or suspends payment to its creditors or ceases or threatens to cease to carry on its business or convenes a meeting of its creditors to propose a scheme of arrangement with its creditors;
e.If a petition for the winding up of a Relevant Party is presented or advertised or a resolution is passed or purports to be passed for the winding up of a party;
f.A Relevant Party has a receiver or manager or statutory manager or administrator appointed;
g.A Relevant Party transfers or disposes of or threatens to transfer or dispose of a substantial part of its assets for inadequate consideration;
h.If without the prior consent in writing of another party a Relevant Party reduces its share capital or convenes a meeting of its members for the purpose of passing a resolution reducing its share capital.
…
29.PROBATION PERIOD
Notwithstanding any other provision in this Agreement the Shareholders agree there shall be a twenty-four (24) month probation period from the Commencement Date so the parties may assess whether the arrangement contemplated by this Agreement shall be continued. Either Shareholder 1 or Shareholder 2 may give notice to the other, no later than two (2) months prior to the expiration of the twenty-four (24) month period, that they no longer wish to continue with the Agreement.
Should either Shareholder 1 or Shareholder 2 no longer wish to continue with the Agreement they may purchase the other’s shares on the basis of the following process:
(a)The Offeror must first offer the Offeror’s shares to the remaining Shareholder (“the Offeree”) by giving notice (“Offer Notice”) to the Offeree and serving a copy on the Company. The shares shall be offered to the Offeree on the basis of the valuation process in clause 11.
(b)The Offeree must within 30 working days of receipt of the Offer Notice indicate to the Offeror in writing whether it wishes to purchase the Offeror’s shares.
(c)Should the Offeree not wish to purchase the shares then the process under 29 (a) and (b) then the right to purchase shall be reciprocated.
(d)If neither Shareholder 1 or Shareholder 2 give notice of intent to purchase under clause 29 the Company will sell all of its assets on the open market at the best possible price reasonably available in the circumstances and once the Company assets are sold the Company will be liquidated and the Shareholders paid out.
[68] There is a dispute resolution clause (cl 23) which provides that any dispute arising out of or relating to this agreement may be referred to mediation. If a dispute referred to mediation is unable to be resolved by mediation, then the dispute shall be referred to a single arbitrator in accordance with the Act (or any amendment to the Act).
[69] There is also a mechanism to resolve any dispute over any provision or interpretation of the Shareholder Agreement through referral to the President of the New Zealand Law Society or his or her nominee, whose decision is final and binding as to both matters of law and fact. There has been no submission to the New Zealand Law Society President for interpretation of the agreement.
[70]Schedule A records the shareholder advances. The applicants advanced
$2.291 million or thereabouts. The respondents advanced just under $670,000 to enable the company to operate the business.
[71] Under a heading “shareholder drawings” the schedule states that the respondents shall be entitled to weekly drawings of $1,150 to operate the Farm. This is the only express reference to their role as opposed to the mandate of the Board of J & P Farms Limited.
[72] An additional schedule to the Shareholder Agreement headed “Farm consultant — key services” defines the key services to be provided by the consultant including: business planning, advice on labour structures, enterprise analysis, feed planning and farm modelling, financial planning, benchmarking and developing sustainable farming systems, precision farm mapping, whole farm planning and supporting the development of key agribusiness partnerships.
[73]As noted, disputes over farming practices arose virtually immediately.
[74] The applicants have, since March 2024, purported to cancel the Shareholder Agreement alleging the respondents’ refusal to follow conventional farming practices with resulting financial losses amounts to a repudiation of the Shareholder Agreement or otherwise entitles the applicants to cancel.
[75] The respondents reject that position. They say that they have been improving a farm which, from the inception of the relationship between the parties, was in poor condition and that the holistic practices they employ are agreed on. In particular, they deny that they are contractually bound to follow the advice of the farm consultants.
[76] It is more than arguable that cl 12, properly construed, limits the termination of contracts only as between J & P Farms Limited and a director and/or shareholder rather than agreements between shareholders. If so, this clause is not inconsistent with the termination provisions of the Shareholder Agreement in cl 14. However, whether (or not) the arrangement that the respondents manage the Farm is an arrangement between the company and the respondents was not argued by Mr Bowden and will be a matter for arbitration.
Arbitral claims
[77] The applicants produced a statement of claim comprising the intended claims in the arbitration. There are five proposed causes of action. The first is misrepresentation. It is alleged that Mrs Perrett made various representations about her willingness to use conventional farming methodologies and perform the tasks and duties directed by the farm advisor which induced the applicants to enter into the Shareholder Agreement. Contrary to those representations, the respondents have since refused to do anything which conflicts with their organic production aims and beliefs.
[78] The claim seeks an order cancelling the contract, relying on s 37 of the Contract and Commercial Law Act 2017 and damages, including general damages.
[79] The second cause of action alleges repudiation by the respondents arising from the same facts. It pleads that the consequence of those breaches are: lower farm production, no money for farm development or to pay Mr Jellick for his services, lack of fertility (further impacting production), damage to the grass and rendering the farm an unsafe place for Mr Jellick and his partner.
[80] The third cause of action is for breach of contract in failing to achieve the budgeted figure for the 2023/24 season and which led to a reduction in profit payable and damage to the value of the applicants’ shareholding.
[81] The fourth pleaded cause of action is deceit. It is alleged that the respondents have deliberately damaged and run down farm infrastructure and pastures along with lowering production to reduce the value of the farm so that they might purchase it (at a lesser value) after the expiry of a five-year period.17
[82] The fifth cause of action seeks rectification of the Shareholder Agreement insofar as the requirement of unanimity in cl 12.2 is concerned. The pleading alleges that cl 12.2 was agreed to by the applicants under duress and reads in part:
The applicants did not, and could not reasonably have been expected to, understand that the amendments would allow the respondents to act in breach of contract and rely on the inserted clauses to override the standard conditions of the contract which would afford a remedy for those breaches.
Accordingly, the requirement of unanimity of directors in clause 12.2 of the [Shareholder Agreement] should be:
a.Rectified; or
b.Treated as a mistake not reflecting the common intentions of the parties, including imputed reasonable intentions; or
c.otherwise amended due to the circumstances of duress and misrepresentation under which it was entered into; or
d.Ignored as a matter of construction, being wholly inconsistent with the allocation of shares and directors set out elsewhere in the [Shareholder Agreement].
Interim relief — parties’ respective arguments
[83] Mr Bowden submitted that interim relief is necessary since the minority shareholders have de facto control over the Farm and J & P Farms by virtue of cl 12 of the Shareholder Agreement. He maintained that the ensuing deadlock requires the Court’s intervention to ensure that there is proper preparation for the next farming season (commencing 1 June 2025). The interim arrangement proposed includes the continued milking of the herd by the respondents until the cows are “dried off” which is likely to have occurred by early May.
17 Clause 10.4 of the Shareholder Agreement provides that five years from the date of the agreement, Shareholder 2 (the respondents) shall purchase a minimum of 10 per cent of the total shares of the Company and if Shareholder 2’s holding then exceeds 49 per cent they will be required to purchase all of Shareholder 1’s (the applicants) holding.
[84] He contended that the test of “reasonable possibility” that the applicants will succeed on the merits of the claim as required under art 17B(1) of the Act is consonant with the test of “serious issue to be tried” under the court’s inherent jurisdiction.18 This is met by the evidence of Mr Manjala that the Farm is being run inconsistently with AgFirst’s directives and is placing the continuing viability of the Farm in jeopardy.
[85] He submitted that status quo is a flexible concept. In this case, it ought to be seen as operation of the Farm consistently with the Shareholder Agreement rather than management/operation of the Farm by the respondents in a non-compliant way. He acknowledged that this imports an element analogous to specific performance into the notion of what constitutes the status quo. He contended that the Shareholder Agreement directs the running of the Farm by the Board of J & P Farms Limited (of which the applicants make up two-thirds) who intend to farm in accordance with the mandated advice of the farm consultant/advisor. He advised the Court that the applicants intend to prepare the Farm for sale and that maintaining its value is critical for a staged and orderly conclusion to the relationship between the parties.
[86] Mr Bowden also submitted that there is no evidence from the respondents that they have the means to meet an award of damages, while in contrast Mr Jellick both personally and in his capacity as trustee of the Jellick Trust has given an undertaking as to damages which has substance.
[87] In response, Mr Hooper argued that there is no reasonable possibility that the applicants will succeed on the merits of the claim. He contended that the Shareholder Agreement provides that the respondents are to operate the Farm. It does not require them to operate it as a conventional dairy unit under the direction of a farm consultant or require achievement of a minimum production target. He argued that the evidence does not support the allegations of poor farm management and that the Farm was in poor condition before they arrived. He noted that the respondents’ requests for documentary evidence about the productivity and condition of the Farm prior to them entering into the Shareholder Agreement, have not been provided by the applicants. He also contended that claims to rectification and duress are misconceived and incompatible.
18 Safe Kids in Daily Supervision Ltd v McNeill, above n 1, at [30].
[88] Mr Hooper pointed to the company’s healthy cash surplus and evidence that the milking herd’s production is growing. He submitted that the only reason that production targets have not been met is because the targets were based on incorrect information and assumptions compounded by external factors such as weather and a staphylococcal outbreak.
[89] Mr Hooper maintained that the harm to the respondents substantially outweighs the alleged harm to the applicants as their removal will leave them unemployed and unable to meet their financial commitments. He argued that the primary remedy in the substantive proceeding is damages (therefore damages are an adequate remedy) and the Shareholder Agreement provides a mechanism for sale and liquidation.
[90] Finally, he contended that the orders sought would undermine the integrity of the arbitral process by practically determining the dispute and removing any motivation to progress arbitration. Further, the applicants’ delay (in commencing arbitration) is fatal to the application.
Jurisdiction to grant interim measures/relief
[91]The starting point is art 5 in sch 1of the Act which reads:
In matters governed by this schedule, no court shall intervene except where so provided in this schedule.
[92] This Court’s power to grant interim relief under the Act derives from art 9(1) in sch 1 to the Act:
It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure and for a court to grant such measure.
[93] The purpose of an interim measure is to maintain or restore a state of affairs pending the determination of the underlying dispute.19 It is a holding or temporary order.20 The term “interim measure” is defined in art 17:
19 Smith Elements & Controls Ltd v EPI Group Ltd [2018] NZHC 336.
20 Safe Kids in Daily Supervision Ltd v McNeill, above n 1, at [26]–[27].
interim measure means a temporary measure (whether or not in the form of an award) by which a party is required, at any time before an award is made in relation to a dispute, to do all or any of the following:
(a)maintain or restore the status quo pending the determination of the dispute:
(b)take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral proceedings:
(c)provide a means of preserving assets out of which a subsequent award may be satisfied:
(d)preserve evidence that may be relevant and material to the resolution of the dispute:
(e)give security for cost
[94] Relevantly, in respect of the powers of the High Court art 9(2) of sch 1 provides:
For the purposes of paragraph (1), the High Court or … has the same powers as an arbitral tribunal to grant an interim measure under article 17A for the purposes of proceedings before that court, and that article and article 17B apply accordingly subject to all necessary modifications.
[95]While arts 17A and 17B read as follows:
17A Power of arbitral tribunal to grant interim measure
Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant an interim measure.
17B Conditions for granting interim measure
(1)If an interim measure of a kind described in subparagraph (a), (b), or
(c) of the definition of that term in article 17 is requested, the applicant must satisfy the arbitral tribunal that—
(a)harm not adequately reparable by an award of damages is likely to result if the measure is not granted; and
(b)the harm substantially outweighs the harm that is likely to result to the respondent if the measure is granted; and
(c)there is a reasonable possibility that the applicant will succeed on the merits of the claim.
(2)If an interim measure of a kind described in subparagraph (d) of the definition of that term in article 17 is requested, the applicant must satisfy the arbitral tribunal of the matters specified in paragraph (1)(a)
to (c), but only to the extent that the arbitral tribunal considers appropriate.
(3)If an interim measure of a kind described in subparagraph (e) of the definition of that term in article 17 is requested, the applicant must satisfy the arbitral tribunal that the applicant will be able to pay the costs of the respondent if the applicant is unsuccessful on the merits of the claim.
(4)A determination by the arbitral tribunal on the matter specified in paragraph (1)(c) does not affect its discretion to make any subsequent determination.
[96] Notwithstanding art 9, the Court is generally cautious about granting interim relief unless it is either impossible or impracticable for the arbitral tribunal to deal with the matter.21 Court imposed interim measures are intended to “compliment and facilitate” arbitrations and not to encroach on the powers of arbitrators or act as a substitute for them.22 The Court and the arbitral tribunal are not “jurisdictional competitors”.23
[97] Commentators have suggested that the Courts should defer to the arbitral tribunal unless there are compelling reasons for it to grant the interim measures sought.24 This might, for example, be in a situation where an arbitration tribunal has not yet been formed (or an arbitrator not yet appointed) and as such, the necessary protection cannot be implemented soon enough.25
[98] The Courts have a discretion whether or not to grant an interim measure and they will generally be reluctant to express views on the merits or take steps that might be seen as intruding on the arbitrator’s domain.26 As stated by Lord Mustill in Channel Tunnel v Balfour Beatty Construction Ltd:27
21 Sim’s Court Practice (online ed, LexisNexis) at [AART9.2]; Smith Elements & Controls Ltd v EPI Group Ltd [2018] NZHC 336.
22 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, [1993] 1 All ER 664 (HL) at 688; Sensation Yachts Ltd v Darby Maritime Ltd HC Auckland CIV-2005-404-1908, 16 May 2005 at [22].
23 Smith Elements & Controls Ltd v EPI Group Ltd, above n 19, at [31] referencing David A R Williams and Amokura Kawharu Williams & Kawharu on Arbitration (2nd ed, LexisNexis, Wellington, 2017) at [9.4.3].
24 At [9.4.3].
25 Marnell Corraro Associates v Sensation Yachts, (2000) 15 PRNZ 608.
26 Mike Pero Real Estate Ltd v Tauranga Realty Ltd [2015] NZHC 1162; Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 (HC) at [40]; Williams and Kawharu, above n 23, at [9.6]; Phillip Green and Barbara Hunt Green & Hunt on Arbitration Law & Practice (online looseleaf ed, Thomson Reuters, 2017) at [ARSch1.17A.02]
27 Channel Tunnel v Balfour Beatty Construction Ltd, above n 22, at 688.
The purpose of interim measures of protection … is not to encroach on the procedural powers of the arbitrators but to reinforce them, and to render more effective the decision at which the arbitrators will ultimately arrive on the substance of the dispute. … I prefer the view that when properly used such measures serve to reinforce the agreed method, not to bypass it.
Discussion
[99] The application falls to be determined by applying the test in art 17B of sch 1 of the Act. The criteria in 17B(1)(a) and (b) of the Act share characteristics with balance of convenience considerations in the interlocutory injunction jurisdiction.
[100] Despite the order in which it appears in the section, it is orthodox to deal with the last of the 17(B)(1) factors first. 17B(1)(c) requires a “reasonable possibility” that the applicant will succeed on the merits of the claim.28 I turn to consider that issue first.
Whether there is a reasonable possibility that the applicants will succeed on the merits
[101] While I accept that there is no express requirement that the Farm was to be managed as a “conventional farming arrangement”, the Shareholder Agreement is clear that in the event of disagreement, the parties agree to follow the advice of the Farm Consultant unless mutually agreed otherwise. It is apparent that there was disagreement about the style of farming. Thus, it is strongly arguable that the obligation was to follow the AgFirst recommendations.
[102] There is evidence pointing to the respondents refusing to follow that advice of AgFirst in breach of their obligations. The respondents’ stance that they are entitled to follow a non-conventional system of farming (as opposed to a high input, high output system) is inconsistent with overall tenor of the Shareholder Agreement. I consider, without finally determining the point, that the respondents do not have carte blanche under the Shareholder Agreement to farm in any way they wish. Clause 7.1(g) and the stipulation that prior to the commencement of each farming year the Farm Consultant shall provide a “farming plan that will be adopted by the Company subject to any mutually agreed amendments” points the other way. The farming plans
28 Smith Elements & Controls Ltd v EPI Group Ltd [2018] NZHC 336 at [30] citing Safe Kids in Daily Supervision Ltd v McNeill, above n 1, at [30]–[31];
produced by AgFirst adopted conventional farming practices. There is no cogent evidence that AgFirst also provided holistic farming advice or sustainable farming advice.
[103] I am satisfied that there is a reasonable possibility of establishing that the respondents’ management of the Farm is inconsistent with the advice from AgFirst through failure to adhere to recommended grazing practices and feeding schedules; failing to break-feed; allowing cows to overgraze; and underfeeding the milking herd leading to lower than expected milk production. The concerns expressed by Fonterra leading to the Farm being placed on “farm-watch” are significant and the clearest indication of poor management given the criticality of the Fonterra supply arrangement.
[104] It is notable that the respondents take issue with the Fonterra metrics in that they do not agree the body condition score of the cow is a proxy measure for health and welfare.
[105] It follows that there is a reasonable possibility that the applicants can establish breach of the Shareholder Agreement and repudiation. It is unnecessary to discuss the other intended claims set out in the draft arbitral claim, and I decline to do so considering the recently commenced arbitration.
Whether harm not adequately reparable by an award of damages is likely to result if interim measures are not granted
[106] I accept Mr Hooper’s submission that since the primary remedy the applicants seek in the arbitration (according to the draft intended claim) is cancellation and damages, it follows that damages must be an adequate remedy.
[107] The core underlying complaint is the financial impact of the respondents’ alleged mismanagement which includes negatively impacting the Farm’s long term production capacity. That in turn logically impacts value of the Farm in any pending sale. Along with any loss of profits claim, this appears to be quintessentially an issue of quantification of damages.
[108] The Shareholder Agreement sets out a process for valuation of the respective shareholdings if cl 29 is triggered. Mr Jellick deposes that the respondents have equity in their shareholder account. It follows that a successful substantive claim at arbitration following sale of the Farm could see damages payable to the applicants from the respondents’ share of equity. This is underscored by the interim award made by the arbitrator providing for sale proceeds to be held in a solicitor’s trust account until the outcome of the arbitration is known.
[109]This factor tells against the grant of interim relief.
Whether interim measures are supportive of any relief sought in the arbitration
[110] As Kós J said in Discovery Geo Corporation v STP Energy Pty Limited, the purpose of art 9(2) is to authorise the High Court to support the arbitral process, not to grant relief of a kind not contemplated in that proceeding or not essential to protect the integrity of the arbitral process.29
[111] No injunctive relief is sought in the intended arbitral claim, at least in the form presented to this Court. Materially, I find that the relief sought in this application is not essential to protect the integrity of the arbitral process.
Whether the harm to the applicants substantially outweighs the harm likely to result to the respondents if interim measures are not granted
[112] I do not accept that harm to the respondents should an interim order be made substantially outweighs harm to the applicants if it is not made. This is on the proviso that the respondents continue to manage the milking in the interim and receive their weekly dividend payment — as is now the position advanced by the applicants. Nor is there any realistic prospect that the applicants could now choose not to advance the arbitration if interim orders are made. Practically, any orders can be made contingent on faithful prosecution of the arbitral claims by the applicants but in any event, the making of the interim award by the arbitrator renders this argument redundant. This factor favours the applicants.
29 Discovery Geo Corporation v STP Energy Pte Limited [2012] NZHC 3549 citing Asher J in Safe Kids in Daily Supervision Ltd v McNeill, above n 1, at [18].
Whether there are any other factors for or against granting interim measures
[113] Two factors are relevant at this stage. The first is status quo. Article 17 of sch 1 of the Act recognises the fluidity of status quo since it refers to “maintain or restore the status quo”.30 As Asher J held in Safe Kids, this is not intended to require some “identifiable and precisely definable situation” that exists or has existed.31 However, no authority was provided to support the applicants’ approach as to the identification of the status quo, while the proposition that status quo imports a specific performance element does not withstand scrutiny because it is premised on determination of the parties’ positions. In my assessment, for the purposes of the present inquiry, the relevant status quo is that the respondents are managing the Farm operations, including the milk production. The status quo therefore favours the respondents in that the orders sought by the applicants cannot be said to maintain or restore the status quo. Rather, they arguably cut across the arbitral tribunal’s jurisdiction to resolve the dispute.
[114] The second is delay. I am not satisfied that the relief sought is urgent given the delays in progressing arbitration prior to this application. This is notwithstanding that the first of June date is critical, being the beginning of the new farming year. Disagreement about the running of the Farm has been ongoing since mid-2023. Physical altercations between the parties took place in May and August 2024. In November 2024, the applicants advised they were nominating an arbitrator but did not do so until some months later.
[115] Now that the arbitrator has been appointed there would need to be compelling reasons for this Court to grant interim measures. Standing back, I am not satisfied that the reasons presented are compelling, though it is likely to be in both parties’ interests for the question of management leading to a sale to be resolved in a way which preserves the Farm’s value.
30 Safe Kids in Daily Supervision Ltd v McNeill, above n 1, at [26].
31 At [27].
Result
[116] Not being satisfied that all the requisite elements in art 17B are made out, I decline to grant the orders sought.
Costs
[117] The respondents seek to be heard on costs. I reserve costs. In the event costs are not agreed by the parties, memoranda of no more than five pages may be filed.
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Walker J
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