Kirkcaldie & Stains Limited - [2016] NZHC 112

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-989 [2016] NZHC 112

IN THE MATTER OF
an arrangement under Part 15 of the

Companies Act 1993

BETWEEN

KIRKCALDIE & STAINS LIMITED First Applicant

AND

THE KIRKCALDIE & STAINS TRUSTEE COMPANY LIMITED Second Applicant

On the Papers

Counsel:

H Wilson and G Fitzgerald for the Applicants

Judgment:

9 February 2016

JUDGMENT OF ASSOCIATE JUDGE SMITH

[1] The first applicant (Kirkcaldie) applies under pt 15 of the Companies Act 1993 (the Act) for orders approving an arrangement under which four out of every five shares in Kirkcaldie registered in the name of each shareholder at a prescribed date (the Record Date) will be cancelled, with $2.3602 per share paid to each registered holder of a cancelled share. A copy of the proposed arrangement is annexed to this judgment.

[2] The second applicant (the trustee company) is a wholly-owned subsidiary of Kirkcaldie, and has acted as trustee of Kirkcaldie’s employee share scheme (the Scheme) which was established in 1998. The Scheme is no longer operating. The trustee company holds 35,850 shares in Kirkcaldie.1 It is proposed that the trustee company will participate in the arrangement so that four fifths of the trustee
company’s shares will be cancelled and it will be paid $2.3602 for each of the

1 These shares have been held pursuant to s 82(6) of the Act, under which a subsidiary may hold shares in its holding company in the capacity as personal representative or as trustee.

KIRKCALDIE & STAINS LIMITED v THE KIRKCALDIE & STAINS TRUSTEE COMPANY LIMITED [2016] NZHC 112 [9 February 2016]

cancelled shares. The arrangement then proposes that, following the payment out to each shareholder of the amount payable for their cancelled shares, the residual 7,170 shares in Kirkcaldie held by the trustee company will be cancelled, and the Scheme will be wound up.

[3] The application is made ex parte, and separate orders have been sought dispensing with service and representation of other parties.

Background

[4] For many years Kirkcaldie has operated a well known department store on Lambton Quay, Wellington. However, over the last decade Kirkcaldie has been facing a more challenging retail environment, and has suffered declining store revenues.

[5] On 4 June 2015, Kirkcaldie entered into a conditional agreement for the sale of its retail business to David Jones Pty Ltd (David Jones), a wholly-owned subsidiary of Woolworths Holdings Ltd (a company listed on the South African stock exchange).

[6] Under the agreement with David Jones, David Jones was to acquire Kirkcaldie’s main store lease at Lambton Quay, together with associated brands and trademarks. The agreement with David Jones was expressly conditional on Kirkcaldie’s shareholders approving the sale and the terms and conditions of the sale agreement by 31 July 2015. The agreement was further conditional on David Jones receiving all consents required under the Overseas Investments Act 2005, and the Overseas Investment Regulations, by 30 November 2015.

[7] Kirkcaldie’s shareholders approved the sale at a special meeting held on 31

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: [2016] NZHC 112
Decision Date: 9 February 2016

CaseChat Overview and Summary

Kirkcaldie & Stains Limited (Kirkcaldie) sought orders under Part 15 of the Companies Act 1993 for the approval of an arrangement whereby four out of every five shares in the company would be cancelled, and a payment made to each shareholder of $2.3602 for each share cancelled. The arrangement also provided for the winding up of Kirkcaldie’s employee share scheme and the cancellation of the residual shares held by the trustee company. The application was made ex parte, and orders were sought dispensing with the service of the application and representation of other parties. The court was required to determine whether the arrangement was fair and equitable and whether the procedural requirements of the Act had been complied with. The court found that the arrangement was fair and equitable and that the procedural requirements of the Act had been complied with. The court also found that the arrangement was necessary and desirable to give effect to the winding up of Kirkcaldie’s operations. The court made orders sanctioning the arrangement, dispensing with the service of the application, and declaring the arrangement to be binding on Kirkcaldie, all its shareholders, the trustee company and all other persons necessary.

Orders