IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000604
[2019] NZHC 300
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:
28 February 2019
ORAL JUDGMENT OF JUSTICE OSBORNE
(on leave to proceed under Part 19 High Court Rules)
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 MARTIN [2019] NZHC 300 [28 February 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 seeks leave to proceed pursuant to r 19.5 of the High Court Rules. This judgment deals with that leave application.
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…
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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AGLC
Solar Bright Ltd v Martin [2019] NZHC 300
Case
[2019] NZHC 300
Decision Date
CaseChat Overview and Summary
Solar Bright Ltd, the owner of intellectual property relating to an ice warning device for roads, sought to avoid a transaction where its intellectual property was assigned to Patrick Martin, a former director of the company. The assignment was executed by Nicola Martin, the managing director, on 11 January 2018. Following the resignation of both Patrick and Nicola Martin, the remaining shareholders appointed new directors who sought to avoid the transaction under s 141 of the Companies Act 1993. The court was required to determine whether Solar Bright was entitled to avoid the transaction and whether it received fair value for the intellectual property. The primary legal issue was whether the transaction was entered into in the ordinary course of business and on usual terms and conditions, which would presume fair value had been received. Alternatively, the court had to determine whether fair value was received based on the information known to the company and interested director at the time of the transaction.
The court considered whether it was appropriate to grant leave to proceed under Part 19 of the High Court Rules, as the avoidance of transactions under s 141 of the Companies Act 1993 was not one of the provisions required to be brought by originating application. The court found that the proceeding was appropriate for leave under r 19.5 because it involved a straightforward statutory test, and the parties had well understood the issues between them. Additionally, there was no demonstrated absence of fairness or justice, as the respondents were the ones who engaged in the conduct that was the subject of the litigation. The court concluded that the just, speedy, and inexpensive determination of the proceeding required that leave be granted.
The court granted Solar Bright leave to bring the application under Part 19 and proceeded to determine the substantive issues. The court found that the transaction was not entered into in the ordinary course of Solar Bright's business and on its usual terms and conditions, and therefore, the presumption of fair value under s 141(4) did not apply. The court then determined whether fair value was received under s 141(3) based on the information known to the company and interested director at the time of the transaction. The court found that fair value was not received, and Solar Bright was entitled to avoid the transaction. The court ordered that the assignment of intellectual property be avoided, and the intellectual property be restored to Solar Bright.