F E Geiringer for Appellant in CA366/2013 and CA717/2013 and Second Appellant in CA367/2013
P G Skelton QC and A Borchardt for First Appellant in CA367/2013
J A Farmer QC, M D O’Brien and S M Consedine for First, Second, Seventh and Eighth Respondents
J F Anderson for Third, Fourth, Fifth and Sixth Respondents
Judgment:
24 June 2014 at 11.00 am
INTERIM JUDGMENT OF THE COURT
AThe form of relief in relation to orders 1 and 3 is reserved for further argument. A short timetable will be fixed by minute accompanying this judgment. Leave is reserved to apply. The appeals in CA366/2013, CA367/2013 and CA717/2013 are otherwise dismissed.
BThe cross-appeals in CA366/2013, having been abandoned, are formally dismissed.
INTRODUCTION 1] THE ISSUES25] CLAIMS UNDER THE SHAREHOLDER AGREEMENT Event of Default: the Methanex disclosure
The facts The shareholder agreement The High Court’s conclusions
Assessment
Deadlock: the unresolved Board resolution
The facts The deadlock provision The High Court’s conclusions
Assessment
QUESTIONS OF BEHAVIOUR Was Mr Sturgess responsible for managing all of Greymouth’s
operations?
The High Court conclusions
Assessment
Midhurst
The High Court findings
Assessment
Radnor
The High Court findings
Assessment
Other allegations of misconduct
Clarencia
Waimanu
Brotula
Turangi
Findings of misconduct not appealed Was the conduct of Mr Sturgess oppressive, unfairly discriminatory or unfairly prejudicial?
RELIEF Winding up Relief under s 174(2) Relief in this case Was it appropriate to grant relief that extended to Jet? Was the sale of Group 2 shares appropriate? Process for addressing the orders for sale
Decision
Costs
INTRODUCTION
Mark Dunphy, Peter Masfen and John Sturgess founded Greymouth Petroleum Holdings Ltd (Greymouth) in 2002 as the vehicle for a joint venture. They come to law because they have fallen out, with Mr Sturgess on one side and Messrs Dunphy and Masfen on the other, and the co-operation that the venture requires is now beyond them.
The three men are associated with Greymouth’s three shareholding groups; the Dunphy or Group 1 interests…
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
Sturgess v Dunphy [2014] NZCA 266
Case
[2014] NZCA 266
Decision Date
CaseChat Overview and Summary
The Court of Appeal heard an appeal concerning the shareholder agreement of Greymouth Petroleum Holdings Ltd, a successful petroleum exploration and production company. The appeal centred on the terms under which the Sturgess interests would sell their shares. The central question was not whether, but on what terms the Sturgess interests would sell their shares; to whom, subject to which conditions, and at what price. The three shareholders, Mark Dunphy, Peter Masfen, and John Sturgess, were associated with Greymouth's three shareholding groups and were also the directors of the company. The shareholder agreement obliged shareholders to use reasonable endeavours to see that their directors took all reasonable steps to honour certain provisions of the agreement, including those dealing with decisions vested in the Board. The agreement generally vested governance in the Board, whose decisions must be unanimous. Should a resolution submitted to the Board by a director not be resolved within 90 working days, any shareholder may require that all the shares in the company be sold to a third party. Should a shareholder commit an event of default under the shareholder agreement, then fail to remedy the default on notice, the others may require that the defaulter transfer its shares to them at fair market value. The Court found that Mr Sturgess had failed to report to Mr Dunphy and the Board, had conducted operations without approval and sometimes negligently, and had committed the company to unauthorised capital expenditure. The Court found that the suspension and later termination of the JSAL management services contract unlawful and ordered that arrears of management fees be paid, but also held that Mr Sturgess had behaved oppressively and that the Group 1 and 3 shareholders should have relief under s 174. The Court found the Board was dysfunctional, a result of Mr Sturgess's behaviour, and would likely remain so; further, the Group 2 shareholders had said they were willing to sell provided they got fair market value. The Court decided that it was appropriate to order sale of the Group 2 shares. The Court dismissed the appeal and the cross-appeals, and reserved leave to apply and costs.