Manning v Smith
[2020] NZHC 1888
•31 July 2020
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2019-470-000069
[2020] NZHC 1888
UNDER the Companies Act 1993, s 284(1) IN THE MATTER OF
MEDICANN NZ HOLDINGS LIMITED (IN LIQUIDATION)
BETWEEN
PAUL THOMAS MANNING and
KENNETH PETER BROWN, as liquidators of MEDICANN NZ HOLDINGS LIMITED (IN LIQUIDATION)
Applicants
AND
ROSS HENRY SMITH and BRENDON GEORGE OGILVY
Respondents
Hearing: 24-25 June 2020 Appearances:
J Burt and J Tunna for Applicants
M Macfarlane for Respondent (R Smith) B Gustafson for Respondent (G Ogilvy)
Judgment:
31 July 2020
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by me on 31 July 2020 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Sainsbury Logan & Williams, Napier Lowndes Ltd, Auckland
B Gustafson, Auckland J Burt, Auckland
MANNING v SMITH [2020] NZHC 1888 [31 July 2020]
Introduction
[1] The applicants are the liquidators of Medicann NZ Holdings Ltd (in liquidation) (Medicann Holdings). The company was incorporated in June 2018 and intended, as part of a group of companies (Medicann group), to operate in the medical cannabis industry.
[2] The applicants seek directions pursuant to s 284(1) of the Companies Act 1993 (the Act) as to whether shares held in Medicann Holdings by Mr Ross Smith, a founder investor, and other interests associated with him (together, the Smith entities) either became void or were validly cancelled prior to liquidation. The applicant liquidators require directions to determine who is entitled to the surplus assets in Medicann Holdings’ liquidation, but have no other interest in whether the question is answered in the affirmative or the negative. The dispute is essentially between Mr Brendon Ogilvy (the chief executive officer of the Medicann group, and a shareholder of Medicann Holdings), and the Smith entities.
[3] Mr Ogilvy and the Smith entities have each filed a Notice of Opposition. Neither Mr Ogilvy nor the Smith entities are opposed to directions being made per se, but they take opposing positions regarding the content of those directions. Mr Ogilvy contends the shares were void or were validly cancelled in November 2018, while the Smith entities contend the shares were neither void nor validly cancelled.
[4] At issue is the interpretation of Medicann Holdings’ constitution (Constitution) and a companion “Subscription and Shareholder’s Agreement” (SSA). Clause 3.4 of the Constitution provided that no person could hold shares in Medicann Holdings without signing or being bound by (via a duly executed accession deed) the SSA. It is not in dispute that none of the Smith entities ever signed the SSA or executed an accession deed. The Smith entities say they were never bound by the SSA. They further say that there was an improper alteration to the Constitution, which expropriated shares of valuable proprietary rights and thereby infringed the principles of equitable limitations on shareholders’ powers.
Factual background
[5] In his affidavit, Mr Ross Smith says that in late 2017 he started exploring the formation of a New Zealand medical cannabis company. He first contacted Mr Luc Krol, the founder of Paradise Seeds in the Netherlands, about this idea. Mr Smith was anxious to secure exclusive licences for cannabis strains which, he says, would have become the crucial piece of intellectual property that would set the enterprise apart from any competitors.
[6] In early 2018, Mr Smith gathered together a group of founders and partners for what would become Medicann NZ Ltd (Medicann NZ). That group included – Mr Smith; Ms Kelly Desire (Mr Smith’s then fiancé), a corporate communications specialist; Dr Franz Strydom, a medical practitioner; Mr Brendon Ogilvy, a market researcher; Mr Krol, mentioned above; and Ms Elizabeth Plant, a pharmacologist (Co-Founders).
[7] On 20 March 2018, Medicann NZ was incorporated with 100 issued shares. Fifty of those shares were held by Mr Smith and the other 50 by Mr Krol. On 28 May 2018, Medicann NZ employed Mr Ogilvy as its chief executive officer.
[8] On 23 May 2018, Medicann NZ issued an “Excluded Offer Information Memorandum” (Information Memorandum). That memorandum sought to raise up to
$2M from wholesale and eligible investors (to whom the disclosure requirements in Part 3 of the Financial Markets Conduct Act 2013 would not apply) for the development, registration, and commercialisation of pharmaceutical-grade medical cannabis products, delivery systems, and treatments.
[9] The Information Memorandum described Dr Strydom, Mr Ogilvy, Mr Krol, Ms Desire, and Ms Plant as “co-founders”. Mr Smith was not described as a “co- founder” in that memorandum, but rather, as a “cannabis visionary” and “global cannabis consultant”.
[10] On 25 June 2018, Medicann Holdings was incorporated with two million shares held by Mr Ogilvy, and the rest, being 500,000 shares, held by Mr Smith. At incorporation, Mr Ogilvy was the sole director of Medicann Holdings.
[11] On 27 June 2018, the shares held by Messrs Smith and Krol in Medicann NZ were transferred to Medicann Holdings, such that Medicann Holdings became the parent company.
[12] On 29 June 2018, Messrs Ogilvy and Smith signed a resolution adopting the Constitution.
[13]Clause 3.4 of the Constitution provides:
Condition of Shareholding: No person may hold Shares without signing or being bound by (via a duly executed accession deed) the Subscription and Shareholders’ Agreement. If Shares are issued or transferred to a Shareholder prior to the Shareholder being bound by the Subscription and Shareholders’ Agreement, the issue or transfer (as applicable) is not void if:
(a)the Shareholder becomes a party to the Subscription and Shareholders’ Agreement (via a duly executed accession deed) within one month of the issue or transfer (as applicable); and
(b)The Shares have been issued or transferred (as applicable) in accordance with this Constitution and the Subscription and Shareholders’ Agreement.
[14] At cl 1.1, the Constitution defines “Subscription and Shareholders’ Agreement” as follows:
Subscription and Shareholders’ Agreement means the Subscription and Shareholders’ Agreement entered into between (among others) the Company, the Founder Investors and the Initial Investors (as such terms are defined in the Subscription and Shareholders’ Agreement) dated on or about the date of adoption of this Constitution, as may be varied, supplemented or replaced from time to time (the intention being that this definition will refer to any agreement(s) between the Shareholders relating to the Company which exist at a relevant time and which contain provisions relevant to the usage of such definition in this Constitution).
[15] The SSA is dated 1 July 2018, although the final version was not circulated to shareholders until 4 July 2018 (at the earliest). The SSA was subsequently signed by, or on behalf of, all shareholders except the Smith entities.
[16] On or about 29 June 2018, Mr Ogilvy transferred one million of his Medicann Holdings shares to the Co-Founders as follows:
(a)Dr Strydom (200,000 shares);
(b)Ms Plant (100,000 shares);
(c)Mr Krol (500,000 shares); and
(d)Ms Desire (200,000 shares).
[17] On or about 1 July 2018, Mr Ogilvy caused Medicann Holdings to issue a further two million shares. Those shares were initially held by Medicann Holdings itself, but during the course of July 2018, the shares were transferred to those investors who had submitted applications to acquire shares.
[18] On 25 July 2018, the 500,000 shares issued to Mr Smith were transferred to Mr Smith and Ruahine Professional Trustee Co Ltd (RPTCL), as trustee of the Mohaka Capital Trust; and 500,000 of the additional shares were issued to RPTCL as trustee of the Waitara Capital Trust (also a trust associated with Mr Smith).
[19] Relationships between the Co-Founders quickly deteriorated, particularly those between Mr Smith, Ms Desire and Dr Strydom on the one hand, and on the other, Mr Ogilvy, together with Mr Bastiaan Kramer, the Medicann group’s chief operating officer.
[20] On 21 August 2018, Mr Smith’s consultancy agreement with Medicann Holdings was cancelled.
[21] Ms Desire attended a meeting at Holland Beckett solicitors on 23 August 2018, where she was given a copy of the SSA.
[22] In September and October 2018, the parties attempted to settle differences at mediation, but despite draft settlement agreements being prepared, no settlement was concluded.
[23] There was an extraordinary general meeting at Medicann Holdings’ premises on 3 November 2018.
[24] On 9 November 2018, the solicitors for Medicann Holdings wrote to Mr Smith and Ms Desire proposing a full and final settlement of all disputes. The solicitors for the Smith entities subsequently sought an extension of time to accept the settlement offer, but no settlement was ever concluded.
[25] By email dated 9 November 2018, at 5.47 pm, Mr Ogilvy wrote to the Smith entities (namely, Mr Smith, Ms Desire, and Dr Strydom) advising that the board of directors cancelled the following shareholding in Medicann Holdings:
(a)500,000 shares held by Mr Smith and RPTCL;
(b)500,000 shares held by RPTCL; and
(c)200,000 shares held by Ms Desire.
[26] On 12 November 2018, the remaining shareholders of Medicann Holdings resolved to put the company into liquidation, and Mr Manning and Mr Brown were appointed as liquidators.
[27] By way of an amended memorandum dated 29 June 2020, the applicant liquidators advise that they currently hold approximately $298,000 in their trust account. They estimate that an amount in the range of approximately $83,000-
$152,000 would be available to distribute to Medicann Holdings’ shareholders.1
Jurisdiction
[28]Section 284(1)(a) and (b) of the Act provide that:
On the application of the liquidator, a liquidation committee, or, with the leave of the court, a creditor, shareholder, other entitled person, or director of a company in liquidation, the court may –
(a)Give directions in relation to any matter arising in connection with the liquidation;
1 The liquidators have calculated the distribution to each shareholder based upon a high end and a low end of the range of funds anticipated to be available for distribution, under both the scenario that the Smith entities are excluded from the distribution and the scenario that the Smith entities are entitled to participate in the distribution.
(b)Confirm, reverse, or modify an act or decision of the liquidator.
[29] The powers under s 284(1) of the Act may be exercised in relation to a matter occurring before or after the commencement of the liquidation, as per s 284(2).
[30] As a general proposition, if there is a difficulty at any stage of liquidation, it is the liquidator’s duty to inform the Court and seek directions.2 The Court will rarely assist if purely commercial decisions are in issue, but a liquidator is entitled to seek directions on legal points.3
Analysis and decision
[31] Mr Macfarlane, on behalf of Mr Smith and Ms Desire, submitted that Medicann Holdings “purported to adopt a constitution”, and then a few days later the SSA was circulated, but after the shares were issued. He said timing was important because Mr Smith and Ms Desire said they did not know the content of the Constitution, nor had they seen even a draft of the SSA until sometime later. In particular, they said they did not know of cl 3.4 of the Constitution or its relationship with the SSA.
[32] Furthermore, Mr Smith and Ms Desire say that, when they did become aware of the content of the SSA and cl 3.4, they refused to sign the SSA as it failed to reflect the contents of the Information Memorandum, and allegedly produced provisions that had not been agreed to, or even the subject of consultation. They further say that it appeared not to include the usual provisions for a company where an IPO was intended, and that the SSA was intended only for a private company.
[33] In his affidavit, Mr Smith says that cl 3.4 of the Constitution is not in and of itself objectionable. He claims that the issue at hand is that the SSA was not provided to either him or Ms Desire at the time they received their shares; that the SSA was
2 Australian Securities & Investment Commission v Edge [2007] VSC 170 at [47], citing Pace v Antlers Pty Ltd (in liq) (1998) 26 ACSR 490.
3 Heath & Whale on Insolvency (online looseleaf ed, LexisNexis) at [22.1]; citing Re Securitibank [1978] 1 NZLR 97 (SC) at 105–106; Re Timberland Ltd (in liq) and Equitable Forestry Services Pty Ltd (in liq), Commissioner for Corporate Affairs v Harvey (1979) 4 ACLR 259 at 281; Re Home and Colonial Insurance Co Ltd [1930] 1 Ch 102 at 125; ASIC v Edge [2007] VSC 170 at [47]; and Re CBL Insurance Ltd (in interim liq) [2018] NZHC 2547, [2019] 2 NZLR 262 at [20].
negotiated without their involvement; and that when they objected to being presented with a document that did not align with the agreed pathway for the company, the failure to execute the SSA was used as a basis for termination of their shares.
[34] It is clear, however, and not in dispute, that Mr Smith (in his capacity at the time as a 20 per cent shareholder of Medicann Holdings) signed the resolution adopting the Constitution. Therefore, regardless of whether Mr Smith had the opportunity to read the Constitution or not, and regardless of whether he did in fact read it (he claims he did not), he still chose to sign the resolution and is therefore bound by it.
[35] As Mr Burt submitted, cl 3.4 of the Constitution is self-executing. There is an absolute prohibition against a person holding shares in Medicann Holdings, unless that person has signed either the SSA contemplated by the Constitution, or an accession deed. Any issue or transfer of shares would automatically become void unless the recipient signed either the SSA or an accession deed within one month of the issue or transfer.
[36] In my view, the principal issue for determination is whether the SSA, signed by all other shareholders of Medicann Holdings, was that contemplated when the Constitution was adopted and, if so, whether the SSA is valid and binding on the Smith entities. If it was binding, then Mr Ogilvy’s email purporting to cancel the Smith entities’ shares for non-compliance with cl 3.4 of the Constitution was strictly unnecessary – the shares were already void.
[37] The critical issue of interpretation requires an objective approach.4 Tipping J in Vector Gas Ltd v Bay of Plenty Energy Ltd re-stated the modern approach to contractual interpretation in this way:5
The necessary inquiry therefore concerns what a reasonable and properly informed third party would consider the parties intended the words of their contract to mean. The Court embodies that person. To be properly informed the Court must be aware of the commercial or other context in which the
4 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn & Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 187.
5 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [19].
contract was made and all of the facts and circumstances known to and likely to be operating on the parties’ minds.
[38] Before turning directly to address the critical issue of interpretation, it is necessary to resolve some conflicts in the evidential and factual matrix, being important factors likely to be operating on the parties’ minds.
[39] Mr Smith was a very unimpressive witness. He made intemperate, wide-ranging, and unsubstantiated attacks on a number of witnesses, and others, and in my view, had far greater awareness and understanding of the documents at issue than he was prepared to acknowledge. By contrast, the evidence of Mr Hawkes, Mr Ogilvy, and Mr Kramer was credible, plausible, and consistent. I clearly prefer their account of the critical events at issue.6
[40] I accept for present purposes that Mr Smith is dyslexic. On his own account he has significant commercial experience, and in his customary manner relies greatly on legal advisers and others in the execution of documents. His general approach is to pay little attention to the detail of documents, preferring instead to rely on his advisers.
[41] Mr Smith claimed also that he suffers from Asperger syndrome. However, there was no medical evidence before me in support of that claim, and in any event, nothing turns on his claimed condition.
[42] I find that Mr Kramer took some care to explain to Mr Smith the proposed structure involving Medicann Holdings as the parent company of Medicann NZ. Not only did he present a diagram structure to Mr Smith, but his email to him on
26 June 2018, at 8.05 pm, sets out the legal structure in relatively clear and straightforward terms. I also accept that Mr Kramer gave a copy of the SSA to Mr Smith to review at their meeting on 27 June 2018. Mr Smith’s evidence that no meeting took place is, in my view, simply not credible. I also reject Mr Smith’s contention that he was misled in any way by either Mr Kramer, Mr Ogilvy, or any
6 For the record, I note that Mr Macfarlane, on behalf of Mr Smith, did not pursue a claim of forgery (Mr Smith claimed in two sworn statements to the NZ Police in September 2018 that he never executed critical documents at issue in this case and that his signature on those documents was forged).
other relevant player. In my view, Mr Smith did know about the structure involving Medicann Holdings.
[43] There is no doubt that matters proceeded at speed, but that was essentially in line with the clear instructions from Mr Smith himself.
[44] I agree with the submission of Mr Gustafson that it is rather difficult to understand what Mr Smith’s real objection was and is to the SSA. In cross- examination, Mr Smith claimed that the overall scheme was, from his perspective, intended to be a “pump and dump” scheme. He claimed to have experience in listing public companies and described his approach as follows:
I list public companies and even Kramer touched on it yesterday. He said, “It was a ‘pump and dump scheme’. Well, of course, it was. Well how do you think I make my money, mate? Like, as an investment banker, we put together early stage companies. We put a management team around it and then we list it on the stock exchange and then we sit out our escrow period and then chisel that stock out of the market.
[45]He further stated:
… But look, what is very clear, the strategic objective. Now, the strategic objective of the Medicann group as per the [the Information Memorandum], Your Honour, the strategic objective was to go public, alright, and my plan was to, as Mr Kramer so eloquently put it, a pump and dump. Absolutely, I would’ve chiselled this doc out because that’s what I do. I mean, but the investors that wanna stay in the company, you can stay in but you’ve got – that’s the advantage of a public company, you can buy in, you can move in and out of the register, alright, that’s what it’s all about so that’s the number 1 point, because these guys have essentially stopped me from doing what I do. That’s how I make my money. I don’t work for a couple of hundred thousand dollars a year alright. I make millions, alright, tax free, so can you see how.
[46] There is little doubt that Mr Smith was impatient and seeking a quick financial return. However, I find that it was made clear to him that, as Mr Hawkes explained, what was happening was capital raising in a non-regulated environment, and the clear intention was, in the first instance, to make sure the shares were not distributed beyond what was under the control of the company. This was also done with a view to prevent dilution of the investor shareholding. Indeed, it is clear from the Information Memorandum (which Mr Smith and others prepared) that the intention of the company was “to remain private until the company receive[d] the five medical cannabis licences” it intended to apply for. It went on to note that “once this is achieved, we
believe that a second round of capital raising will be done via a stock exchange listing via an IPO”.
[47] Mr Smith’s claim that he was misled and did not understand the true nature of the documents at issue is further undermined by the fact his then solicitor and fellow corporate director trustee, Mr Karl Sandbrook, appears to have a very clear understanding of the structure and legal arrangements. Mr Sandbrook witnessed the share transfer from Mr Smith to RPTC on 28 June 2018, and responded by email to Mr Kramer on 4 July 2018, indicating he was “now happy to proceed”. I note that no evidence was given by Mr Sandbrook.
[48]I turn now to address directly the critical issue of interpretation.
[49] The definition of the SSA in cl 1.1 of the Constitution expressly contemplates an agreement that is either in existence when the Constitution is adopted or is executed shortly after. In my view, the language “dated on or about the date of adoption of this constitution” expressly contemplates a degree of flexibility as to when exactly the SSA comes into force, and is to be interpreted in the context where, at Mr Smith’s instruction, matters were progressing at speed. It is also important to note that the SSA is both a subscription and a shareholders’ agreement. In my view, it was intended to bind the Co-Founders to the arrangement (which included Mr Smith). As Mr Hawkes (the solicitor who drafted the SSA) observed, if the Co-Founders were to sit outside that arrangement, it would not be a shareholders’ agreement. In my view, the clear intention was that the SSA be binding on all the shareholders, whether existing or future, and the company.
[50] Mr Smith signed three critical documents in relatively quick succession, and as I have concluded, had a reasonable understanding of each one’s intention. He signed the share transfer form, making Medicann NZ a 100 per cent subsidiary of Medicann Holdings; the Constitution; and the consent to set up Medicann Holdings. The Constitution was of course adopted unanimously by the then shareholders. All these documents, and the SSA, should be read together as an important part of the factual matrix in determining who was bound by the SSA.
[51] At the time the Constitution was signed, the SSA was in final form and subsequently signed by the other shareholders, which was the SSA that was contemplated when the Constitution was adopted. The SSA was not a document that Mr Smith was unaware of, and as I have found, he was not misled by either Mr Ogilvy, Mr Kramer, or anyone else for that matter, as to its contents.
[52] I find that the clear objective intention was that the Constitution and the near- finalised draft SSA be read together. The SSA was a critical and essential part of the constitutional arrangements of the company. Clause 3.4 makes no sense without the SSA that was clearly in contemplation when the Constitution was adopted. As Mr Hawkes observed (and he drafted both documents), it is normal commercial practice for a transaction of this nature to bind the new shareholders to the SSA, and for the existence of the shareholders’ agreement to be referred to in the Constitution. The requirement to comply with cl 3.4 of the Constitution applied to all investors, whether founder investors (which included the Smith entities) or otherwise, and that was in turn a condition of the investment.
[53] I accept that cl 1.1 of the Constitution defines the SSA by reference to terms in the SSA itself. In particular, the Constitution defines the SSA as being entered into between Medicann Holdings and the “Founder Investors” (among others). The definition of “Founder Investors” in the SSA includes the Smith entities. However, I do not accept the submission that, to the extent that the Constitution contemplated a document which had been, or would be, entered into by all of the “Founder Investors”, such a document never came into existence because the Smith entities never signed it. Mr Smith adopted the Constitution and the SSA. He was thus bound by both documents, despite never having signed the SSA.
[54] This is not a case where, as Mr Macfarlane suggested, a person allocates shares before a constitution or SSA comes into existence but can nevertheless be bound by the content of an SSA they have never heard of or could have known about, when the shares were allocated.
[55] I accept, in principle, Mr Macfarlane’s submission that it is possible a shareholder agreement may be binding only on some shareholders.7 However, that principle has no application here, where, in my view, all shareholders (whether original investors or otherwise) were bound by both the Constitution and the SSA.
[56] I reject Mr Macfarlane’s submission that it would be surprising and “not an appropriate outcome” if, by the mere omission of some administrative step such as the signing of a document, there was a loss of one’s shares. In my view, there was a clear obligation to sign the necessary documentation (which, in the case of a new holder, requires the execution of an accession deed), despite already being bound to do so, and that is a sensible and conventional way to avoid the very problems that have now arisen.
Conclusion
[57] I find that, in accordance with cl 3.4 of the Constitution, the shares held by the Smith entities who did not sign and execute the SSA were void.
[58] I further find that it was not necessary for steps to be taken in November 2018 to cancel those shares because, in my view, they were already void.
[59] The SSA itself is dated 1 July 2018, although it appears that it was not circulated to shareholders until 4 July 2018 (at the earliest). In my view, in accordance with cl 3.4, the Smith entities’ failure to sign by 4 August 2018 was fatal. It was on or about 4 August 2018 that the shares became void.
[60] I note that no accession deed to the SSA was signed in relation to the transfer of Mr Smith’s shares to RPTCL as trustee of the Mohaka Trust on 25 July 2018, or in relation to the issue of 500,000 additional shares to RPTCL as trustee of the Waitara Capital Trust. Both the transfer and the issue of those shares were void. The restoration of the status quo ante does not, however, assist the Smith entities. For reasons I have given above, the shares issued to the Smith entities at the outset became void.
7 Black v Giltech Precision Castings Ltd [2012] NZHC 1148 at [161].
Equitable limitation
[61] Mr Macfarlane submitted that to read into cl 3.4 of the Constitution a present obligation for a shareholder who has not agreed to the SSA, but already had shares allocated, would create an alteration of that shareholder’s rights, which immediately attracts the doctrine of equitable limitation.
[62] However, despite the careful and measured submissions Mr Macfarlane made, in my view, the claim of equitable limitation is, on the facts as I find them, misconceived.
[63] The Constitution was registered and applied and, as I have concluded above, Mr Smith adopted both the Constitution and the SSA. There is no alteration of the Constitution to which the equitable limitation doctrine could apply. I also reject the submission that the equitable limitation document could still apply to the extent that the SSA was subsequently incorporated by reference to the Constitution. In my view, the SSA’s incorporation was not an alteration to the Constitution – it was clearly part and parcel of the Constitution, as first ratified by the shareholder parties. Furthermore, the cancellation of Mr Smith’s shares was not the effect of a shareholder’s decision to alter the Constitution, but rather, of the operation of cl 3.4. As I have noted, that clause was already part of the Constitution adopted and signed by Mr Smith himself.
[64] The premise underlying the claim of equitable limitation, namely, that Mr Smith and entities associated with him were somehow blinded by not knowing that there was a cancellation provision until August 2018, is flawed.
[65] In the circumstances, it is not necessary for me to address the issue of whether, in applying the equitable limitation doctrine, this Court should follow the English or Australian approach.8 In any event, it is difficult to see how equity would come to Mr Smith’s aid when, on his own evidence, he essentially blinded himself through his own cavalier behaviour towards important legal requirements, and now comes along
8 See Sitco Banking Corporation NV v Pusser’s Ltd & Anor (British Virgin Islands) [2007] UKPC 13 at 19 and 20; and Gambotto v WCP Ltd [1995] 182 CLR 432. See also Lynne Taylor “Controlling Shareholders” in John Farrar and Susan Watson (eds) Company & Securities Law in New Zealand (2nd ed) at 543–550.
to complain about them. Furthermore, if Mr Smith is as commercially experienced and successful as he claims, while suffering from Asperger syndrome and dyslexia, it seems implausible that he would not have had his own personal, legal, and/or other advisers pay particular attention to the legal obligations he was entering into, and then provide him with very clear advice about those obligations, when entering into a significant financial transaction. It is also pertinent to note, as recorded above, that Mr Smith’s objection to the SSA is difficult to understand. It appears that, as part of the proposed settlement in November 2018 (which, for reasons unknown to the Court, never materialised), Mr Smith was prepared to sign the SSA. As Mr Gustafson submitted, it simply seems that matters did not work out commercially for Mr Smith, and the consequences are a result of choices he made.
[66]I find that there is no equitable limitation defence available.
Result
[67] I make the following directions pursuant to s 284(a) of the Companies Act 1993:
(a)The 500,000 shares previously held by Ross Henry Smith and Ruahine Professional Trustee Company Ltd, as trustee of the Mohaka Capital Trust, became void.
(b)The 500,000 shares previously held by Ruahine Professional Trustee Co Ltd, as trustee of the Waitara Capital Trust, became void.
(c)The 200,000 shares previously held by Solange Kelly Mary Desire, became void.
[68] As to costs, I am of the preliminary view that, having succeeded, Mr Ogilvy and the applicant liquidators are entitled to costs on a 2B basis plus disbursements.
[69]I note that the applicant liquidators seek to be heard on the question of costs.
[70] If costs cannot be agreed, then memoranda (no more than three pages) are to be filed and served within 14 days.
Associate Judge P J Andrew
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