Sparkes v Campbells Carrying Company Limited

[2015] NZHC 1949

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-000548 [2015] NZHC 1949

BETWEEN

LISA MARY SPARKES

Plaintiff

AND

CAMPBELLS CARRYING COMPANY LIMITED

Defendant

Hearing:	17 August 2015
Appearances:	C Orton for the Plaintiff N Tabb for the Defendant
Judgment:	17 August 2015

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

L M SPARKES v CAMPBELLS CARRYING COMPANY LIMITED [2015] NZHC 1949 [17 August 2015]

[1]      The plaintiff seeks an order that the defendant (the company) be placed into liquidation pursuant to the just and equitable provisions of s 241(4)(d) upon the grounds that there has been a collapse of the relationship between the directors and because the substratum of the defendant has gone.

[2]      The company was incorporated on 20 September 2013.  Its two directors are the plaintiff and Mr Campbell who were married on 28 January 2009.

[3]      Mr Campbell and the plaintiff’s trusts each hold 49 shares in the company. As well Mr Campbell and the plaintiff each hold one share.

[4]      The plaintiff and Mr Campbell have lived apart since 14 July 2014.  She says he assaulted her at that time.  She complained to the Police and he was prosecuted and found not guilty.  He says her complaint was “trumped up”.

[5]      Financial  factors  feature  in  the  breakdown  of  the  parties’  personal  and business relationship.  Each has their own point of view about the extent to which the plaintiff contributed to the company’s transport operations.

[6]      Prior to the company being incorporated Mr Campbell worked as a sole trader.  His accountant suggested the setting up of the company because he said the business was growing and staff may have to be employed.

[7]      Mr Campbell says that prior to his de facto relationship with the plaintiff beginning in 2006 he had worked as a sole trader and was financially successful in the cartage business and had good contacts and customer relationships.

[8]      The plaintiff’s position is explained in her affidavit as follows:

[4]       In early 2014, I began to have considerable concerns with some of

Scott’s financial dealings with the defendant.

[5]       I raised these concerns with Scott on a number of occasions but never received a satisfactory response.   However, heated discussions did always result.

[6]       On 14 July 2014 I again raised these concerns.  As a result of my raising these concerns, Scott assaulted me.   Since that time, we have not

lived together and communication and dealings between Scott and I have been impossible.  There is been an irretrievable breakdown of a relationship and we cannot work together.

[9]      The present proceeding has been prompted by a letter dated 20 February

2015 from Mr Campbell’s lawyers which advised:

Our client is in the process of winding up Campbells Carrying company Limited and you will note that it is in the process of being removed from the Companies Office Register.   Our client is now trading under Campbells Carrying company (2014) Limited.

[10]     The  tenor  of  Mr  Campbell’s  evidence  is  that  he  managed  and  ran  the company and made all decisions and that the plaintiff did not have any involvement in the company’s management.

[11]     The plaintiff denies this account stating she worked long hours and was responsible for dealing with all staffing issues.

[12]     Regarding Mr Campbell’s claims of a debt due to his trust, she states she never signed any documentation agreeing to any loans from the trust.

[13]     Another issue arises from the plaintiff’s engagement of the services of Norrie and Daughters to provide accounting services.  The plaintiff said she later received advice that Mr Norrie was not acting in her best interests.

[14]     The plaintiff says that in a meeting of solicitors in December 2014 it was agreed she would be provided with financial information about the company but that information has not been provided.

[15]     The plaintiff says there is a difference of opinion regarding how a residential property owned by their trusts should be marketed for sale.

[16]     The plaintiff takes issue with the impartiality of advice received from Ms Toon of Corporate Restructuring Limited who was consulted for the purpose of assisting the parties’ resolve of their financial differences.

[17]     Mr Orton submits that there has been a complete and irretrievable breakdown in the original partnership concept to which the company had intended to give effect and therefore it is just and equitable that the company be wound up.

[18]     He argues the company is in deadlock.

Considerations

[19]     The  Court’s  jurisdiction  to  liquidate  the  company  on  just  and  equitable grounds is discretionary.  In this case issues regarding the control and operation of the company have been affected by the parties’ separation.  Such situations are not uncommon.  Obviously the Court should in these types of cases proceed with caution and may consider some other remedy may be appropriate instead of liquidation.

[20]     The evidence is that neither party has filed proceedings before the Family Court.  Mr Campbell says he has now given instructions for the filing of those.  This Court  considers  that  it  is  appropriate  to  ensure  that  all  issues  regarding  their respective interests in the relationship property are fully examined.  It is before the Family Court that the parties can determine exactly what interest each holds in the company.  Only then will it be clear whether it is necessary to liquidate the company to ensure equitable division of the relationship property.

[21]     The Court’s perception of the plaintiff’s evidence is that Mr Campbell does not sufficiently recognise her contribution to the running of the company’s business. However, in that regard there is not a lot of detail provided by her.  The evidence appears to be that:

(a)       she received her shares in the company as a gift and made no financial contributions to the company;

(b)he cooperated when the plaintiff instructed Norrie and Daughters to investigate the business;

(c)       he  has  made  a  number  of  offers  to  purchase  her  shares  in  the company;

(d)a number of attempts have been made to settle relationship property matters and now his position is that he will shortly file proceedings before the Family Court.

[22]     Mr Campbell says he has offered to purchase the plaintiff’s family trust’s

shares at market value.

Summary

[23]     In  essence  the  plaintiff’s  claims  are  about  company  management  and finances.  The Court does not think the plaintiff has sufficiently explained or justified the action she seeks.

[24]     The  creation  of  another  company  was  at  the  suggestion  of  professional advisors.  In essence it needed to be done to ensure that the business and the equity in it could survive. Also the plaintiff was told about what was going on.

[25]     Her interest in the company is not jeopardised – but her actions in wanting to liquidate the company do threaten the value of the company’s assets, to which she is making a claim.

[26]     If the company was liquidated then the liquidator would have effective means to retrieve those assets presently utilised by the replacement trading company.   In that outcome effectively both companies would be brought to an end.

[27]     The value of those assets should be the subject of a Family Court relationship property enquiry.  By that process the plaintiff will get access to all that information she thinks may be missing.

Result

[28]     In the Court’s view it does not consider it is just and equitable to place the company into liquidation at this stage.   It considers that prompt action should be taken to refer the matter of the parties’ relationship property to the Family Court.  It is  within  the  means  of  that  Court  to  determine  the  extent  of  the  plaintiff’s

relationship property entitlement and at what cost the interests of the plaintiff and her family trust ought to be paid.

[29]     The fact that the company now trades under another name will not affect that outcome.   Also the evidence is the new company is solvent.   The liquidation proceeding is unnecessarily pre-emptive.

Judgment

[30]     The proceeding is dismissed.

[31]     The plaintiff shall pay the company’s costs calculated on a 2B basis together

with disbursements approved by the Registrar.

Associate Judge Christiansen