McVitty v Waewaepa Station 2002 Limited - [2016] NZHC 765

IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY

CIV-2015-435-000021 [2016] NZHC 765

UNDER the Companies Act 1993

IN THE MATTER

of an application under section 179 of the
Act for an investigation of records

BETWEEN

JAMES ROBERT MCVITTY Plaintiff

AND

WAEWAEPA STATION 2002 LIMITED Defendant

Hearing: 21 April 2016

Counsel:

J W Maassen and M W G Riordan for Plaintiff
M J Neill for Defendant

Judgment:

22 April 2016

JUDGMENT OF COLLINS J

Introduction

[1] James McVitty is a director and shareholder of Waewaepa Station 2002 Ltd (Waewaepa). He has applied under s 179 of the Companies Act 1993 (the Act) for orders appointing an auditor to audit the accounts of Waewaepa for the financial years ending 30 June 2012, 2013, 2014 and 2015. He also seeks a full livestock reconciliation.

[2] Section 179(1) of the Act provides:

179 Investigation of records

(1) The Court may, on the application of a shareholder or creditor of a company, make an order authorising a person named in the order at a time specified in the order, to inspect and to make copies of, or take extracts from, the records or other documents of the company, or

MCVITTY v WAEWAEPA STATION 2002 LIMITED [2016] NZHC 765 [22 April 2016]

such of the records or documents of the company as are specified in the order, and may make such ancillary order as it thinks fit, including an order that the accounts of the company be audited by that person.

...

[3] Under s 179(2) of the Act, I can only exercise my discretion to make the orders sought by James McVitty if I am satisfied that the application is made in good faith, the proposed inspection is made for a proper purpose, and the person to be appointed is a proper person for the task.

Background

[4] Waewaepa owns and operates a sheep and beef farm comprising approximately 2,500 hectares in the Wairarapa.

[5] Waewaepa was incorporated in March 2002 as a joint venture between the McVitty and the Currie families. There are two million shares in Waewaepa, of which one million are held by four representatives of the McVitty family and the other one million shares are held by four representatives of the Currie family. There are currently four directors, namely James McVitty and William McVitty, who are brothers, and Cameron Currie and his father, Shaun Currie.

[6] Shaun Currie is the farm manager and is responsible for the day-to-day operations of Waewaepa. James and William McVitty live and work in the United States.

[7] In his affidavit in support of the application, James McVitty says he is concerned the “Currie interests have being taking advantage of the McVitty interests’ isolation from the day-to-day operations of Waewaepa and are exploiting the company for their own personal benefit”.1

[8] James McVitty says the relationship between the McVitty and the Currie families has deteriorated over time. Part of that deterioration has, according to

James McVitty, related to the management of another family company, Te…

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 765
Decision Date: 22 April 2016

CaseChat Overview and Summary

The case of McVitty v Waewaepa Station 2002 Limited was heard in the High Court of New Zealand, Masterton Registry. James McVitty, a director and shareholder of Waewaepa Station 2002 Limited, sought an order under Section 179 of the Companies Act 1993 for an auditor to audit the company's accounts for the financial years ending 30 June 2012, 2013, 2014, and 2015, as well as a full livestock reconciliation. McVitty claimed that the Currie family, who also held shares in the company, were exploiting the company for personal benefit. The legal issues at hand were whether McVitty's application was made in good faith, whether it was for a proper purpose, and whether the proposed auditor was a proper person for the task.

The Court found that McVitty's application was made in good faith, as he sought the audit to determine if there was any basis for his concerns that the company had been financially mismanaged, and to provide information that would assist McVitty shareholders in determining what steps, if any, they should take to protect their interests. The Court also found that the application had a proper purpose, as it would enable McVitty to make an informed decision as to what, if any, further action should be taken to protect his interests. The Court further found that any of the auditors nominated by the parties were proper entities to undertake the task sought by the application.

In light of the findings, the Court ordered the appointment of Grant Thornton to undertake audits of Waewaepa for the financial years ending 30 June 2012 to 30 June 2015 inclusive. Grant Thornton was also to provide a stock reconciliation, which was to be undertaken by a suitably qualified person in June 2016. The parties were granted leave to apply for further directions and orders if required. Costs were reserved until the audit reports were obtained, at which stage counsel were to file memoranda on the issue of costs if no agreement was reached.

Orders