Nobilo v Nobilo - [2015] NZCA 54

IN THE COURT OF APPEAL OF NEW ZEALAND

CA198/2014
[2015] NZCA 54

BETWEEN	JOHN SAMUEL NOBILO Appellant
AND	DEBORAH KATHLEEN NOBILO Respondent

Hearing:	18 February 2015
Court:	Randerson, Winkelmann and Venning JJ
Counsel:	G L Harrison and A V Shinkarenko for Appellant G M Cameron for Respondent
Judgment:	10 March 2015 at 11:00 am

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellant is to pay the respondent costs for a standard appeal on a Band A basis with usual disbursements.

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REASONS OF THE COURT

(Given by Venning J)

The appellant, Mr Nobilo, sought leave to bring a derivative action in the name of Nobilo and Co Ltd (NCL) against the respondent, Mrs Nobilo. In a decision delivered on 7 March 2014 Associate Judge Abbott declined the application.[1]

Background

[1]Nobilo v Nobilo [2014] NZHC 401.

Mr and Mrs Nobilo are married but separated. They separated on 18 September 2012. They are also both accountants and directors of NCL. Before separation they ran an accountancy practice through NCL.
After their separation Mrs Nobilo set up a separate accountancy practice, Nesti & Associates Limited (Nesti). While still a director of NCL she wrote to the clients for whom she was the principal point of contact and invited them to complete an authority if they wanted her to continue to undertake their work at Nesti. Most, if not all, of the clients she wrote to have transferred their work to Nesti. Mr Nobilo says some 70 per cent of NCL’s clients have transferred their work to Nesti. He says Mrs Nobilo has breached the fiduciary duty she owed NCL as a director. As NCL is deadlocked (the shareholding is held or controlled equally by the parties and they are the only two directors) Mr Nobilo applied for leave to bring an action in NCL’s name to recover the losses he contends it has suffered because of Mrs Nobilo’s breach.[2]

The High Court judgment

[2]Mr and Mrs Nobilo hold one share each. The remaining 98 shares are held by a family trust of which Mr and Mrs Nobilo are two of the three trustees. The remaining trustee is the family lawyer.

Associate Judge Abbott considered that as NCL was in danger of collapsing due to the tensions between Mr and Mrs Nobilo, what otherwise might be seen to have been a reasonably strong case for breach of duty became a marginal one at best. The Judge next considered that the losses Mr Nobilo projected (the draft statement of claim referred to a sum of $400,000) were excessively optimistic and that any loss would be modest at best. He then noted that costs of at least $50,000 and perhaps more would be incurred in the proceedings. He considered there was at most a marginal benefit to NCL in the proceeding. Finally, the Judge considered that, given the former relationship between the parties and the relationship property proceedings between them, (and the possibility of an application under s 182 of the…

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 Nobilo v Nobilo

Details

AGLC: Nobilo v Nobilo [2015] NZCA 54
Case: [2015] NZCA 54
Decision Date: 10 March 2015 at 11:00 am

CaseChat Overview and Summary

The Court of Appeal of New Zealand heard an appeal brought by Mr. John Nobilo against Mrs. Deborah Nobilo. Mr. Nobilo sought leave to bring a derivative action on behalf of Nobilo and Co Ltd (NCL) against Mrs. Nobilo. The appeal arose from the High Court's decision to deny Mr. Nobilo's application for leave to bring an action in NCL's name against Mrs. Nobilo. The main issues before the Court of Appeal were whether the Court should grant leave under s 165 of the Companies Act 1993 for Mr. Nobilo to bring the derivative action, and whether the potential benefit to NCL of such an action outweighed the costs involved.

The Court of Appeal considered the relevant mandatory considerations under s 165(2) of the Companies Act 1993. The Court was satisfied that NCL did not intend to bring, diligently continue, or defend the proceedings, as per s 165(3)(a). However, in weighing the other mandatory considerations, the Court determined that the likelihood of the proceedings succeeding was marginal at best, and the costs associated with the proceedings were likely to exceed the potential return. The Court further considered that NCL was not left without an avenue of redress, as the appeal itself was an attempt to bring the action on behalf of NCL.

In addition to the mandatory considerations, the Court took into account other relevant factors, such as the practical implications of granting leave and the ultimate beneficiaries of any judgment in NCL's favour. The Court concluded that it was not in the interests of NCL to grant leave, as the cost of the proceedings outweighed the potential benefit, and the interests of the parties as beneficiaries of the principal shareholder would need to be considered.

The Court of Appeal dismissed the appeal and ordered Mr. Nobilo to pay the respondent's costs for a standard appeal on a Band A basis, with usual disbursements.

Orders