McCulloch v Quinn - [2012] NZHC 16

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-003508 [2012] NZHC 16

BETWEEN DONALD ASPINALL MCCULLOCH, NOLA EVANS AND PETER GLYN EVANS AS TRUSTEES OF TOTARA TRUST
Plaintiffs

ANDBERNARD PAUL QUINN First Defendant

ANDNGATI AWA ASSET HOLDINGS LIMITED
Second Defendant

ANDALAN PATRICK PETERS Third Defendant

ANDPETERS CAPITAL LIMITED Fourth Defendant

ANDWILLIAM NORMAN BIRNIE Fifth Defendant

ANDSTEPHEN ROBERT NORRIE Sixth Defendant

ANDBIRNIE CAPITAL PROPERTY PARTNERSHIP LIMITED Seventh Defendant

ANDPICASSO NOMINEES LIMITED Eighth Defendant

ANDWILLIAM NORMAN BIRNIE, STEPHEN ROBERT NORRIE AND RICHARD JAMES O'BRYEN HOARE AS
TRUSTEES OF THE PAONEONE SETTLEMENT TRUST NO. 5
Ninth Defendant

ANDBJF PROPERTIES LIMITED Tenth Defendant

MCCULLOCH & ORS AS TRUSTEES OF TOTARA TRUST V QUINN HC AK CIV-2011-404-003508 23
January 2012

Hearing: 16 December 2011

Appearances: G Turkington and K L J Simcock for Plaintiffs
Z Kennedy and M Pascariu for First, Second, Third and Fourth
Defendants
M O'Brien for Fifth to Ninth Defendants
N W Woods for Gough Capital Ltd

Judgment: 23 January 2012 at 3:00 PM

JUDGMENT OF VENNING J

This judgment was delivered by me on 23 January 2012 at 3.00 pm, pursuant to Rule 11.5 of the High
Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors: Izard Weston, Wellington
Lee Salmon Long, Auckland (C Wilson) Minter Ellison Rudd Watts, Auckland
Rice Craig, Papakura, Auckland
Bell Gully, Wellington

Copy to: G L Turkington, Wellington

Introduction

[1] The plaintiffs seek relief against the defendants under s 174 of the Companies Act 1993. The first, second, third and fourth defendants have applied to strike out the claim against them on the grounds it does not disclose any reasonably arguable cause of action.

Background

[2] In November 2007 a number of investors, including the plaintiffs, agreed to invest in various property projects owned and controlled by the fifth defendant (Mr Birnie). Mr Birnie owned or controlled the projects either personally or through related parties, namely the eighth defendant (Picasso) and ninth defendant (Paoneone). The seventh defendant, (BCPP) was incorporated as the vehicle for the investments. Sixteen million Group A shares (48.1% of the total shareholding) were issued to Paoneone for the Birnie interests. Seventeen million, two hundred and fifty thousand Group B shares (the remaining 51.9% of the total shareholding) were issued to outside investors. The second defendant (Ngati Awa), a company controlled by the first defendant Mr Quinn and the fourth defendant (Peters Capital), a company controlled by the third defendant Mr Peters, took up 6,000,000 shares between them. The current plaintiffs were issued five million shares in BCPP. The remaining shares were held by the late Alan Hubbard and Mrs Hubbard (5,000,000) and Gough Capital Limited (1,250,000).

[3] BCPP was structured so that the Group A and B shareholders could each appoint a maximum of four directors to the Board. A valid resolution required a vote of the majority of directors. Importantly, the resolution also had to be supported by at least one director from each shareholding group.

[4] In 2008 BCPP agreed to purchase a number of property projects from Mr Birnie, Picasso…

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.

Continue reading McCulloch v Quinn

Details

AGLC: McCulloch v Quinn [2012] NZHC 16
Case: [2012] NZHC 16
Decision Date: 23 January 2012

CaseChat Overview and Summary

The plaintiffs in McCulloch v Quinn sought relief against the first to fourth defendants under s 174 of the Companies Act 1993. The plaintiffs claimed that the defendants breached statutory and fiduciary duties owed to BCPP and the plaintiffs by compromising the derivative proceedings to their own advantage. The first to fourth defendants applied to strike out the plaintiffs’ claim against them on the grounds that it did not disclose a reasonably arguable cause of action. The court held that the plaintiffs could not bring a claim on behalf of BCPP but that the relief provisions of s 174 could enable the court to make an order that the defendants pay compensation to BCPP as any other person. The court found that it was arguable that the defendants’ actions in compromising the derivative action amounted to the affairs of BCPP being conducted in an oppressive, unfairly discriminatory or unfairly prejudicial way. The application to strike out was dismissed and the plaintiffs were required to file and serve an amended statement of claim by 3 February 2012. The matter was returned to the Commercial List for further direction on 10 February 2012. Costs were awarded to the plaintiffs on a 2B basis together with disbursements as fixed.

Orders