Strachan v Denbigh Property Limited HC Palmerston North CIV-2010-454-232

[2011] NZHC 2404

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2010-454-232

IN THE MATTER OF     the Companies Act 1993

BETWEEN  ELIZABETH GRACE STRACHAN Plaintiff

ANDDENBIGH PROPERTY LIMITED Defendant

Hearing:         3 December 2010

Appearances: P.B. Churchman - Counsel for Plaintiff

R.A. Moodie - for himself and Mrs SP Moodie as Trustees of the
Moodie Family Trust
No appearance - defendant company

Judgment:      17 December 2010 at 3.00 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment is delivered by Associate Judge Gendall on 17 December 2010 at 3.00 pm under r 11.5 of the High Court Rules.

Solicitors:           Rainey Collins, Solicitors, PO Box 689, Wellington

Moodie & Co, Solicitors, PO Box 376, Feilding 4740

EG STRACHAN V DENBIGH PROPERTY LIMITED HC PMN CIV-2010-454-232  17 December 2010

Introduction

[1]      This proceeding involves an application by the plaintiff, Elizabeth Grace Strachan  (“Ms  Strachan”)  for  an  order  that  the  defendant  company,  Denbigh Property Limited (“the Company”) be placed into liquidation in terms of s 241(4)(d) Companies Act 1993 relying on the just and equitable ground outlined in that provision.

[2]      The shareholders in the Company are Ms Strachan as to a 50% interest and Robert Alexander Moodie (“Mr Moodie”) and Suzanne Patricia Moodie (“Mrs Moodie”) jointly as trustees of the Moodie Family Trust (“Moodie Trust”) as to the other 50% interest.

[3]      Before the Court are two applications:

(a)The  application  of  Ms  Strachan  seeking  an  order  to  place  the Company into liquidation – this application is opposed by Mr and Mrs Moodie as trustees of the Moodie Trust and 50% shareholders in the Company.

(b)An application by Mr and Mrs Moodie seeking an order for security for costs on the liquidation application against Ms Strachan – that application is opposed by Ms Strachan.

[4]      This proceeding was the subject of an earlier application by Mrs Moodie to stay the liquidation application and restrain advertising.   That application was dismissed in a judgment I gave on 25 August 2010.

[5]      Since that time, Ms Strachan has completed advertising of the liquidation application, this occurring on 16 September 2010.  Earlier, the proceeding had been served on the Company.   There has been no opposition or defence filed by the Company.

Preliminary Matter

[6]      As a preliminary matter, at the commencement of the hearing of the two applications before me on 2 December 2010, I raised with counsel the issue of which of the two applications before the Court should be heard first (and thus determining which party would commence) given that I was assuming the security for costs application brought by Mr and Mrs Moodie would be dealt with first.

[7]      Mr Moodie, who appeared at the hearing for himself, his wife Mrs Moodie and the Moodie Trust, indicated that Ms Strachan’s liquidation application should proceed first with Mr Churchman for Ms Strachan leading off for the plaintiff, and that he had assumed throughout that this was to occur.

[8]      Mr Churchman had no objection to that course and thus the Court heard first the liquidation application against the Company.

Background Facts

[9]      The general background facts in this matter initially were set out at paras 3-

14 of my 25 August 2010 judgment (noted at [4] above) dismissing the application by Mrs Moodie to stay the liquidation application. It is useful to repeat those background facts now, which I now do in this judgment at paras [10]-[20] below.

[10]     As I have noted, the company has two equal shareholders: (a)           Ms Strachan as to a 50% interest;

(b)       Mr Moodie and Mrs Moodie jointly as trustees of the Moodie Family

Trust – as to the other 50% interest, and two directors, Ms Strachan and Mr Moodie.

[11]     The only asset of the company excluding its bank account would appear to be a property located at 2B Denbigh Square, Feilding (“the property”).  This property was purchased in September 2005 for $195,000.00 and the purchase price was made available to the company by equal contributions from the 50% shareholders.   It

appears that certain alterations and repairs to the property were subsequently carried out again with funds provided by the shareholders.

[12]     Ms Strachan maintains based on calculations which, as I understand it, have been  undertaken  by  the  Moodies,  that  her  share  of  the  contribution  to  these additional property repairs and alterations totals some $27,254.89.

[13]     Some time after their purchase in 2005 a significant portion of the premises on the property were leased by the company to Moodie & Co, a law firm of which Mr Moodie is the principal.  (At the time Ms Strachan worked as an “Associate” for or with Moodie & Co, but on some basis that the parties have been unable to agree upon since.)  A Deed of Lease was prepared, signed and witnessed around the time of the purchase.  This document, although incomplete, appears to show that part of the premises including two car parks were leased to Moodie & Co (Mr Moodie) for a term  which  probably  commenced  on  20  October  2005  at  an  annual  rental  of

$30,000.00 per annum plus GST.  This rental was to be paid monthly in advance by payments stipulated in the lease of $2,500.00 per month for rent plus $278.00 for GST.   These monthly rent payments were stipulated to commence on 20 October

2005 and made monthly thereafter.

[14]     The Deed of Lease document, however, did not provide for a term of the lease, any rights of renewal, a final expiry date, or insurance or outgoings details.

[15]     Nevertheless, Mr Moodie, through his firm Moodie & Co appeared to occupy that part of the premises from some time after October 2005 up to the present time. Whether or not rent was paid for all this period appears to be a matter of some dispute.  There is a suggestion that at one point a variation of the lease arrangement was entered into whereby Moodie & Co would cease to pay rental for its share of the premises during a period when Ms Strachan occupied rent-free another portion of the premises as a residential flat.  This arrangement, however, appeared to come to an end sometime in late 2007 or early 2008.

[16]     Towards the end of 2009 or early in 2010 it appears that Mr Moodie without reference to Ms Strachan arranged a tenancy for the company of that portion of the

premises which were not occupied by his firm Moodie & Co.  This tenancy is with

Live Properties Limited, a real estate agency.

[17]     That  Live  Properties  Limited  tenancy  commenced  early  in  2010  and continues to run but it appears that the rental which has been paid since then by the tenant has not been deposited into the company bank account.   Rather, in his submissions before me, Mr Moodie indicated that he had arranged a separate bank account under his control in the name of “Denbigh Property” into which this rent has been  paid.    He  indicated  this  was  because  the  company’s  bank  account  had effectively  become  “frozen”  due  to  the  dispute  between  Ms  Strachan  and  the Moodies.

[18]     Two additional matters need to be mentioned at this point.  The first is that in

2009 Ms Strachan brought a claim in the Employment Court against Moodie & Co and/or their various entities.  That proceeding was the subject of a lengthy hearing at the Employment Court which finished in May 2010 with the decision of that Court reserved.  The decision is apparently still awaited.

[19]     Secondly, Mr Moodie has brought a claim in this Court against Ms Strachan and others in defamation, these proceedings being filed in 2007.   A substantive hearing of these defamation proceedings is yet to take place.

[20]     Finally,  Ms  Strachan  complains  that  in  her  words  the  Moodies  have evidenced an intention to bring further civil or criminal claims against her and/or to make further complaints about her to the New Zealand Law Society.   All this emanates from a relationship which Ms Strachan formed with the Moodies from about 2005 when the property was purchased and Ms Strachan worked as a lawyer in some form as either an employee, an “Associate” or otherwise with Moodie & Co up to about December 2006.  There seems to be little doubt that this relationship ended in acrimony.

[21]     Some additional and alternative matters emerged at the hearing of this matter before me on 2 December 2010, however, and it is important at this point to refer

specifically to one aspect of these.  This relates to the “lease” of the premises to Mr

Moodie’s legal practice, Moodie & Co noted at paras [13] and [14] above.

[22]     So far as this “lease” to Moodie & Co is concerned, before me, and in his recent 15 November 2010 affidavit filed in this proceeding, Mr Moodie contended that no such lease had been entered into.  Instead he claimed that at some time after the Company was formed, Ms Strachan placed before him for signature a standard printed commercial premises lease form with the operative details left blank.  He did not explain why this had occurred but went on to say that he had simply signed this form in blank and later, without his authority Ms Strachan had completed certain details in the document.  These were to purportedly provide for commencement of a lease  of  the  entire  property  from  about  20  October  2005  at  an  annual  rent  of

$30,000.00 p.a. plus GST with monthly rental payments in advance of $2,500.00 plus GST.  The tenant in the document was described as “Moodie & Co” alongside Mr Moodie’s first signature, and the landlord described as “Denbigh Property Trust” which was presumably meant to be “Denbigh Property Limited”, the company here. Mr Moodie’s second signature on the document appeared alongside the description of landlord.

[23]     Ms  Strachan  in  her  evidence  takes  issue  with  the  detail  of  these  events suggested by Mr Moodie and maintains that the “lease” was a valid document, properly signed at the time to record the agreed terms of Moodie & Co’s lease of the premises  from  the  company.     Notwithstanding  all  of  this,  what  does  appear undisputed  however,  is  that  Mr  Moodie’s  legal  practice,  Moodie  &  Co  did commence occupying the premises on some basis after the property was purchased and still remains there now.   At present, it seems Moodie & Co occupies only between one-third and one-half of the building on the property.

[24]     So far as the suggested leasing arrangements for the premises are concerned, there is some independent evidence before the Court as to the possible original intentions of the parties.  This is provided by Mr Moodie as Annexure “RM55” to his 15 November 2010 affidavit.   It takes the form of a copy brief of evidence of Stuart Ian Atkins (“Mr Atkins”) in a personal action between Ms Strachan and Mr Moodie before the Employment Court.   It includes an affidavit sworn 19 January

2007.  Mr Atkins has been the accountant to Mr and Mrs Moodie, Moodie & Co and the Company for some time.  He notes specifically issues concerning the proposed lease at para [8] of his affidavit and states:

7.        I agreed to attend a meeting at the Moodie & Co offices, 2B Denbigh Square, Feilding on 4 April 2006 to discuss with both Ms Strachan and Miss Alice (Mr Moodie) what their arrangements regarding finances were. My appointment was for 10.00 so I also bought morning tea with me.

8.At this meeting I discussed several things with Ms Strachan and Miss Alice.    I  discussed  with  both  Ms  Strachan and  Ms  Alice  their  50-50 partnership agreement.   It was perfectly evident to me that there was a verbal agreement in place for a partnership of 50-50 in relation to RA & SP Moodie Ltd Trading as Moodie & Co.  I am not sure when this agreement was first entered into but it was obvious that this partnership had existed from at least the 1st April 2006. I also instructed Ms Strachan and Ms Alice to arrange for a lease to be drawn up between RA & SP Moodie Ltd Trading as Moodie & Co and Denbigh Property Ltd.   I suggested that monthly rental payments SHOULD be made from RA & SP Moodie Ltd trading as Moodie & Co to Denbigh Property Ltd.

[25]     In addition, before the Court are annual financial accounts prepared for the

Company by Mr Atkins for the years ending 31 March 2006, 31 March 2007, 31

March 2008 and 31 March 2009.

[26]     These accounts for the Company perhaps somewhat suprisingly show the only gross rentals received for these particular years as:

(1)      Year to 31 March 2006 – Total rentals received                   $5,633.00 (2)      Year to 31 March 2007 – Total rentals received                   $2,802.00 (3)      Year to 31 March 2008 – Total rentals received                   $1,600.00 (4)      Year to 31 March 2009 – Total rentals received                   $Nil

These  financial  accounts,  and  particularly  those  for  the  later   years,  would presumably have been prepared by Mr Atkins at the instruction of and with information provided solely by Mr Moodie as a director of the company.  And, at the hearing on  3 December 2010, Mr Moodie raised no issue with regard to these accounts.

Counsel’s Arguments and My Decision

[27]   Turning now to Ms Strachan’s application to place the Company into liquidation, this application is brought under the “just and equitable” ground for liquidating a company under s. 241(4)(d) of the Companies Act 1993.   Brookers Company & Securities Law at para. CA241.03(4) addresses this ground and provides

(in part):

“(4)     Just and Equitable Grounds

Section 241(4)(d) empowers the Court to appoint a liquidator on just and equitable grounds. Ebrahimi v Westbourne Galleries Ltd [1973] AC 360; [1972] 2 All ER 492 (HL) established influential guidelines. Lord Wilberforce emphasised that the Court should not be too timorous in giving full force to the words of the provision. His Lordship commented (at p 379; p 500) that a company is more than a legal entity and that the rights, expectations, and obligations of individuals within the company should be recognised:

“The  ‘just  and  equitable’  provision  does  not  …  entitle  one  party  to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.”

In Jenkins v Supscaf Ltd 26/4/06, Heath J, HC Auckland CIV-2005-404-

5222, Heath J conducted a review of case law relevant to the application of s 241(4)(d) (in the context of a small joint venture company where one party had lost trust and confidence in the other) and held that s 241(4)(d) places no fetter upon the discretion of the Court, either in relation to the factors justifying an order, or in relation to the circumstances where an order must be refused. The Court proceeded on the basis that it  must balance all relevant factors available for consideration at the time the order was sought.

A party who wishes to rely on the “just and equitable” provision must come to Court with clean hands. Thus, if the breakdown in trust or the deadlock is caused by the conduct of the petitioner, he or she will not be able to rely on s 241(4)(d). In Vujnovich v Vujnovich [1989] 3 NZLR 513; (1989) 4

NZCLC 65,186 (PC), Lord Oliver pointed out that this rule applied where the misconduct was the cause of the breakdown in confidence and not merely where it is a symptom of the breakdown. Where there is no clear cut apportionment of blame, the real determinant for granting relief should be the existence of the breakdown, not the cause of it: Re Rongo-ma-tane Farms Ltd (1987) 3 NZCLC 100,145.

In the past, if the Courts believed a remedy other than liquidation was reasonably available to the applicants, it would decline to order liquidation: s 220(2) unamended 1955 Act; Re Gerard Nouvelle Cuisine Ltd (1981) 1

NZCLC 95,016. Although this is no longer a requirement under the Act, it is likely that the Courts will regard the question of whether the applicants are acting unreasonably in seeking liquidation rather than another remedy, as a factor in evaluating whether liquidation would be just and equitable. In Cornes v Taylor (t/a Kawerau Hotel (1994) Ltd) (1999) 8 NZCLC 261,815, the  Court  held  that  neither  justice  nor  equity  to  the  plaintiff required

liquidation  of  the  defendant  company  while  his  position  could  be

satisfactorily protected by the making of orders under s 174. The more recent case of The Orthodontic Centre Ltd v M D Courtney Orthodontics Ltd 14/9/07, Gendall J, HC Palmerston North CIV-2006-454-238; CIV-

2006-454-365; CIV-2007-454-419, came  to  the  same  result.  Gendall  J

quoted the observations of Regan J in Marryatt v PC Home Hire Ltd [2002]

9 NZCLC 263,033 with approval: “[A]n order for the liquidation of a company [on just and equitable grounds] is seen as something of a last resort and if it is more appropriate that an order under s 174 requiring the purchase of shares because it is just and equitable to do so, then it is to be preferred.”

[28]     There is no fetter upon the Court’s discretion when considering applications under s. 241(4)(d) of the Act in relation to the factors justifying an order for liquidation – Jenkins v Subscaf Limited.  Orders for liquidation under this “just and equitable” ground have been made in cases where a serious deadlock has arisen between  directors  and  shareholders  of  a  company.    A  breakdown  in  personal relations between those parties has also been seen to justify the making of a liquidation order – Re Gerard Nouvelle Cuisine Limited and Re Rongo-ma-Tane Farms Limited.

[29]     Deadlocks may also arise when the principal shareholders of a company are not able to work together in any way for the benefit of the Company – Jaycue Investments Limited (in liquidation) v J Fox Developments Limited, 2 April 1996, High Court Auckland, Tompkins J, M952/95.

[30]     Similarly, in circumstances where there is a justifiable loss of confidence in the conduct and management of a company, the Court may find that it is just and equitable to appoint a liquidator – Morgan Roche Limited v Registrar of Companies [1987] 3NZCLC 100,189.

[31]     In the present case there is really no argument between the parties here that the relationship between Ms Strachan and the Moodies as shareholders and directors of the Company has broken down in a major way.  What is essentially a complete collapse in their personal relationship, coupled with the deadlock between them and increasing dysfunction in their commercial relationship, has meant that they have also fallen out totally.

[32]     In dealing with these aspects, in my earlier 25 August 2010 judgment in this proceeding dismissing Mrs Moodie’s application to stay the liquidation, I noted at paras [26] and [27]:

[26]Turning now to the substantive claim before the Court, at the outset I need to say that on its face the evidence which is currently before me would appear to show that a serious deadlock has arisen between the directors and shareholders of the company, that the relationship between the shareholders has  totally collapsed and it  would be quite unrealistic to  advance any argument for a continuing business involvement between the parties. There is also some suggestion in my view reasonably made here, that the manner in which the company and its directors have transacted its business since

2005, on  further  enquiry,  may prove  to  be  somewhat contentious and require further investigation.

[27]     I say this bearing in mind the following matters relating to the breakdown in the relationship between the shareholders:

(a)       The outstanding and obviously acrimonious claim noted at para [18] above brought in the Employment Court by Ms Strachan against  Moodie  &  Co  which  concluded  in  May  2010  and  a decision on which is still awaited.

(b)        The  defamation  action  brought  by  Mr  Moodie  against  Ms

Strachan in this Court in 2007 noted at para [19] above.

(c)        The numerous and detailed accusations on both sides in the many affidavits filed in this and other proceedings relating to allegations bordering on dishonesty, fraud, theft and the like, made by one party against the other.

(d)The fact, as I understand it, that at least one formal complaint has been made to the Police by one party here against the actions of the other.

Although  these  ultimately  will  be  matters  for  a  full  hearing  of  Ms Strachan’s liquidation application, on their face it would seem that the significant degree of trust which existed between the parties when the company was formed, the property was purchased and they commenced their relationship as part of what was essentially a form of joint venture arrangement,   would   appear   to   have   gone   completely  now.      This relationship would seem to be the subject of a complete and irretrievable breakdown.

[33]     Since  the  time  of  the  hearing  which  resulted  in  that  25  August  2010 judgment, the dispute between the parties has certainly not eased in any way.   If anything, it has deepened.  Huge amounts of additional “evidence” have been filed in the present proceeding, especially by Mr Moodie.  (On 16 November 2010 he filed a

56 page, 193 paragraph affidavit he had sworn on 15 November 2010, together with

3 large bound volumes alone annexing a total of 93 exhibit documents).

[34]     It is quite apparent from all the material before the Court that the situation between Ms Strachan and the Moodies has become acrimonious in the extreme.  This has meant the Company is simply not functioning or able to properly function.  It’s bank account is effectively frozen, no directors’ meetings have been held and directors’ decisions are unable to be taken, leasing and premises matters are virtually in abeyance and at this point, the parties as directors and shareholders appear to disagree on almost everything.  One thing, however, on which the parties do seem to agree on is that they all seem to accept that something must be done with the Company now, as this situation cannot be allowed to continue.

[35]  This proceeding involves the Company, its position and its future. Notwithstanding this, the proceedings before me reflect what has become for some time nasty squabbling between the individual shareholder parties.

[36]     The time is long overdue for this nasty squabbling to come to an end.  Ms Strachan and Mr Moodie are both barristers and solicitors and as such are officers of this Court.  It goes without saying that their behaviour in all matters before the Court should reflect this.

[37]     What they may do with respect to the various personal fights which have developed between them (in particular the Employment Court proceeding and the defamation proceedings before this Court) are matters for them.   Before me is the application to liquidate the Company and my focus here must be the Company, its position and what the interests of justice require by way of a future for that company and its owners.

[38]     This brings me to consider the issue of the Company’s financial position. Essentially,  its  principal  asset  is  the property in  Feilding which  is  occupied  by Moodie & Co, Mr Moodie’s legal practice as his premises together with an adjacent tenant the real estate firm, Live Properties Limited.  That other tenancy was arranged

in  January 2010  by Mr  Moodie  himself,  it  is alleged,  without  reference  to  Ms

Strachan his co-director.

[39]     Critical issues for the company involve questions as to what are the terms of these two tenancies.  Given that they are leases of what is really the company’s only asset, it is fundamentally important to the Company and its interests as to what those terms may be.  What rent and outgoings are to be paid?  What is the term and tenure of each tenancy?  These are all critical matters and may go to issues as to the value of the property and the ability of the Company to deal with or sell the building.

[40] As I have noted at [13] above, on file is what appears to be a “lease” signed by Mr Moodie for Moodie & Co taking a lease of the entire property for an unspecified term from October 2007 at a monthly rental of $2,500.00.

[41] I have said at [22] above that Mr Moodie contests that he signed any lease, argues that this document was signed in blank, with details completed later without his consent or authority by Ms Strachan, and takes the position that no such lease actually exists.

[42] Notwithstanding this, as I have noted at [26] above the accounts show the Company has received certain (modest and reducing) rental payments, presumably from Moodie & Co. These accounts must raise concerns because, notwithstanding that the property has been occupied (in whole or in part by Moodie & Co) throughout; and latterly by another tenant, gross rental income is shown as reducing from $5,633.00 in the 2005/06 year to nil in the 2008/09 year.

[43]     There  was  an  issue  between  the  Moodies  and  Ms  Strachan  that  as shareholders, they agreed that for a time they would occupy equal portions of the premises and would pay no rent but as I understand it, that arrangement lasted only for about 18 months and ended in late 2007.  Those, of course, are decisions which impact upon the Company, leaving aside any other issues regarding taxation, GST and the like.

[44]     And, in any event, in the years ending 31 March 2008 and 31 March 2009 by when Ms Strachan had departed the scene, very little by way of rent appears to have been paid to the Company according to its annual accounts.  With the directors and shareholders at loggerheads over most of this period, presumably decisions for the Company were taken by Mr Moodie and perhaps not engaging as a director but instead wearing his Moodie & Co legal practice cap.

[45]     These issues in my view at the very least require some enquiry, investigation and resolution.  At one level they might be seen as providing another reason why an independent liquidator should be appointed here.

[46]     In opposing the present application, the grounds advanced by Mr and Mrs

Moodie are essentially twofold:

(a)In wishing to rely on the just and equitable ground for liquidation Ms Strachan is required to come to the Court with “clean hands” and this has not occurred.  The Moodies contend that the breakdown in trust and the deadlock caused here between the parties has resulted from Ms Strachan’s own conduct alone and therefore she is unable to rely on s 241(4)(d) in seeking a liquidation order.

(b)A remedy other than liquidation is appropriate here and is reasonably available to the parties.   On this, the Moodies argue that alternative and satisfactory orders can be made under s 174 Companies Act 1993 in particular bearing in mind that Mr Moodie maintains the shareholders  had  an  arrangement  whereby,  if  either  wished  to withdraw from the Company, they would first offer their shares for sale to the continuing party.

[47]     Before addressing these grounds of opposition here, it is useful to record at this point that it is absolutely clear to me in this case that a serious deadlock has arisen between the directors and shareholders of the Company and the relationship between the shareholders has totally collapsed.   In addition, all parties appear to

accept here that it would be quite unrealistic for Ms Strachan and the Moodies to continue any business involvement or relationship together in the future.

Cause of the Breakdown or Deadlock

[48]     That said, I turn to address the argument advanced by Mr and Mrs Moodie that the reason for this breakdown and deadlock has been misconduct on the part of Ms Strachan which disentitles her to a liquidation order under s 241(4)(d).

[49] On this Mr Moodie has presented to the Court large volumes of material for consideration here, much of which I find to be irrelevant. Mr Moodie appears to lay the blame for the state of affairs which has developed between the parties solely upon the plaintiff. In particular, amongst other claims he makes, he describes her as having a “psychopathic personality”, and to be a “false pretender”, a “liar, thief and forger” and to have engaged in criminal behaviour. As I have noted at [33] above, the latest affidavit of Mr Moodie filed in this matter dated 15 November 2010 alone runs to some 56 pages with 3 spiral bound folders containing 93 exhibits.

[50]     Many of the issues raised in this affidavit alone, and dealt with in the annexed documents, relate to the Employment Court dispute between Mr Moodie and Ms Strachan personally and the defamation proceedings in this Court.  In many instances their relevance escapes me.

[51]     Before me at the hearing on 2 December 2010 Mr Moodie required Ms Strachan for cross-examination.  She was then cross-examined for some time.  At the outset  I need  to  say that  during  this  cross-examination,  I found  Ms  Strachan’s evidence  to  be  clear  and  direct  and  that  she  straight-forwardly  answered  the questions put to her.   In her cross-examination, and in her earlier affidavit/s, Ms Strachan denied virtually every allegation of wrong-doing on her part put to her by Mr Moodie.  My general conclusion from these impressions and her evidence is that Ms Strachan was a reliable witness, notwithstanding the clear emotions which were involved throughout this matter.

[52]     It is difficult, if not impossible, on the voluminous material before the Court to isolate the origins of the breakdown in the relationship between Ms Strachan and the Moodies here.  Suffice to say that, the fact that parties who acknowledge they were friends at the outset have now parted company, in large measure has brought about the difficulties which they are experiencing.

[53]     What  is  clear  to  me  from  everything  which  is  before  the  Court  is  that throughout, there have been a range of allegations and counter-allegations made by Mr and Mrs Moodie against Ms Strachan and by Ms Strachan against the Moodies. The real truth of all matters is somewhat unclear.   As I have noted, these parties, once friends, have sadly fallen out in a major way, and responsibility for individual events which may have occurred along their shared path, if indeed this is relevant in any event, may well rest at least in part in each camp.

[54]     That said, I conclude that it is simply impossible to find here, as Mr Moodie urged upon me, that there can be a clear-cut apportionment of blame for the breakdown such that Ms Strachan is disentitled to bring the present application.

[55] Turning again to the authorities in this area, as I note at [29] above, it is clear they require that the breakdown in trust or the deadlock must be caused by the conduct of the applicant for a liquidation order (Vujnovich v Vujnovich [1989] 3

NZLR  513  (PC))  rather  than  that  conduct  merely  being  a  symptom  of  the breakdown.  Similarly where there is no clear-cut apportionment of blame, the Court has accepted the real determinant for granting relief to the parties by concluding a liquidation order should be the existence of the breakdown not the cause of it – see Re Rongo-Ma-Tane Farms Limited [1987] 3 NZCLC 100,145.

[56]     For the reasons I have outlined above, I reject the argument advanced for Mr and Mrs Moodie here that it is disentitling mis-conduct on the part of Ms Strachan which was the cause of the breakdown between the parties and thus, not having clean hands, Ms Strachan cannot obtain a liquidation order under the just and equitable ground.

Other Remedy Reasonably Available

[57]     As I have noted at para [27] above, an order for liquidation on just and equitable grounds is to be seen as something of a last resort.  If another remedy such as an order under s 174 Companies Act 1993 requiring the purchase of shares is appropriate and available, this is to be preferred.

[58]     Before me Mr Moodie argued strongly that this is a situation where such an alternative remedy should be ordered, given particularly that here, the Company is entirely solvent and also that it is the owner of premises occupied for some time by his legal practice, Moodie & Co.

[59]     Section 174(2) of the Act sets out possible alternative remedies in that case for a prejudiced shareholder’s application.   Under that section which, by analogy, can be considered here:

(2)       If, on an application under this section, the Court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order –

(a)        Requiring  the  company  or  any  other  person  to  acquire  the shareholder’s shares; or

(b)        Requiring the company or any other person to pay compensation to a person; or

(c)         Regulating the future conduct of the company’s affairs; or

(d)        Altering or adding to the company’s constitution; or

(e)         Appointing a receiver of the company; or

(f)         Directing the rectification of the records of the company; or

(g)         Putting the company into liquidation; or

(h)        Setting aside action taken by the company or the board in breach of this Act or the constitution of the company.”

[60]     In my clear view, in this case, under the bitter, acrimonious and uncertain circumstances of the Company and the parties prevailing here, a requirement for one party to acquire the other parties’ shares under s.174(2)(a) Companies Act 1993 is simply not a realistic possibility as an alternative remedy.

[61]     In addition, it is clear from the evidence before the Court that over the last two or three years there have been numerous attempts by the parties to resolve their impasse by one party making a purchase of the other party’s shares.    The many

purchase offers both ways have not been successful.  As I understand it, they have foundered on issues concerning valuations of the shares, monies owing or owed by each party to the Company, and perhaps also the growing personal animosity each party felt for the other.

[62]     Given  those  factors  and  the  level  to  which  the  relationship  between  the parties  has  sunk  (defamation  proceedings  brought  by  Mr  Moodie  against  Ms Strachan are still extant in this Court for example) the introduction of an independent third party to ultimately sell the assets of the Company and to provide a judicious untangling of the Company’s affairs in my view would seem highly desirable here.

[63]     For these reasons I also reject the argument advanced by Mr Moodie that an alternative s 174(2) Companies Act 1993 remedy other than liquidation should be ordered here.

[64]     Lastly, an important factor in this case which I have signalled earlier and which supports the appointment of an independent liquidator, is the real need as I see it for  a  thorough  and  independent  investigation  of  the Company’s  affairs  to  be undertaken.     Issues  regarding  the  leases  of  the  property,  the  payment  and whereabouts of rent due to the Company, the moneys spent on premises repairs and improvements, and accounting and taxation issues need to be explored and some finality achieved.

[65]     For all these reasons, I conclude that, although an order for liquidation must always be seen as something of a last resort, particularly where just and equitable grounds are advanced, this case is one like Jenkins v Subscaf which requires an order for liquidation to be made.   This is because of the catastrophic and ongoing breakdown in the relationship between the shareholders and directors which has lead to a complete impasse in the proper operation of the Company, in a situation where I am satisfied no other realistic remedy is possible.

[66]     Ms  Strachan’s  liquidation  application  has  succeeded.     She  seeks  the appointment of Barry Phillip Jordan and David Stuart Vance as liquidators.  No issue

is raised by Mr and Mrs Moodie as to the identity of the liquidators.   Orders are therefore to follow.

[67]     This effectively disposes of the current proceeding.  The second application noted at para [3] above, that by Mr and Mrs Moodie for security for costs, on which I note that the parties made little by way of submission to me at the hearing on 3

December 2010, effectively falls away.  That application is dismissed.

Orders

[68]     An order is now made placing the defendant company Denbigh Property

Limited into liquidation.

[69]     Barry Philip Jordan and David Stuart Vance are appointed liquidators.

[70]     An  order  is  made  approving  the  rates  of  liquidators  remuneration  in accordance with the affidavit of David Stuart Vance filed herein dated 12 August

2010 subject to s 284 Companies Act 1993.

[71]     Costs are reserved.  In the absence of agreement between the parties on the costs issue they may be the subject of memoranda filed sequentially which are to be referred to me and I will make a decision on costs based on the material then before the Court.

[72]     This order is timed at 3.00 pm today, 17 December 2010.

Post Script

[73]     Without in any way wishing to circumscribe the actions or powers of the liquidators appointed in this judgment, nevertheless I wish to add one brief comment for their consideration regarding this whole sorry affair for the Company.   This is simply a suggestion that in carrying out their powers as liquidators for the Company, they may wish to consider allowing a short period of time for the arranging of a market value sale of the Company’s Feilding property to the Moodie interests if this may prove to be at all possible.   This is because first, the Feilding premises are

occupied by Mr Moodie’s legal practice, Moodie & Co and have been for some time and that firm presumably may well have much to lose if they are required to vacate, and secondly, this is clearly a solvent liquidation.  If such sale cannot be fairly and properly arranged without delay then of course the liquidators would need to take the next appropriate steps.

‘Associate Judge D.I. Gendall’