Solar Bright Limited v Martin - [2019] NZHC 447

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000604

[2019] NZHC 447

BETWEEN
SOLAR BRIGHT LIMITED

Applicant

AND

PATRICK MARTIN

First Respondent

AND

NICOLA JANE MARTIN

Second Respondent

Hearing: 28 February 2019

Appearances:

G E Slevin for Applicant

P J Shamy for Respondents

Judgment:

15 March 2019

JUDGMENT OF OSBORNE J

(on application under s 141 Companies Act 1993)

Introduction

[1] On 11 January 2018, Solar Bright Ltd (Solar Bright) was the owner of an invention relating to an ice warning device for roads, the subject of granted patents, patent applications and trademarks and commonly referred to as “PATeye”. That day, the second respondent, Nicola Martin, as the managing director of Solar Bright, executed a deed whereby all Solar Bright’s right, title and interest in PATeye was assigned to Ms Martin’s husband, Patrick Martin, who had been a director of Solar Bright until he resigned on 20 December 2017.

SOLAR BRIGHT LIMITED v PATRICK MARTIN [2019] NZHC 447 [15 March 2019]

[2] On 21 January 2018, Ms Martin also resigned as a director. Those associated with other shareholder interests in Solar Bright appointed John Walley and Murray Spackman as directors of Solar Bright on 14 February 2018.

[3] In the meantime, the other shareholders had had disclosure that the PATeye assignment had been made.

[4] On 23 March 2018, the Board of Directors of Solar Bright passed a resolution avoiding the assignment transaction pursuant to s 141 Companies Act 1993.

This proceeding

[5] By this proceeding, Solar Bright seeks a declaration as to the validity of its avoidance of the assignment transaction. It also seeks consequential directions requiring the respondents to restore the position to what it had been.

[6] Solar Bright, at the start of this hearing, obtained upon argument, leave to proceed pursuant to r 19.5 of the High Court Rules.

The subject-matter of the litigation – PATeye

[7] PATeye is, as stated, an invention for ice detection and warning with associated patents, patent applications and trademarks.

[8] As described by Ms Martin, both PATeye and another invention, DATAeye, were “the brain children of Mr Martin”. PATeye had been transferred into Solar Bright when Mr Spackman and others invested and became involved in Solar Bright. DATAeye was subsequently conceived but is not nearly as developed as PATeye.

[9] Mr Spackman has deposed that Solar Bright intended to create and commercialise intellectual property. The products normally sold were related to lighting or solar powered products. The intellectual property and patents themselves were not ordinarily sold. In her evidence, Ms Martin refers to the PATeye revenue as having been very low given that it was in the research and development phase, with revenue being between $20,000 and $40,000 per annum. Documents dating from

2017 were produced in order to attract investors to Solar Bright. Those documents indicated that the company was building its future on three foundational pillars: being a patented product portfolio, a product pipeline and a breadth and depth…

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: [2019] NZHC 447
Decision Date: 15 March 2019

CaseChat Overview and Summary

Solar Bright Limited sought a declaration that the avoidance of the assignment of its intellectual property rights to the PATeye device to Patrick Martin was valid, and consequential directions requiring the respondents to restore the position to what it had been. The Court was required to determine whether the transaction was entered into in the ordinary course of Solar Bright's business and on its usual terms and conditions. If so, fair value would be presumed to have been received. If it was not, the court would have to determine whether fair value had been received. The onus was upon the Martins to establish fair value if the transaction was not entered into in the ordinary course of business and on its usual terms and conditions. The Court held that the transaction was not entered into in the ordinary course of Solar Bright's business. The Court also held that the Martins had failed to discharge the onus of establishing the fair value of the transaction. Solar Bright's avoidance of the transaction was valid. Solar Bright was entitled to the declaration and consequential directions which it sought.

Orders