Szekely v North - [2018] NZCA 227

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA249/2017
[2018] NZCA 227

BETWEEN	JOZSEF GABOR SZEKELY Appellant
AND	SAMUEL RAYMOND NORTH First Respondent DEBBIE VIVIAN NORTH Second Respondent

Hearing:	24 May 2018
Court:	Clifford, Venning and Mander JJ
Counsel:	Q S Haines for Appellant S J Iorns for First Respondent No appearance for Second Respondent
Judgment:	29 June 2018 at 4 pm

JUDGMENT OF THE COURT

AThe application for leave to adduce further evidence is declined.
BThe appeal is dismissed.
CThe appellant must pay the first respondent costs for a standard appeal on a band A basis and usual disbursements.

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REASONS OF THE COURT

(Given by Venning J)

Jozsef Szekely and Samuel North are chefs. In 2012 they decided to open a restaurant together. They each invested money in the business as did Mr North’s parents and his partner. The restaurant business was established as a company called Muse on Allen Ltd.
The restaurant venture was not successful. Within a short time there was a serious breakdown in the relationship between Mr Szekely and the North interests. Mr Szekely was removed as a director of the company on 11 January 2013 and on 24 February 2013 Mr North altered the Company Office records by transferring Mr Szekely’s shares into his own name. From that time on, Mr Szekely had no involvement in the company.
Mr Szekely brought proceedings against the company, Mr North and his parents, Debbie and Malcolm North, under s 174 of the Companies Act 1993 (the Act). He alleged the Norths had conducted the company’s affairs in an oppressive, unfairly discriminatory or unfairly prejudicial manner.[1] By the time of the hearing the company had been placed into liquidation. The liquidators did not agree to the litigation being continued against the company.[2] Mr Szekely did not seek leave to continue his claim against the company. Instead, Mr Szekely sought compensation from the Norths personally of $97,449.60 together with interest and costs.

High Court decision

[1]The second respondent is Debbie North. At relevant times she was a director of the company.

[2]Companies Act 1993, s 248.

After discussing the background to the breakdown in the relationship and noting that Mr Szekely had been excluded from the business, Mallon J opined that, if the shares had some value at the date he was excluded, then potentially it would be just and equitable to order compensation to Mr Szekely, even if the exclusion was partly or even substantially a result of his own actions.[3] The starting point for assessing compensation would be the fair value of the shareholding at the relevant time.
[3]Szekely v Muse on Allen Ltd [2017] NZHC 703, [2017] NZCCLR 17 at [41].
Mr Szekely and the Norths both called expert accounting evidence on the issue of the value of Mr Szekely’s shareholding at the time he was excluded from the company. The Judge agreed with Mr Rendell, the expert called for Mr Szekely, that 24 February 2013…

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.

Continue reading Szekely v North

Details

AGLC: Szekely v North [2018] NZCA 227
Case: [2018] NZCA 227
Decision Date: 29 June 2018 at 4 pm

CaseChat Overview and Summary

In Szekely v North, the Court of Appeal considered an appeal by Jozsef Szekely against a decision of the High Court which dismissed his claim for relief under s 174 of the Companies Act 1993. Mr Szekely had been a shareholder and director of Muse on Allen Ltd, a restaurant company. He alleged the company's affairs had been conducted in an oppressive, unfairly discriminatory or unfairly prejudicial manner towards him by Samuel North and his parents, Debbie and Malcolm North. The Court of Appeal found that while the Norths had acted oppressively towards Mr Szekely, it was not just and equitable to grant him relief under s 174 as his shares in the company had no value at the time he was excluded. The Court declined to admit further evidence which the appellant sought to adduce in support of his appeal. The appeal was dismissed with the appellant ordered to pay the first respondent's costs.

The key issues before the Court of Appeal were whether the High Court Judge was wrong in (a) not declaring that the conduct of the Norths was oppressive, unfairly discriminatory or unfairly prejudicial to Mr Szekely, and (b) concluding that Mr Szekely's shares had no value at the time they were transferred by Mr North. The Court found that while the Norths had acted oppressively, the Judge was not wrong in declining to grant Mr Szekely relief under s 174 as his shares were valueless. The Court also declined to admit the further evidence sought by Mr Szekely as it was not cogent and credible.

Orders