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Sykes v Sykes

Sykes v Sykes

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IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV 2018-463-0120

[2019] NZHC 2636

BETWEEN
ROBERT BRADLEY SYKES

Plaintiff

AND

DAVID WALTER BRADLEY SYKES

Defendant

Hearing: 14 October 2019 (Heard at Hamilton)

Appearances:

K G Davenport QC and EID Fox for the plaintiff

S L Robertson QC and A J Harris for the defendant

Date of Judgment:

16 October 2019

Reissued:

22 October 2019

JUDGMENT OF JAGOSE J

Solicitors/Counsel:
Kathryn Davenport QC, Auckland Anderson Creagh Lai Limited, Auckland Suzanne Robertson QC, Auckland Gifford Devine, Waipawa

SYKES v SYKES [2019] NZHC 2636 [16 October 2019]

[1] The plaintiff, Robert Sykes, claims the defendant – Robert’s uncle, David Sykes – holds all the shares in Orchard Investments Limited (the “Company”) on express or constructive trust for him (and, possibly, his brothers). Robert worked as the Company’s operations manager until recently.1 That work is contended to provide an alternative basis for fixing a constructive trust over some lesser proportion of the shares. Trial of his claim for such declarations and ancillary relief is set down for February 2020.

[2] David denies he holds the shares on trust, or such had ever been put to him before receipt of Robert’s solicitors’ letter dated 31 July 2018, but says he acquired them in 1999 in his own right (albeit to advance his deceased brother’s family interests). The Company’s financial circumstances may require sale of its shares or business if it is to avoid insolvency before the end of this year. David’s counsel, Suzanne Robertson QC, provides his undertaking David will “hold half of the net proceeds of sale (after repayment of all shareholder loans and external debt) pending the outcome” of this proceeding (although that does not address Robert’s claim to beneficial interest in the Company).

[3] For my determination is Robert’s application for an interlocutory injunction, comprehensively to prevent David from dealing “in any manner whatsoever” with his shares pending trial.

Background

[4] In continuation of their family tradition, Robert and his brothers, Kevin and Gregory, operated an apple orchard and packhouse business in the Hawkes Bay as Sykes Packhouse Limited. Financial difficulties in the late 1990s led to sale of much of that company’s assets and ultimately to its liquidation. The rump of the company’s unsecured assets was acquired by the Company, originally a shelf company held by

1 Robert’s affidavit describes himself as the Company’s “founder”. I am unsure of the intended meaning of that term, but – with the exception of holding office as director for some 10 months until April 2018 – there is no evidence Robert held any other formal role in the Company’s structure. If he means ‘promoter’ – a person taking an active part in bringing a company into existence: Jubilee Cotton Mills Ltd v Lewis [1924] AC 958 (HL); and having a fiduciary obligation to it so as may be compelled to return secret profits: Gluckstein v Barnes [1900] AC 240 (HL) – there is no evidence…

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 2636
Decision Date: 16 October 2019

CaseChat Overview and Summary

In Sykes v Sykes, Robert Bradley Sykes sought an interlocutory injunction to prevent David Walter Bradley Sykes from dealing with his shares in Orchard Investments Limited. Robert claimed that David held the shares on express or constructive trust for him and his brothers. The case was heard in the High Court of New Zealand Rotorua Registry. The central legal issue was whether Robert had a serious question for trial and whether the balance of convenience and overall interests of justice favoured granting the injunction. The court found that while Robert had a real prospect of succeeding at trial, the balance of convenience and overall justice favoured refusing the injunction. The court highlighted the risk of the company's liquidation due to the financial difficulties it faced, which would result in irreparable damage that damages could not adequately compensate. Additionally, the court considered David's substantial financial support for the company and the lack of pressing need for the sale of the company's shares. The court also noted the late emergence of the trust claim and the disavowal of the proceeding by Robert's brothers, which influenced the decision against granting the injunction. The application was ultimately dismissed, and David was awarded costs.

Orders