Samy Trustee Limited v Pauanui Dream Estate Limited
[2016] NZHC 569
•5 April 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-4219 [2016] NZHC 569
BETWEEN SAMY TRUSTEE LIMITED
Plaintiff
AND
PAUANUI DREAM ESTATE LIMITED First Defendant
ANTHONY DAVID BANBROOK Second Defendant
GREGORY ABE NEEDHAM Third Defendant
RICHARD ALEXANDER NEEDHAM Fourth Defendant
Hearing: 7 and 8 March 2016 Counsel:
E J Werry for Plaintiff
A D Banbrook for DefendantsJudgment:
5 April 2016
JUDGMENT OF FOGARTY J
This judgment was delivered by Justice Fogarty on
5 April 2016 at 4.00 p.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors: Parshotam & Co, Auckland
Brookfields, Auckland
SAMY TRUSTEE LIMITED v PAUANUI DREAM ESTATE LIMITED [2016] NZHC 569 [5 April 2016]
Introduction
[1] The Companies Act 1993 (the Act) requires every company to maintain a share register. Section 89 of that Act provides that, subject to s 91, the entry of the name of a person in the share register is prima facie evidence of legal title to those shares. Section 91 of the Act confers power to this Court to both rectify a share register and provide compensation if the name of a person is wrongly entered into, or omitted from, the share register of a company.
[2] The New Zealand Register of Companies currently records:
(a) The shareholders in Pauanui Dream Estate Ltd (PDEL) as Messrs Holmes and Banbrook, jointly holding 450 shares or 45 per cent of the issued capital1; and
(b)The third defendant, Gregory Abe Needham, holding 550 shares or 55 per cent of the issued share capital.
[3] Mr Needham claims he has the company share register and that accords with
the New Zealand Register of Companies’ records.
[4] The plaintiff, Samy Trustee Limited (STL), claims that Mr Needham’s accountants (Patel) hold the company share register, disputes the validity of Mr Needham’s share register and claims that the shareholding, as currently recorded in the New Zealand Companies Office Register, does not reflect the true legal ownership. It is contended that it ought to show that STL, owns 600 of the shares and Mr Banbrook, as trustee of the PPI Trust, owns 400.
[5] In these proceedings, under the umbrella of s 91 of the Companies Act, STL seeks a number of orders against Mr Banbrook, as trustee of the Pecunia Posterum Institutum Trust (PPI Trust), and Mr GA Needham and his son, Mr RA Needham. All the orders are intended to rectify the register. The principal orders that STL
seeks are:
1 These shares are now owned by Mr Banbrook in his capacity as trustee of the Pecunia Posterum
Institutum Trust (PPI Trust); and
(a) that Mr Needham specifically perform the Memorandum of Agreement (MOA) and the addendum thereto (to be discussed in detail in this judgment), by transferring to STL the 550 shares which are held by him; and
(b)order Mr Banbrook to likewise perform the MOA and addendum by transferring to STL 50 shares, of the 450, held by him.
[6] There then follows a series of orders designed to both restrain the defendants from taking any steps to prevent the plaintiff from registering in its name the 600 shares and, failing cooperation from the defendants, empowering the Registrar of this Court to execute a transfer from the second and third defendants as to these shares, and other orders by way of injunction, rectification and declaration.
Narrative of events
[7] At the start of 2012, Pauanui Mountain Estates Limited (PMEL) owned 62.23 hectares of land in South Auckland. Its title was encumbered with two mortgages: to Basecorp Finance Limited and to Barbara Needham, the wife of the third defendant. At the beginning of March 2012, PMEL was in financial difficulties. It had a debt of
$200,000 owed to the Inland Revenue Department (IRD), which was pressing for payment. It was in need of an investor.
[8] On 6 March 2012, a valuer, Mr Jim Glen, inspected PMEL’s property in order
to provide “a current market value of the land”. He provided that valuation on 9
March, expressing the opinion that the land was worth $2,100,000.
[9] On 8 March 2012, the MOA was signed between PMEL and STL. PMEL was recorded as being represented by Mr Gregory Needham and STL was recorded as being represented by Mr John Samy. PMEL was recorded as “the borrower” and STL as “the financier”.
[10] The preamble to this agreement records:
WHEREAS
A. The Borrower, in regard to the 65.92 hectares of prime land that it owned in Pauanui, had embarked on the sub-division and development of the said land into fully serviced residential sites. To achieve this, the Borrower adopted a Two-Stage plan: i) the first covering 3.69 hectares of land and involving the development and sale of 42 fully serviced sites; and ii) the second Stage, covering
62.23 hectares of land and involving the development and sale of approximately 280 fully serviced residential sites together with other amenities such as, inter alia, provision for a Hotel/Convention Centre; a commercial zone; and natural reserves and walkways (hereafter “The Project”).
Stage One of the Borrower’s development plans has been completed, and, as at 1 March, 2012, all of the 42 fully serviced residential sites were sold.
The Borrower now seeks to move on to and progress the implementation of Stage Two of the Project. In order to be able to do this, the Borrower needs to be free of financial liabilities including various encumbrances on its balance of land holdings of
62.23 hectares. In particular, the Borrower requires financing in an amount totalling $700,000 (seven hundred thousand dollars) to ensure that it can move on to Stage Two of the Project, and to be able to do this free of any encumbrances.
In this context, the Borrower has produced documentary evidence (Market Valuation dated 10 October 2010 by Jim Glenn Valuers Ltd, Registered Valuer) that its remaining land holding of 62.23 hectares for Stage Two in Pauanui has a current indicative market valuation of $2,100,000 (two million and one hundred thousand dollars). GST, if payable, is not included in this assessment. The Borrower has proposed (the Proposal) that it is prepared to transfer the ownership of this land holding of 62.23 hectares to a separate corporate entity and to assign a shareholding equity of 55% in that entity to the Financier in return for financing in an amount of
$700,000 (seven hundred thousand dollars).
B. Representatives of the Financier and the Borrower have held discussions on the Proposal of the Borrower. Understandings have been reached to which both parties mutually agree, and which is recorded in this MOA.
[11] Articles 1, 2, 3 and 4 of the MOA then provide:
ARTICLE 1: SALE AND PURCHASE OF SHARE OF PMEL LAND HOLDING IN PAUANUI
1.1The Borrower has offered a 55% equity share ownership of its land holding of 62.23 hectares that is, 34.23 hectares equivalent for the financing in an amount of $700,000 (seven hundred thousand dollars).
1.2 Through the signing of this MOA, the Financier accepts the
Borrower’s offer, subject to the following:
i. that $200,000 (two hundred thousand dollars) of the total purchase price of $700,000 (seven hundred thousand dollars) shall be payable at the latest by 9 March, 2012; and
ii the balance of the financing in an amount totalling $500,000 (five hundred thousand dollars) shall be payable on 16 April,
2012 as follows: a) the sum of $400,000 (four hundred thousand dollars) payable to the Borrower; and b) $100,000
(one hundred thousand dollars) set aside to meet the costs of the plan change approval for commencement of Stage Twoof the Project.
ARTICLE 2: ESTABLISHMENT OF A NEW CORPORATE ENTITY
2.1The Borrower and the Financier are in mutual agreement that to progress on to the development of Stage Two of the Project, they will jointly establish a new corporate entity which shall be named PAUANUI DREAM ESTATE LIMITED.
2.2It is further agreed that PAUANUI DREAM ESTATES LIMITED (hereafter referred to as PDEL), with registered office c/- Patel and Associates at 12 Amera Place, Huntington Centre, Botany Downs, East Tamaki, Auckland, shall have the following equity ownership and shareholding structure:
i) Pecunia in Posterum Institutum Trust : 45.0%
ii) Samy Trustee Limited : 55.0%
100.0%
2.3 Initially, the Board of Directors of PDEL shall consist of Mr.
Gregory Abe Needham and Mr John Samy, with each having equal voting rights. Any of the Parties shall be entitled to divest all or a part of its shareholding in PDEL at any time following the signing of this MOA provided the existing shareholders are given the right of first option to purchase. The price to be paid for the share(s) shall be determined by a resolution of the Board of Directors of PDEL.
ARTICLE 3: BO RRO WER’ S OB LIGATIO NS AND RIGH TS
3.1For its part, the Borrower will undertake to ensure, inter alia, the following:
(a) that on 9 March, 2012 upon receiving the initial financing in an amount of $200,000 (two hundred thousand dollars), the Borrower’s and the Financier’s Solicitors will coordinate and register the interests of Samy Trustees Limited as Mortgagee in the Certificate of Title of the Land.
(b) that the day on which the Financier pays to the Borrower the
$500,000 (five hundred thousand dollars) representing the
balance of the financing, on that particular day, concurrently, the following action will be taken by the Solicitors of the Borrower and the Financier: the land on Lot 6 on Deposited Plan 375136 having an area of 62.23 hectares, more or less, and being all the land contained and described in Certificate of Title 302523, in Pauanui, Coromandel Peninsula, shall be transferred to PDEL, as a clean Title i.e. without any encumbrances whatsoever;
(c) that prior to the transfer of the ownership of the land to PDEL, the Borrower will have paid all outstanding loans, rates, fees and charges relative to the land on Lot 6 on Deposited Plan 375136 with Certificate of Title 302523; and
(d) that should the Financier fail to make the full and final payment of $500,000 (five hundred thousand dollars) on
16 April, 2012, then the initial amount of $200,000 (two hundred thousand dollars) advanced on 9 March, 2012, shall
be forfeited.
3.2The Borrower shall also, by or on 16 April, 2012, duly arrange for the transfer to the name of PDEL all the Planning, Zoning and Resource consents obtained to-date from the municipal authorities.
ARTICLE 4: FINANCIERS OBLIGATIONS AND RIGHTS
4.1 For its part, the Financiers will undertake to ensure the following:
(a) Payment of the agreed financing of $700,000 (seven hundred thousand dollars) as and when due i.e. $200,000 (two hundred thousand dollars) by 9 March, 2012; and $500,000 (five hundred thousand dollars) on latest by 16 April, 2012; and
(b) That in compliance with Clause 1.2(ii) of this MOA, that from the amount of $500,000 (five hundred thousand dollars) payable by 16 April, 2012, the sum of $100,000 (one hundred thousand dollars) shall be deposited directly into the bank account of PDEL by the Financier’s Solicitors.
4.2Upon the full and final settlement on Monday, 16 April, 2012, as of that particular date, the land on Lot 6 on Deposited Plan 375136 having an area of 62.23 hectares and being all the land contained and described in Certificate of Title 302523, shall become the property of PDEL, reflecting the following proportionate ownership rights among its shareholders:
(i) Pecunia in Posterum Institutum Trust : 45% (ii) Samy Trustee Limited : 55%
[12] Articles 5, 6, 7 8 and 9 do not need to be set out. Neither party to this litigation relies on them. The last Article of relevance is article 10:
ARTICLE 10: TIME
10.1Time, wherever mentioned, shall be of the essence in the execution of this MOA.
[13] In addition to the execution of the MOA, Mr Samy’s wife, Mrs Olivia Samy, recorded notes of the first meeting of the directors of PDEL which was held on
8 March 2012, the same day as the MOA was signed. Plainly, Mr John Samy had the benefit of these notes. Mr Needham’s evidence was that he did not see them. A number of decisions were made or deferred, such as who would be the solicitor (which was deferred), who would be the accountants (Patel & Associates (PAL). Also recorded is the following listed as “Agenda Item 2(iv)”::
The Directors noted that a Shareholders Agreement will need to be prepared for the overall management and governance of PDEL.
[14] The notes of the first meeting then end:
The directors agreed to hold the second meeting of the Board on 12 March,
2012, at the same venue.
[15] The next day, on 9 March 2012 at 10.19, Mr Needham sent an email to Mr
Holmes, which begins:
Hi John,
We are working towards settlement of IRD today.
The security document for the advance of $200k provided for in MOUY needs to be done today as we do need to draw the funds down today. On draw down the funds are to be deposited in the PMEL HSBC account.
What time shall I call by to sign the security documents this morning? If ready I can sign the transfer document at the same time.
Brdgs
Greg
[16] It is common ground that the $200,000 payable by art 3.1(a) was paid that day, that is 9 March.
[17] Mr John Holmes replied to Mr Needham later that morning via email. He explains in the first paragraph of his email that PDEL had not been completely
incorporated. I pause to reiterate that PDEL was to be incorporated, and was incorporated later that day, with the shareholding of 550 shares held by STL, and 450 shares held by the trustees of PPI, in accordance with MOA art 2.2 (see above). With this in mind, Mr Holme’s 9 March email continues:
Also, it would be desirable to have a clear understanding with John Samy that you or Barbara remain the sole shareholders until settlement of the
$500k. I think ideally we should have him sign a share transfer for the 55%
for which he has initially subscribe, which we can hold until settlement and then destroy.
So, I think that this reshuffle does give us the opportunity to remove the current account owed by Greg and Barbara Needham family trust to PMEL – it is important that be done; Tony and I are limited liability trustees, but you would be exposed in the event of liquidation of the company – even in the event of a later shareholders liquidation when the company had done its dash, that will need to be sorted and this strikes me as the obvious opportunity. …
[18] Later that day, still 9 March, Samy Trustee Limited transferred its 550 ordinary shares in PDEL for the consideration of $1 to Mr Gregory Needham. That transfer was witnessed by Mr Samy’s solicitor and, in respect of Mr Needham, by Mr Holmes.
[19] On 12 March, PMEL transferred title to the land to PDEL. This was after a mortgage had been registered against the title in favour of STL, about three hours beforehand.
[20] It will be recalled that art 3.1(b) (set out above) provided for the conveyance of the land to PDEL with clear title to take place on the day on which the Financier paid the $500,000. That sum was not paid on 12 March. Nonetheless, the land was transferred to PDEL.
[21] Also, on the same day, the share transfer of 550 ordinary shares, drawn on
9 March as a security against a promise the transfer would be destroyed when the
$500,000 was paid, was in fact registered with the New Zealand Register of Companies. So that as from 12 March, the New Zealand Register of Companies recorded a “new shareholder”, G A Needham, and a “removed shareholder”, Samy Trustee Limited. This was done without Mr Samy’s knowledge. It was done immediately and well before the date for payment of the $500,000 which, by art
1.2(ii), was payable on 16 April. The date 16 April is mentioned in cl 3.2 as the day the transfer to the name of PDEL, of all the Planning, Zoning and Resource consents obtained to date. (See [11] above.)
[22] At the time of the transfer the land also remained encumbered to a mortgage to Mrs Needham and to Basecorp. So, in respect of the last two debts, it was not transferred free of encumbrances. The Basecorp mortgage was discharged on 2 May, as was Mrs Needham’s mortgage.
[23] An addendum to the MOA was later executed between PMEL and STL. It is more likely than not that this was executed on 29 April 2012, which is the date upon which the witness to Mr Samy’s signature by his solicitor, Mr Parshotam, records.
[24] I set out the terms of the addendum in full:
ADDENDUM TO THE MEMORANDUM OF AGREEMENT DATED
8TH MARCH, 2012 BETWEEN PAUANUI MOUNTAIN ESTATE LIMITED AND SAMY TRUSTEE LIMITED
This ADDENDUM records a number of important changes to the Memorandum of Agreement (MoA) dated 8th March, 2012 as mutually agreed by the representatives of Pauanui Mountain Estates Limited, (PMEL) and Samy Trustee Limited (STL).
The material and significant changes to the MoA are as follows:
1.The financing amount of $700,000, referred to in the MoA (paras 1 and 2 on pages 2; Article 1-2; Article 4.1) has been increased to a total of $720,000, the balance payable for the full and final settlement now being $520,000 rather than $500,000. This is in exchange for the 5% share parcel noted in para 3.
2.In addition, STL has agreed to provide to Gregory Needham (GAN), the sum of $70,000, as a loan, to enable the amount payable to Oxford Finance to be negotiated and settled. A Term Loan Agreement will be signed between GAN and STL setting out the terms and conditions for this loan of $70,000 from STL to GAN, including that STL shall have the personal guarantee of GAN and if absolutely required also a backup guarantee from Pecunia trust.
3.The Parties ie PMEL and STL have further agreed that the shareholding structure of Pauanui Dream Estate Limited (PDEL) which is referred to in Articles 1.1; 2.2; and 4.2(i) as being 55% STL and 45% for PMEL shall, upon full and final settlement, be as follows:
Samy Trust Limited : 60%
Pecunia in Posterum Institutum Trust : 40%
4.That the sum of $100,000, referred to Article 1.2 ii; and 4.3(b) to be deposited by PMEL into the bank account of PDEL on the date of full and final settlement, shall now be reduced to $50,000 with PMEL giving to STL the undertaking that it shall have endeavoured, by or on the date of full and final settlement, paid all its sundry creditors, outstanding fees and charges including the rates payable on the land at 996 Settlement Road; and
5. That the date for the full and final settlement shall be shifted from
16 April, 2012 to Monday, 30 April, 2012.
[25] It may be noticed that the signature of Mr GA Needham is not witnessed. In the trial, Mr Needham variously suggested his signature had been forged but in the end accepted that it was his signature, but he did not know on what date he had signed it.
[26] It is also to be noticed that the financial terms had been altered, not greatly, but materially. Implicitly, the addendum recognises that the payment of $200,000 had been made, but for the addendum the balance to pay would be $500,000, it now being $520,000 and this was in exchange for the 5 per cent share, taking the interest of STL up to 60 per cent. There was a new date of full and final settlement being shifted from 16 April to 30 April, the day after the addendum was executed by Samy Trustees Limited. There is no dispute that STL paid $520,000 the following day.
[27] In December 2012, Mr Samy learned from his accountant that STL’s 55 per cent shareholding recorded in the New Zealand Companies Office had been transferred and recorded in the name of Mr Gregory Needham on 12 March 2012. Mr Samy contacted Mr Holmes. On 11 December, Mr Holmes replied to Mr Samy, copying the reply to Mr Needham (his client). The reply is as follows:
As requested, I have attached a copy of the share transfer from Greg back to STL, which was to be actioned after completion of settlement, also the amendment to the MOA signed by Greg but not STL. I think you are right that the transfer from STL to Greg was intended to be held unregistered, and I don’t know how it came to be registered – I don’t recall doing it myself. In any event, following settlement STL is entitled to be registered in respect to that 55 per cent shareholding and the attached transfer, which should have been released to you or Bharat [Mr Samy’s solicitor, Mr Parshotam] following settlement, presumably can be used for that purpose. I note it still needs to be signed by STL.
[28] On the same day, at the request of Mr Samy on behalf of STL, the company, NET, registered at the New Zealand Companies Office particulars of the shareholding, removing Mr Needham as a shareholder and recording the plaintiff as a holder of 600 shares and amending the share allocation of Messrs Banbrook and Holmes down to 400 shares. The reader will recall that the extra 50 shares was provided for in the addendum.
[29] On 17 December, there then began an unresolved tussle between Mr Needham and Mr Samy as to the register of shareholding at the New Zealand Companies Office. On 17 December, Mr Needham wrote to the Registrar of Companies complaining that there was no legitimate documentation to support the share transfers back and requesting the share transfers to be immediately reversed.
[30] On 10 January, Mr Samy emailed Mr Needham referring him to the MOA and the addendum. He requested that Mr Needham obtain from Messrs Banbrook and Holmes a transfer of the 50 shares (or 5 per cent of the shares) they held as trustees in PDEL. No reply was received.
[31] On 26 March, Mr Needham succeeded in registering at the New Zealand Companies Office particulars of shareholding removing STL’s shareholding and allocating those shares to himself. By 16 April, the New Zealand Companies Office wrote to Mr Samy advising he should take legal advice. It is not necessary to go through the filing and counter-filing of particulars with the New Zealand Companies that Office that ensued, through to June 2013, when on the 16 June 2013, the New Zealand Companies Office emailed Parshotam & Co advising that an application to the High Court may be necessary. That resulted in these proceedings being commenced on 16 September 2013.
[32] Summary judgment was also sought against Mr Needham in respect of the
$70,000 advanced to him personally and judgment for that sum, together with interest, was entered on 14 February 2014 at $107,540.14.
The defence
[33] At trial the principal argument for the defence came from the evidence of Mr Needham and from the closing address of Mr Banbrook, who appeared as counsel for Mr Needham, and for himself as second defendant. The argument was that pleaded in the statement of defence:
That at all material times the shareholding of STL in PDEL was subject to the parties negotiating and agreeing a shareholders’ agreement and that this agreement was never concluded.
[34] A subsidiary argument, not advanced in any detail, was that, under the MOA, the land had to be transferred to PDEL free of encumbrances and that did not happen.
[35] Mr Needham’s evidence was:
5.From the outset, the discussions with STL revolved around initial financial advances that were to be made to the company, PMEL. The agreement between the parties was that, subject to satisfactory shareholder agreements and associated documentation being concluded, then there would be an equity participation by STL in the Pauanui development.
6.On 8 March 2012, in my capacity as managing director of PMEL, I entered into an agreement with STL entitled memorandum of agreement [MOA]. …The MOA was, however, subject to the conclusion of a satisfactory shareholders agreement to enable the joint venture between the parties to proceed.
7. The mortgage charges over the property at Pauanui comprising
62.23 ha are shown in a search copy of the title to the Pauanui
property dated 5 March. … These comprise a mortgage to Basecorp
Finance and a mortgage to Barbara Ingrid Needham.
8.…I agree that a newly incorporated entity called Pauanui Dream Estate Limited [PDEL] was to be created but I do not accept that there was to be any immediate equity participation on the part of STL until a satisfactory shareholders agreement and joint venture arrangements have been agreed.
It is correct that original the sum of $700,000 was to be advanced by STL to PMEL in two instalments being $200,000 on 9 March and the balance of $500,000 on 16 April 2012. … It is correct that from the advance of $500,000, the sum of $100,000 was to be deposited into the bank account of PDEL for utilization as working capital, however, this deposit never eventuated.
9.It is correct that I agreed with John Samy that the Pauanui land would be transferred to PDEL by PMEL but I never agreed that Mr Samy would effectively be the managing director of the new company and managing the investment project.
10. It is correct that the MOA was signed by all parties on 8 March 2012
which was the same day that PDEL was incorporated. …
11. Patel & Associates have been instructed to incorporate PDEL with a share register and a director’s register and a constitution for the new company. …
12.It is not correct that from incorporation, the share register, constitution and register of the companies was in the custody of Patel & Associates. I had the share register in my office at all material times.
13.I do not accept that the first meeting of directors at PDEL took place on 8 March. The [summary of notes of first meeting of directors of PDEL held on 8 March, drafted by Mrs Oliver Samy] are not minutes of a board meeting of the directors of DPEL. … No Board meeting was held. It is true that a discussion took place about the need to have a shareholders’ agreement in future and that the MOA was still a work in progress, conditional on many open items, including a shareholder’s agreement and shareholder’s approval.
[36] Mr Needham went on to agree there was the addendum to the agreement in his written brief, although orally he gibed a little as to being a party to it, until finally agreeing. He persisted, both in his written and oral evidence, though, with the proposition:
16.… The transfer of these shares, however, remain conditional on the satisfactory shareholder’s agreement and a joint venture agreement concluded between the parties.
[37] As already discussed, this proposition was the key allegation by the defendant for its defence - the argument about the obligations being subject to a shareholder’s agreement. As to that qualification not being in the MOA, he said that was Mr Samy’s problem of acting for himself and not retaining a lawyer to document the agreements.
[38] Mr Banbrook submitted that the clause in the notes of the meeting, “The directors noted that a shareholders’ agreement will need to be prepared for the overall management and governance of PDEL” (see [13] above), had a necessary implication that no transactions would take place until that occurred.
Discussion
[39] I note that it made commercial sense for the transaction at that time to be with PMEL. PDEL was a quality asset to result from the agreement. PMEL owned the land but was seriously in debt. The principal amount of the consideration was to go to the indebted company, enabling the indebted company to transfer the land to the new company, PDEL, without preferring creditors.
[40] In support of Mr Needham’s argument, Mr Banbrook submitted that until directors had a shareholders’ agreement, it would not be possible to manage and govern PDEL. That proposition is simply not correct. Many companies operate without a shareholders’ agreement, relying on the constitution and the Companies Act 1993.
[41] It was not expressly alluded to either by Mr Needham or by Mr Banbrook, but the consequence of this transaction is manifestly that STL would become the majority shareholder and thus likely to be able to dictate the ordinary course of business of PDEL, subject to the qualifications in the Companies Act. So this transaction involved a transfer of power from Mr Needham to Mr Samy unless somehow that could be predicted in a management agreement. In that sense, I can appreciate that from Mr Needham’s point of view, such an agreement was essential. But, on the very day that it was discussed, it was not included and provided for as an obligation in the MOA.
[42] The MOA was clearly not a preliminary agreement. It provided expressly for the incorporation of PDEL for its shareholding structure or specific payment of the
$200,000 by 9 March 2012 and the balance at the latest by 16 April 2012, which was to be the day of “full and final settlement”. There is nothing in that agreement which remotely suggests that it was not intended to take effect on its own terms.
[43] What happened was that Mr Samy did more homework on the company and found that it needed more than $700,000 and it was that judgment by Mr Samy which led to the formal addendum or amendment of the MOA, increasing the amount he would advance and postponing the date of full and final settlement from
16 April to 30 April.
[44] The ultimate weakness of the defence proposition that all these obligations were subject to a shareholders’ agreement being reached sometime in the future, is that such an implication is inconsistent with the express terms agreed in writing on
8 March in the MOA and on 24 April in the addendum.
[45] It is also no defence for Mr Needham to distance himself from the use of the transfer obtained by Mr Holmes to remove STL from the New Zealand Companies Office register of shareholders. Mr Holmes was his solicitor. That transfer was obtained on a promise that it would be held until the $500,000 was paid and then “destroyed”. Mr Holmes was available to give evidence and was not called. I am quite satisfied, on the balance of probabilities, if not more, that that was because Mr Holmes could not assist the defendant’s case.
[46] It has not gone unnoticed by the Court that PMEL did not return, or make any effort to return, the monies paid by STL which, according to the defence in this trial, was under a mistake as to their obligations.
[47] It is utterly irregular that there are two competing share registers. The whole point of the remedies available to the Court is to ensure that a party’s rights as a shareholder are recognised by the limited liability company, thus entitling the plaintiff to exercise its legal rights as a shareholder.
[48] The remedies sought by the plaintiff are all discretionary. The merits are
overwhelmingly in favour of the plaintiff. The defendants’ argument is hopeless.
Decision
[49] Given the behaviour of the plaintiff, it is entirely appropriate that the full suite of remedies sought by the plaintiff be granted. Accordingly, the following orders are made:
(a) In respect of the 550 shares entered on the share register of PDEL, the plaintiff has legal title thereto.
(b)It is declared that PDEL is to treat STL as the registered holder of 550 shares entered into the share register on 8 March 2012.
(c) It is declared that Mr Richard Needham was not validly appointed as a director of PDEL on 2 May 2015.
(d)It is declared that Mr Gregory Needham was validly removed as director on 9 September 2015.
(e) It is declared that Mr Samy, at the incorporation of PDEL, was a director, he remains a director and that from 9 September 2015, is the sole director at the present time.
[50] Pursuant to s 91 of the Companies Act, the register of the company PDEL is to be amended so that STL is the holder of 600 shares; PPI Trust is the holder of 400 shares.
[51] The plaintiff is entitled to compensation from the first and third defendants
(PDEL and Mr Gregory Needham) under s 91(2).
[52] There will be a case management conference at a date to be fixed by the Registrar, within two calendar months of this judgment to settle a timetable of claim and response and a hearing date.
[53] There is an injunction restraining the defendants of these proceedings from taking any steps preventing the plaintiff from registering at the New Zealand Companies Office the 600 shares in the first defendant or preventing the plaintiff registering directorship details, including the removal of the third and fourth defendants as directors and restoring Mr Samy as a director.
[54] As sole director, Mr Samy, has the authority to access the New Zealand Companies Office for the purpose of implementing changes to shareholding and directorships. I note that, at present, he does not have the access code.
[55] The New Zealand Companies Office will, with notice of the terms of the injunction against the third and fourth defendants, implement in favour of Mr Samy, as the sole director, the changes to shareholding and directorships, including provision of the access code.
Costs
[56] The plaintiff is entitled to costs against the first, third and fourth defendants, and against Mr Banbrook, as second defendant, but limited to the assets of the PPI Trust. If the parties cannot agree on costs, I will receive submissions limited to five pages for the plaintiff and five pages for the defendants.
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