Mike Pero Mortgages Ltd v Pero - [2017] NZHC 2647

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-002193 [2017] NZHC 2647

BETWEEN
MIKE PERO MORTGAGES LIMITED

Plaintiff

AND

MIKE PERO First Defendant

MPZ ONE LIMITED Second Defendant

MPRE LIMITED Third Defendant

MIKE PERO REAL ESTATE LIMITED Fourth Defendant

Continued …

Hearing: 13 October 2017 (final submission received 27 October 2017)

Counsel:

G P Blanchard QC and J E M Lethbridge for the Plaintiff
D R Bigio QC and A E Malone for the Defendants

Judgment:

27 October 2017

JUDGMENT OF KATZ J

This judgment was delivered by me on 27 October 2017 at 4:30pm pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Lowndes, Auckland
Duncan Cotterill, Auckland

Counsel: G P Blanchard QC, Auckland
D R Bigio QC, Auckland

MIKE PERO MORTGAGES LIMITED v MIKE PERO [2017] NZHC 2647 [27 October 2017]

CIV-2017-404-1405

BETWEEN MIKE PERO MORTGAGES LIMITED Applicant

ANDMIKE PERO First Respondent

MPZ ONE LIMITED Second Respondent
MPRE LIMITED Third Respondent
MIKE PERO REAL ESTATE LIMITED Fourth Respondent

Introduction

[1] MPRE Ltd and its wholly owned subsidiary, MP Real Estate Ltd (together, “MPRE”), operate a nationwide real estate agency network. MPRE was set up as a joint venture between Mike Pero Mortgages Ltd (“MP Mortgages”), a company ultimately owned by the Liberty Financial Group, and Mike Pero Marketing Ltd (now called MPZ One Ltd (“MPZ”)), a company owned by Mike Pero.

[2] MP Mortgages and MPZ each hold a 50 per cent shareholding in MPRE. On

3 February 2011 they entered into a shareholders’ agreement regarding their new real

estate business. It provided, amongst other things, that Mr Pero would be paid

$200,000 per annum for his executive role within MPRE. Each shareholder has one appointee on the board of MPRE. Currently Sherman Ma is the director appointed by MP Mortgages. Mr Pero is MPZ’s appointee. The quorum of directors is two.

[3] During a period when Mr Pero was the sole director of MPRE, he purported to pass a number of directors’ resolutions that, amongst other things, dramatically increased his own remuneration package. MP Mortgages subsequently brought proceedings (CIV-2014-404-2193) seeking to have the resolutions declared unlawful and to have all the sums that had been paid to Mr Pero and MPZ in excess $200,000 refunded to MPRE. MP Mortgages argued that Mr Pero and MPZ had breached the shareholders’ agreement, the MPRE constitution and the Companies Act 1993 (“Act”). It sought relief as an unfairly prejudiced shareholder under s 174 of the Act.

[4] In an interim judgment delivered on 21 December 2016 (“Interim Judgment”) I declared that the challenged resolutions were invalid and were therefore not binding on MPRE.1 I ordered Mr Pero and MPZ to repay to MPRE all amounts that they (namely Mr Pero and MPZ) or their related entities had received in excess of
$200,000 per annum for services provided in relation to the businesses of MPRE.2
I made ancillary directions requiring the disclosure of documentation relevant to calculating the quantum of…

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: [2017] NZHC 2647
Decision Date: 27 October 2017

CaseChat Overview and Summary

Mike Pero Mortgages Ltd (MP Mortgages) sought leave to bring derivative proceedings in the name of and on behalf of Mike Pero Real Estate Ltd (MPRE) against Mike Pero and MPZ One Ltd. The proceedings were to enforce the judgments and orders of the Court in a substantive proceeding, CIV-2014-404-2193, in which MP Mortgages sought to have certain directors’ resolutions declared unlawful and to have the sums that had been paid to Mr Pero and MPZ in excess of $200,000 refunded to MPRE. The Court considered whether to grant leave under s 165 of the Companies Act 1993 (the Act) to bring derivative proceedings. The Court held that the likelihood of the proceedings succeeding was high, the costs of the proceedings would be low relative to the sum at stake, MPRE had not yet taken any action to obtain relief, and it was in MPRE’s interests that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole. The Court held that the best interests of MPRE would be served by MP Mortgages bringing the proceedings. The Court also held that MPRE should bear the reasonable costs of the proceedings. Finally, the Court held that the application for an enforcement order as part of the final relief in the substantive proceedings, pursuant to s 174 of the Act, was unnecessary given that leave had been granted under s 165. The Court granted the application for leave to bring derivative proceedings.

Orders