Jowada Holdings v Limited - [2003] NZCA 100

IN THE COURT OF APPEAL OF NEW ZEALAND
CA248/02
BETWEENJOWADA HOLDINGS LIMITED

Appellant

ANDCULLEN INVESTMENTS LIMITED

First Respondent
ANDPACIFIC RETAIL GROUP

Second Respondent

Hearing:28 April 2003

Coram:McGrath J
Fisher J
Rodney Hansen J
Appearances: R B Stewart QC for the Appellant

A S Ross and E S Scorgie for the Respondents

Judgment:5 June 2003

JUDGMENT OF THE COURT DELIVERED BY McGRATH J

Introduction
[1]       This is an appeal against the refusal of summary judgment in a contractual claim for an advisory fee of $886,727 (Jowada Holdings Ltd v Cullen Investments Ltd and Pacific Retail Group CP2581MOZ, Auckland, 1 November 2002). The appellant, who is plaintiff in the High Court, claims that the respondents are required to pay the fee following the respondents’ successful takeover of Bendon Group Limited during March and April 2002.
[2]       The appeal raises questions concerning the interpretation and application of a contract between the parties. There are areas of factual disagreement reflected in their affidavits filed in support of and opposition to the summary judgment application. It was largely on that account that the Master decided that it was inappropriate for the Court to determine the appellant’s entitlement in a summary judgment application. The appellant challenges that decision.
Background facts
[3]       In mid 2000 Josephine Grierson, an economist, and David Hayde, a chartered accountant, decided to set up an investment business. Their long term aim was to manage funds for their clients, charging fees, but they decided that they should, early on, undertake a relatively high profile transaction in order to establish a commercial reputation.
[4]       Ms Grierson and Mr Hayde identified Bendon Group Limited (Bendon) as an under-performing company with an established market share in the lingerie trade. The company had a cashflow which would be available to service the debt that they envisaged would be incurred in the course of its acquisition. It also had some $20m surplus cash. They saw Bendon as an attractive target for a leveraged buyout. Importantly they devised a structure for the acquisition using the amalgamation provisions of the Companies Act 1993. They believed that their method would overcome a tax problem that would arise if there were a direct distribution of the surplus cash to shareholders.
[5]       After their own initial researches Ms Grierson and Mr Hayde approached Mr Wayne Walden, chief executive officer and a substantial shareholder in the Farmers Deka Group, which was Bendon’s largest customer. Mr Walden was seen as having knowledge of Bendon’s operations and their shortcomings. He could give valuable assistance in the speedy rectification of those shortcomings following a takeover. Mr Walden was receptive to the approach and indicated his willingness to invest both time and money in the proposal. Ms Grierson and Messrs Hayde and Walden worked out that they would need about $20m of equity to fund the proposed takeover with the balance of approximately $65m to be funded by debt and surplus cash in Bendon. They expected to be able to raise $10m of the equity themselves and…

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.

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Details

Case: [2003] NZCA 100
Decision Date: 5 June 2003

CaseChat Overview and Summary

In Jowada Holdings v Limited, the Court of Appeal of New Zealand considered an appeal against the refusal of summary judgment in a contractual claim for an advisory fee of $886,727. The appellant, Jowada Holdings Limited, claimed that the respondents, Cullen Investments Limited and Pacific Retail Group, were required to pay the fee following their successful takeover of Bendon Group Limited. The appeal raised questions concerning the interpretation and application of a contract between the parties. The Court found that the 29 March 2001 agreement between the parties was binding and remained in effect when the respondents launched their takeover bid for Bendon. The agreement provided for the payment of a fee if the respondents, or an associate, undertook a takeover of Bendon obtaining 51% or more of its share capital. The Court concluded that the respondents proceeded with the transaction and became liable to pay the appellant the prescribed advisory fee, unless they offered the appellant an option to participate by way of a significant equity investment. The offer made on 11 January 2002 did not meet the requirements of the 29 March agreement as it failed to provide an opportunity for the appellant to invest on terms equally advantageous to those enjoyed by the respondents. The appeal was allowed against the first respondent, and the proceedings were remitted to the High Court for determination of the terms of the judgment to be entered against the first respondent. The appellant was also entitled to costs in the Court of Appeal against the first respondent.

Orders