M Yovich & Sons Ltd v Yovich

IN THE COURT OF APPEAL OF NEW ZEALAND CA187/00

BETWEEN	M YOVICH & SONS LIMITED
Appellant

AND	JOHN ZALTO YOVICH
Respondent

Hearing:	22 November 2000
Coram:	McGrath J Doogue J Young J
Appearances:	G P Denholm for the Appellant J D Sadler for the Respondent
Judgment:	22 February 2001

JUDGMENT OF THE COURT DELIVERED BY MCGRATH J

Table of Contents

....................................................................................... Paragraph Number

Introduction..................................................................................... [1]

The Statute...................................................................................... [2]

Facts................................................................................................ [3]

High Court Proceeding.................................................................... [9]

High Court Judgment...................................................................... [18]

Submissions on Appeal............................................................................................... [25]

Prejudicial conduct under s174....................................................... [29]

Fixing the price:.............................................................................. [35]

(a)  Notional costs of liquidation........................................................................... [37]
   (b)  Contingent claim for wages............................................................................ [39]
   (c)  Discount for minority shareholding............................................................. [40]
   (d)  The Windfall Issue............................................................................................ [60]
Costs in the High Court.............................................................................................. [61]
Conclusion...................................................................................................................... [62]

Introduction

1. This is an appeal against the basis on which the High Court fixed the price at which it ordered a company to acquire the minority shareholding of a member under s174 of the Companies Act 1993.   The appeal is against a judgment of Laurenson J delivered in the High Court at Whangarei on 31 July 2000, in which the Court ordered the appellant, M Yovich & Sons Limited, to acquire for $140,000 a parcel of 2027 ordinary shares in the appellant held by the respondent Mr John Yovich.   Before the Judge the parties had accepted that by reason of their inability to work together, the affairs of the appellant were likely to be conducted in a manner unfairly prejudicial to the respondent as a shareholder.   The substantial issue in this case was accordingly the price to be paid for the shares.

The Statute

1. Insofar as it is relevant to the issues in this appeal s174 of the 1993 Act provides as follows:

   174.  Prejudiced shareholders-(1)  A shareholder or former shareholder of a company, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him or her in that capacity or in any other capacity, may apply to the Court for an order under this section.

   (2) If, on an application under this section, the Court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order-

   (a)Requiring the company or any other person to acquire the shareholder’s shares; or

   …

   (3) No order may be made against the company or any other person under subsection (2) of this section unless the company or that person is a party to the proceedings in which the application is made.

Facts

1. On its formation in 1953 the appellant acquired a farm at Mata from the founder of the company Mr Mick Yovich.   He had come to New Zealand in his youth and had purchased the farm in the…