Kaur v RSK Farming Limited - [2022] NZHC 3330

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2022-419-000127

[2022] NZHC 3330

BETWEEN
SARBJIT KAUR

Plaintiff

AND

RSK FARMING LIMITED

Defendant

CIV-2022-419-000088

BETWEEN

BALBIR SINGH-HEER and DABAU MINDHRO KAUR SINGH-HEER

Plaintiffs

AND

RSK FARMING LIMITED

Defendant

Hearing: 7 September 2022

Appearances:

K I Bond for Rupinder Singh-Heer M Reason / F A King for Sarbjit Kaur

M J Fisher / J T Toon for Balbir Singh-Heer and Dabau Mindhro Kaur Singh-Heer

Judgment:

9 December 2022

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 9 December 2022 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

KAUR v RSK FARMING LTD [2022] NZHC 3330 [9 December 2022]

Introduction

[1] Sarbjit Kaur was born and raised in India. Rupinder Singh-Heer was born and raised in New Zealand. They married in India in 2007. The following year, Sarbjit1 came to New Zealand with Rupinder to live on his family farm in Te Aroha.

[2] Rupinder’s parents, Balbir Singh-Heer and Dabau Mindhro Kaur Sing-Heer, bought the Te Aroha farm in the 1990s. Rupinder was raised on the Te Aroha farm and has worked there all his adult life. In 2007, Balbir and Dabau incorporated Sunsuraj Limited (Sunsuraj) and transferred ownership of the Te Aroha farm to that company.

[3] RSK Farming Limited (RSK) was incorporated in 2011, with Rupinder the sole director and shareholder. In 2012, Sarbjit was made a director and 50 per cent of the shares in RSK were transferred to her. Sunsuraj, as owner of the Te Aroha farm, entered into a share milking agreement with RSK as share milker. Before that, Rupinder worked on the farm for a wage. Sarbjit also worked on the farm but says she was unpaid.

[4] In 2016, Sunsuraj sold the Te Aroha farm, and some Fonterra shares, to RSK. The purchase price was $7,246,343, made up of $6,539,293 for the land and improvements and $707,050 for the shares. The purchase was funded by a loan from ASB secured by a first ranking mortgage, an advance from Balbir and Dabau secured by an agreement to mortgage, and an advance from Rupinder also secured by an agreement to mortgage.

[5]

[5]

.

1 In view of the commonality of surnames, I use first names in this judgment.

[6] Sarbjit has filed a statement of claim under s 174 of the Companies Act 1993 (the Act).2 She claims that the affairs of RSK have been conducted in a manner that is unfairly prejudicial to her as a 50 per cent shareholder.

[7] In this interlocutory application, Sarbjit applies for an interim liquidator to be appointed. She asks that the interim liquidator be given the power to manage RSK, examine its directors, shareholders, and others, investigate and report on its financial position and the way in which it acquired its assets, establish reasonable director salaries, and set aside the debt arrangement with Balbir 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: [2022] NZHC 3330
Decision Date: 9 December 2022

CaseChat Overview and Summary

In Kaur v RSK Farming Limited, the High Court considered an application by Sarbjit Kaur for the appointment of an interim liquidator of RSK Farming Limited (RSK) and for leave to intervene in a separate proceeding brought by Balbir and Dabau Singh-Heer. Sarbjit claimed that RSK's affairs had been conducted in a manner that was unfairly prejudicial to her and sought leave to intervene in summary judgment proceedings brought by Balbir and Dabau against RSK.

The court dismissed Sarbjit's application for an interim liquidator, finding that there was no valid winding-up application underway, the application was unlikely to succeed, and it was not necessary or expedient for the purpose of maintaining the value of the assets of the company. The court noted that Sarbjit had not specified the ultimate relief she sought in her substantive proceeding under s 174 of the Companies Act 1993 and that liquidation was a remedy of last resort.

The court granted Sarbjit leave to intervene in the summary judgment proceeding to defend the proceeding on behalf of RSK. The court found that while a prudent businessperson may not have attempted to defend the proceedings, there were compelling reasons to allow Sarbjit to test the circumstances surrounding the debt arrangement in court. The court noted that Sarbjit was a vulnerable person, being relatively new to the country, commercially unsophisticated, and with English as her third language. The court also found that there were aspects of the transaction that could be, based on the limited evidence presented, irregular.

The court ordered RSK to indemnify Sarbjit for the legal costs she incurs for RSK in defending the summary judgment proceeding, up to $50,000, subject to further order of the Court. The court directed the parties to confer and file a joint memorandum within 10 working days proposing the next procedural directions to progress the s 174 proceeding and the summary judgment proceeding to hearing, addressing the suggestion that the two proceedings should be case managed and heard together or, in the alternative, the summary judgment proceeding is stayed until the s 174 proceeding is determined.

Orders