O'Brien v Parkinson - [2020] NZHC 1681

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002814

[2020] NZHC 1681

UNDER the Companies Act 1993

IN THE MATTER OF

an application under s 165 of the Companies Act 1993

BETWEEN

LOUISA JANE O’BRIEN on behalf of GENERAL DYNAMICS CORPORATION LIMITED

First Plaintiff

LOUISA JANE O’BRIEN
Second Plaintiff

AND

KEVIN PARKINSON

First Defendant

KEVIN PARKINSON as trustee of KEVIN PARKINSON FAMILY TRUST
Second Defendant

ANNA VALERIENA KEDRINSKAIA and LISTON TRUSTEE SERVICES LIMITED,

trustees of a trust understood to be named ANNA KEDRINSKAIA TRUST

Third Defendants

Hearing: 21 May 2020

Appearances:

J McCartney QC for Plaintiffs

Z Kennedy and S R Morris for Defendants

Judgment:

14 July 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 14 July 2020 at 12 noon pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar – Date……………………………….

O’BRIEN v PARKINSON v ORS [2020] NZHC 1681 [14 July 2020]

Introduction

[1] The first plaintiff, Ms O’Brien, and the first defendant, Mr Parkinson, were in a relationship for 29 years. They married in 1994 and separated in 2013. There are related relationship property proceedings currently in the Family Court.

[2] Ms Anna Kedrinskaia, one of the third defendant trustees, and Mr Parkinson, are in a de facto relationship.

[3] Ms O’Brien applies for leave to bring a shareholder derivative action pursuant to s 165 of the Companies Act 1993 (the 1993 Act) on behalf of General Dynamics Corporation Ltd (GDC). Ms O’Brien and Mr Parkinson each own one shares in GDC and their respective family trusts own the balance of the shares. Ms O’Brien and Mr Parkinson are directors of GDC.

[4] Ms O’Brien makes a number of claims against Mr Parkinson, both in his personal capacity and trustee capacity. She also makes claims against the third defendants, who are the trustees of a trust which holds a property in Wanaka (the Wanaka property).

[5] Ms O’Brien claims that, following their separation in 2013, Mr Parkinson caused GDC to cease trading and incorporated another company just one month later, General Dynamics Ltd (GDL), which took over the business and trading of GDC. Ms O’Brien claims that Mr Parkinson’s actions in transferring the property of GDC and its profits to interests associated with him is a breach of fiduciary duty. She claims that Mr Parkinson breached the 1993 Act, and that the dispositions (the transfers of the business and company property to the Wanaka property) are prejudicial dispositions under the Property Law Act 2007 (the 2007 Act). She claims a resulting trust in relation to the Wanaka property. She further claims that the third defendant trustees have received property and profits of GDC and have participated dishonestly in a breach of fiduciary duty.

[6]Mr Parkinson opposes the application on two principal grounds:

(a)That there is no reasonable likelihood of the proceedings succeeding; and

(b)That the cost of the proceedings will outweigh any relief realistically obtainable.

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 O'Brien v Parkinson

Details

AGLC: O'Brien v Parkinson [2020] NZHC 1681
Case: [2020] NZHC 1681
Decision Date: 14 July 2020

CaseChat Overview and Summary

The matter before the Court was an application by Ms Louisa Jane O’Brien, on behalf of General Dynamics Corporation Limited (GDC), for leave to bring a shareholder derivative action against Mr Kevin Parkinson, both in his personal capacity and as trustee of the Kevin Parkinson Family Trust, and against trustees of the Anna Kedrinskaia Trust. Ms O’Brien and Mr Parkinson were in a relationship for 29 years and were married from 1994 to 2013. They each own one share in GDC and their respective family trusts own the balance of the shares. Ms O’Brien and Mr Parkinson are directors of GDC. Ms O’Brien claims that Mr Parkinson breached fiduciary duties, breached statutory duties, and that the dispositions (transfers of the business and company property to the Wanaka property) are prejudicial dispositions. She further claims that the third defendant trustees have received property and profits of GDC and have participated dishonestly in a breach of fiduciary duty. Mr Parkinson opposes the application on two principal grounds: there is no reasonable likelihood of the proceedings succeeding; and the cost of the proceedings will outweigh any relief realistically obtainable. The Court considered the statutory and other relevant criteria, including the likelihood of the proceedings succeeding; the cost of the proceedings in relation to the relief likely to be obtained; any action already taken by the company or related company to obtain relief; and the interests of the company or related company in the proceedings being commenced, continued, defended, or discontinued, as the case may be. The Court found that there is a reasonable prospect of the claim of breach of fiduciary duty and breach of s 131 of the 1993 Act succeeding. The Court also found that there is a reasonable prospect of the claim of dishonest participation succeeding. The Court found that the costs of the proceedings would not outweigh any relief realistically obtainable. The Court concluded that a prudent businessman would bring the proceedings in the conduct of his/her own affairs and that the application should thus be granted.

Orders