Singh-Heer v RSK Farming Ltd - [2024] NZHC 1920

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2022-419-088

[2024] NZHC 1920

BETWEEN
BALBIR SINGH-HEER and DABAU MINDHRO KAUR SINGH-HEER

Plaintiffs

AND

RSK FARMING LIMITED

Defendant

Hearing: 19 June 2024

Appearances:

FA King and MS Fyers for Sarbjit Kaur

KI Bond and JW Donald for Rupinder Singh

Judgment:

12 July 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 12 July 2024 at 4.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
McKenna King Dempster Limited, Hamilton Braun, Bond & Lomas Limited, Hamilton

SINGH-HEER v RSK FARMING LTD [2024] NZHC 1920 [12 July 2024]

Introduction

[1] Sarbjit Kaur and Rupinder Singh-Heer are equal shareholders and directors of the defendant company, RSK Farming Ltd (RSK).1 RSK owns a farm at Te Aroha Gordon Road in Te Aroha. Sarbjit and Rupinder were previously married but have been separated for approximately three years.

[2] Sarbjit was granted leave to intervene on behalf of RSK to defend summary judgment proceedings brought by Rupinder’s parents, Balbir Singh-Heer and Dabau Mindhro Kaur Singh-Heer (Mr and Mrs Singh-Heer). At the same time, the Court ordered RSK to indemnify Sarbjit for the legal costs she incurred for RSK for up to
$50,000, subject to further costs being ordered by the Court.2

[3] Sarbjit succeeded in defending the summary judgment application on behalf of RSK on the basis that Sarbjit had laid an evidential foundation to support an arguable claim for undue influence and potentially for unconscionability.3

[4]Sarbjit has applied for orders:

(a)for RSK to indemnify Sarbjit in the sum of a further $50,000 in advance for the cost of further steps in this proceeding up to a judicial settlement conference scheduled for 17 July 2024; or

(b)in the alternative, for RSK to pay an invoice rendered on 6 June 2024 in the amount of $43,437.20 (including GST and disbursements) for attendances required from September 2023.

[5] Sarbjit has also brought proceedings against RSK in her own name, including pursuant to s 174 of the Companies Act 1993 (127 Proceedings). Sarbjit has been granted legal aid for those proceedings.

1      I refer to the parties involved in this application by their first names to avoid confusion. I intend no disrespect in doing so.
2      Kaur v RSK Farming Ltd [2022] NZHC 3330 at [77].
3      Singh-Heer v RSK Farming Ltd [2023] NZHC 2586.

[6] Rupinder, as a shareholder and director of RSK, opposes this application on the following grounds:

(a)he ought to have visibility of the fees charged by Sarbjit’s law firm, McKenna King, to ensure they are fair and reasonable and strictly related to steps taken by RSK in defending the proceedings brought by Mr and Mrs Singh- Heer (referred to as the 88 Proceedings);

(b)$50,000 exceeds the reasonable cost for progressing the 88 Proceedings to the next major milestone, being the judicial settlement conference scheduled for 17 July 2024; and

(c)requiring RSK to make such a significant payment…

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: [2024] NZHC 1920
Decision Date: 12 July 2024

CaseChat Overview and Summary

In Singh-Heer v RSK Farming Ltd, the High Court of New Zealand addressed the issue of whether RSK Farming Ltd (RSK) should indemnify Sarbjit Kaur for further legal costs incurred in defending proceedings brought by Rupinder Singh-Heer’s parents, Balbir and Dabau Singh-Heer, against RSK. Sarbjit, an equal shareholder and director of RSK, had been granted leave to intervene and defend RSK in the proceedings. The court had previously ordered RSK to indemnify Sarbjit for up to $50,000 of her legal costs, subject to further orders. Sarbjit sought an additional $50,000 to cover costs up to a judicial settlement conference, extending the total sought to $55,000.

The legal issues revolved around the applicability of Section 166 of the Companies Act 1993, which mandates that a company must pay the reasonable costs of a shareholder or director who has been granted leave to intervene in proceedings unless it would be unjust or inequitable for the company to do so. The court had to determine whether it would be unjust or inequitable for RSK to pay the additional costs, considering RSK’s financial position and the overlap between Sarbjit’s personal proceedings and those on behalf of RSK.

The court found that RSK could afford the additional $55,000 given its financial position and income projections. It rejected Rupinder’s contention that Sarbjit should bear some of the costs personally, holding that the costs of applying for leave to intervene and extending the indemnity order were reasonably incurred and should be paid by RSK. The court also deemed the fees charged by Sarbjit’s law firm to be reasonable, considering the complexity of the case and the efforts to delineate costs related to RSK’s proceedings from Sarbjit’s personal litigation. The court granted Sarbjit’s application for the additional $55,000, ordering RSK to pay $47,471.50 after deducting the costs of this application, which were to be borne by Rupinder.

This decision underscores the importance of equitable considerations and the public policy behind allowing shareholders or directors to intervene in proceedings on behalf of a company, provided it is in the company’s interest to do so. The court balanced the financial implications for RSK with the necessity of ensuring that RSK’s interests are properly defended.

Orders