Roberts v Davis
[2025] NZHC 1734
•27 June 2025
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2025-409-177
[2025] NZHC 1734
UNDER the Companies Act 1993 IN THE MATTER
of a shareholder’s application under section 174 of the Act
BETWEEN
CHRISTOPHER ANDREW ROBERTS
Plaintiff
AND
AND
MICHAEL DAVIS
First Defendant
DUNCAN MEADOWS TREVELLA
Second Defendant
Hearing: 18 June 2025 Counsel:
C A Roberts – self-represented Plaintiff O D Peers and C F Olds for Defendants
Judgment:
27 June 2025
JUDGMENT OF ASSOCIATE JUDGE LESTER
ROBERTS v DAVIS [2025] NZHC 1734 [27 June 2025]
[1] Christopher Roberts (Chris), Michael Davis (Michael) and Duncan Trevella (Duncan), each hold 40 shares in Third Space Fitness Limited (Third Space). Chris, Michael and Duncan are also the directors of Third Space. The relationship between the parties has broken down.
[2] Third Space was incorporated on 22 August 2023. Chris says at the time of incorporation he was the only director and shareholder, although this is disputed by Michael and Duncan. There is evidence it was contemplated that Michael and Duncan would be directors and shareholders in Third Space from the outset, but they were not registered as shareholders and directors with the Companies Office until April 2024.
[3] The significance of this is that Chris says while he had sole charge of Third Space, the company entered into contracts with a company called Koha Fitness Ltd (Koha) which he wholly owns and is the sole director of. In plain terms, Michael and Duncan say those contracts were unknown to them, disadvantaged Third Space and result in the diversion of profits from Third Space to Koha or to Chris.
[4] On 23 April 2025, the board of Third Space, which is controlled by Michael and Duncan being two of its three directors, resolved to avoid the transactions contemplated by the 22 August 2023 agreements between Third Space and Koha, a step disputed by Chris.
[5] That step led Chris to commence this proceeding on the basis that Michael and Duncan’s actions entitled him to relief under s 174 of the Companies Act 1993 (the Act). Chris sought an injunction preventing Michael and Duncan actioning the steps they passed as directors of Third Space. The statement of claim was filed on 28 April 2025 and was dealt with on a Pickwick basis. The injunction was resolved by undertakings not to action the 23 April 2025 disputed board resolutions.
[6] On 2 May 2025, the solicitors acting for Michael and Duncan made an open offer to purchase Chris’ shares in Third Space. The offer was intended to set out a process by which an independent expert experienced in business valuations, with full access the records of Third Space, and the benefit of any submissions the parties
wish to make, would arrive at a valuation for Chris’ shares. There would be no minority discount.
[7] The offer was not accepted but has been renewed by Michael and Duncan to support their application for summary judgment against Chris.
[8] Chris is prepared to sell his shares and initially said in his statement of claim that he would accept $249,000 for them. In his affidavit sworn 23 May 2025, he invites the Court to “adopt an uplifted valuation in the range of $275,000 to $300,000” for his shares. Chris has not produced a share valuation. It is clear that in valuing his shares, Chris takes into account the income stream he says is payable by Third Space to Koha pursuant to the 22 August 2023 contracts that are of concern to Michael and Duncan. Any benefit Chris receives as sole director and shareholder of Koha is irrelevant to the value of his shares in Third Space.
[9] Accordingly, Chris has been prepared to sell his shares and Michael and Duncan are prepared to buy Chris’ shares albeit at what they consider is a fair value, rather than at Chris’ figure.
[10] Michael and Duncan’s offer was rejected on 6 May 2025 and this application for summary judgment by Michael and Duncan was filed 16 May 2025. A summary judgment application can only be made by a defendant to a s 174 claim in reliance on a buy-out offer where the offer is made before summary judgment is sought.1
Legal Principles
[11] The principles that apply to a defendant’s summary judgment in this context are set out in Birchfield v Birchfield Holdings Ltd.2 The Court of Appeal recognised an offer to buy out at fair value is capable of curing any alleged prejudicial conduct that might qualify for relief under s 174 of the Act. However, whether a buy out cures such unfairness is ultimately a question of fact. If a question of fact cannot be determined in the context of a summary judgment application, then the application will fail. The Court of Appeal gave the example of where the conduct alleged to be
1 Birchfield v Birchfield Holdings Ltd [2021] NZCA 428 at [51].
2 Birchfield v Birchfield Holdings Ltd, above n 1.
unfairly prejudicial has arguably had a material effect on the value of the company. In those circumstances, an offer to buy out at fair value is unlikely to cure the alleged prejudice. Nor would a buy out offer cure unfairness where it is arguable the company has not kept proper accounting records and that would have a material effect on the ability of an expert to assess fair value. In a company, which could fairly be described as a quasi partnership and where the shareholders work fulltime in the company’s business, the unfairness that would result from exclusion from that business may not be cured by a buy-out offer.
Analysis
[12] The last consideration (noted at [11]) does not apply, as Chris is prepared to sell his shares and he does not work in the business. There is no suggestion that the records of Third Space are such that a valuation exercise would be frustrated. The key dispute concerns the validity or otherwise of the Board’s decision to bring to an end the 22 August 2023 contracts between Third Space and Koha. Mr Peers, counsel for Michael and Duncan, submits that matter is addressed by adopting a valuation date of 31 March 2025, pre-dating the 23 April 2025 board meeting.
[13] Chris also noted there were journal entries by Michael and Duncan post 31 March 2025 and backdated to 31 March 2025 which Chris said were aimed at lowering the company’s profits as at that date. It was agreed at the hearing that all post-31 March 2025 accounting entries would be treated as having no impact on the financial position as at 31 March 2025. In short, the valuer would ignore all such disputed entries. The intent is that the business would be valued as at 31 March 2025 as if no further accounting entries had been created.
[14] The position maintained by Chris, that the 22 August 2023 contracts are varied, has the potential to decrease the value of his shares in Third Space as Michael and Duncan say the arrangements put in place in August 2023 result in a diversion of funds to Koha. But if that is the situation that Chris advocates for then there is no prejudice to him in adopting a valuation date of 31 March 2025. Chris does not suggest there is any prejudice from that valuation date. If the disputed contracts are valid and remain in force, Chris benefits from them through his ownership of Koha.
[15] Chris, in his oral submissions, suggested that Michael and Duncan were effectively running a private business from the company’s gym by running training sessions. Michael and Duncan accept they run training sessions but say they are sessions that paying members of the gym are entitled to attend depending on their class of membership. Chris’s brief evidence on this point does not go into any detail. Chris will be entitled to raise this issue with the valuer if required. Chris’ concern is that there is a potential income scheme from these private training sessions that might be available to the company. But that proposition will fall away if the training sessions are simply part of members’ entitlements. If there are private sessions, a fair payment to the company can be assessed by the valuer — Chris has already supplied a figure.
[16] Chris also raised there was a pilates operation at the gym that was not paying rent. Michael and Duncan accept there is a pilates operator at the gym who is not paying rent. The explanation for that is that the pilates operation is a trial to see if it is viable. The operation may turn into an income stream for the company if the operator considers their business is viable. Any potential for that operation to generate income for the company is a matter to be assessed by the valuer. However, that potential is to be assessed as at 31 March 2025.
[17] Michael and Duncan’s offer did not address the costs of the proceeding but having addressed that with Mr Peers, he agreed that Michael and Duncan would pay Chris’ costs at scale (Chris being self-represented), up until the date of their offer on 2 May 2025.
[18] Chris did not file a notice of opposition to the application for summary judgment, albeit it was clear that he opposed the application. However, the real dispute here is between Koha and Third Space. If Third Space does not have grounds to cancel the 22 August 2023 agreements then Koha will have the right to seek relief against Third Space.
[19] Chris, in his speaking notes for the hearing, expressed a concern that the offer to buy out his shares was non-binding. I explained that if summary judgment was granted on the basis of the offer to purchase, the offer would be formalised in the judgment and, if accepted, would be a binding contract which would be subject to
the supervision of the Court. I would intend making a Tomlin Order which would see this proceeding stayed, save for either party having the ability to apply to the Court for the purposes of enforcing the agreement. In that way, both parties can be confident that enforcement of the agreement is under the supervision of the Court.
[20] During the hearing, Chris accepted that the valuation date of 31 March 2025 addressed his concerns about “distorted financials” and other concerns about events after 1 April 2025.
[21] Chris’ speaking notes said; “The offer does not cure procedural exclusion”. To the extent this submission is based on the disputed 23 April 2025 board meeting, the valuation date addresses that point. As noted, Chris does not work in the business so is not being excluded as an employee. Chris has made an offer to sell his shares, so the fact of leaving the company is not the issue — it is the price.
[22] Chris complained of being excluded from a booking system/email system known as “Gym Master” which is apparently run by a third party which manages gym memberships. It was agreed that for the purposes of the offer, Chris would be reinstated with read-only access to the Gym Master system. It was accepted that the valuer would have complete access to that system. Chris raised the issue with not having physical access to the gym. While this is not relevant to value, as the valuer can have access to the gym, Michael and Duncan have agreed that he can have access at arranged times when one of them is present.
[23] That leaves Chris’ concerns about what he sees as the impact of this dispute on his professional standing and reputation.
[24] This is an issue Osborne J commented on in a Minute of 12 May 2025. He noted an aspect of Chris’ claim was that his prayer for relief sought general damages for reputational or financial harm arising from the matters said to have impacted on his reputation. The Minute records that Osborne J explained to Chris that by their nature they appeared to be claims in defamation and would need to be subject to a separate proceeding. They are neither matters relevant to a share valuation nor relevant to this application.
[25] I arrive at the point where there are no factual issues that stand in the way of a valuer fixing fair value. The offer made by Michael and Duncan to Chris is in the attached Schedule which in substance is their offer of 2 May 2025.
[26] Because such an offer cures the unfair treatment/prejudice complained about by Chris, if he does not accept the offer, his proceeding will come to an end. If he accepts the offer, then, as I have said, this proceeding will stay alive by virtue of a Tomlin Order but only for the purposes of completing the sale of his shares. Once that is complete, the proceeding will come to an end.
[27] While the attached offer differs in detail from that advanced on 2 May 2025, the amendments are within those contemplated by the Birchfield decision — that is, they are not material or indeed, are to Chris’ advantage.
[28] I find the attached offer is capable of fully addressing any arguable claims of unfair prejudice by Chris. The offer is open for 20 working days. Mr Peers is to inform me whether the offer is accepted or not. If accepted, I will issue a Tomlin Order. If not accepted, I will issue judgment dismissing Chris’ proceeding.
Costs
[29]Costs are reserved.
Associate Judge Lester
Solicitors:
Buddle Findlay, Christchurch (for First and Second Defendants)
Copy to:
C A Roberts, self-represented Plaintiff
SCHEDULE
Offer by Michael and Duncan to purchase Chris’ shares
This offer records Michael and Duncan’s offer to purchase Chris’ shares in Third Space Fitness Limited.
(1)The purchase price will be the fair value of Chris’ shareholding in Third Space Fitness Limited (Third Space) being one-third of the value of the total issued share capital without any minority discount.
(2)Fair value will be determined and certified by an independent valuer engaged by the parties on the basis that Michael and Duncan will pay 50 per cent of the expert’s costs and Chris will pay the remaining 50 per cent of the costs.
(3)Fair value is to be calculated with regard to the following points:
(a)it is to take into account both income and capital matters including any related adjustments at the independent valuer’s discretion;
(b)the valuation date will be 31 March 2025 and exclude any purported adjustments to 31 March 2025 occurring after that date;
(c)the valuation will be conducted at arms-length and the overall procedure and valuation approach shall be determined by the experts;
(d)the expert will be an independent and competent expert experienced in business valuations to be agreed by the parties, but if agreement is not possible, the expert will be appointed by the President of the New Zealand Law Society (or their nominee);
(e)the purchase price is to be adjusted to include the value of any relevant shareholder/current accounts of Third Space;
(f)the expert will act as an expert and not as an arbitrator;
(g)all parties will be entitled to make submissions to the expert;
(h)the expert and the parties will have access to all relevant company information and records;
(i)the valuation, at the expert’s discretion, will take into consideration, and may comment on, matters raised by Chris, Michael and Duncan. The basis for any adjustments including market indicators and/or assumptions, shall be clearly set out in the expert’s report;
(j)the expert’s determination shall be final and binding without a right of appeal;
(k)the expert shall be entitled to undertake site visits as and when necessary to complete their valuation;
(l)on final determination of the value by the independent valuer, Michael and Duncan will pay the total sum that is determined to be the fair value of Chris’ shares to their solicitor’s trust account. That amount is to be paid within 15 working days of the price being determined. Any late payment will attract interest at a rate equal to the Bank of New Zealand business overdraft base rate from the due date for payment until such payment is received by Chris in full.
(5)Contemporaneously with the payment of the purchase price, Chris will provide Michael and Duncan with all documents necessary to register the transfer of his shares (unencumbered) to Michael and Duncan or their nominees, together with any assignment of Chris’ shareholder current account, if that is necessary.
(6)Michael and Duncan will pay Chris’ costs of this proceeding up to the date of their offer of 2 May 2025 on a 2B basis. Any dispute in relation to the fixing of costs will be determined by the Court.
(7)This offer shall remain open for acceptance for 20 working days after receipt and if not accepted by 5.00 pm on the final day in that period, the offer shall be automatically revoked.
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