The Malthouse Ltd v Rangatira Ltd - [2018] NZHC 816

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE

CIV-2017-485-191

[2018] NZHC 816

BETWEEN
THE MALTHOUSE LTD

Plaintiff

AND

RANGATIRA LTD

Defendant

Hearing: 19&20 March 2018

Appearances:

H McIntosh and H MacFarlane (19 March only) for Plaintiff S Gollin and J Standage for Defendant

Judgment:

27 April 2018

JUDGMENT OF CHURCHMAN J

Introduction

[1] Tuatara Brewing Company Ltd (“Tuatara”) was incorporated on 8 December 2000. The prime movers behind the company were enthusiastic brewers Sean Murrie (“Mr Murrie”) and Carl Vasta (“Mr Vasta”).

[2] The major shareholders in Tuatara were Mr Murrie’s company, The Malthouse Ltd (“TML”), and Mr Vasta’s company, Vasta Brewing Company Ltd (“VBC”).

[3] The company had six other smaller shareholders all of whom were friends of Mr Murrie and Mr Vasta. They held the shares in their individual names in various amounts.

[4] Tuatara prospered over the first decade of its existence but by 2010 the shareholders realised that, in order to develop their business further, the company needed a significant capital investment.

THE MALTHOUSE LTD v RANGATIRA LTD [2018] NZHC 816 [27 April 2018]

[5] Over the period 2011-2013, the shareholders had discussions with several potentially interested parties.

[6] As an up and coming participant in the burgeoning craft beer industry, Tuatara was an attractive investment proposition. The shareholders had a number of options available to them including private equity investment, partnering with other brewing businesses or even selling out to a major brewery.

[7] However, not all of the potential options were equally attractive to the shareholders. There were disadvantages in being perceived in the marketplace as being controlled by one of the major brewing companies. There was also a disadvantage perceived in permitting investment by an investor in return for granting exclusive distribution rights to the investor.

[8] The ideal investor was one from outside the industry who could add value in the form of governance expertise.

[9] Rangatira Ltd (“Rangatira”) is a successful and substantial private equity investor. According to the oral evidence of Christopher Bradshaw (“Mr Bradshaw”), the company has equity of some $240 million. It had the major attributes that the shareholders were looking for in an equity investor and none of the disadvantages.

[10] In September 2012, Rangatira was approached by the lawyer acting for Tuatara about the possibility of becoming an equity investor.

[11] However, although Mr Murrie on behalf of the Tuatara shareholders, and Mr Bradshaw and Ian Frame (“Mr Frame”) on behalf of Rangatira had discussions, nothing came of them because the shareholders wanted a higher price than Rangatira assessed the shares in the business as then being worth.

[12] Tuatara was in active discussions at this time with at least one other potential investor. That entity was prepared to offer substantially more than Rangatira for the 35 per cent shareholding on offer.

[13] However, there were some features of this offer that were unattractive, particularly to the minor shareholders in Tuatara. These were the fact that…

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: [2018] NZHC 816
Decision Date: 27 April 2018

CaseChat Overview and Summary

The Malthouse Ltd, a shareholder in Tuatara Brewing Company Ltd, sued Rangatira Ltd for the contingent payments under an investment agreement which were payable if an “Exit event” occurred. The “Exit event” was defined as the sale of all the assets or shares of Tuatara. The contingent payments were to be made if the value of Tuatara at the time of sale was more than $12 million. The central legal issue in the case was whether cl 9.8 of the agreement was impliedly subject to the Contingent Sunset Date and ceased to have any effect once that date had passed. The court found that the commercial objective of cl 9 and the agreement as a whole was to facilitate the sale of a 35 per cent shareholding in Tuatara to Rangatira at a fair value. The court concluded that it was commercially sensible that all of the provisions of cl 9, including 9.8, were directed at establishing a fair purchase price for the shares in mid-2013 and that all the parts of cl 9 were intended by the parties to expire on the Contingent Sunset Date. The court rejected the submission of the alternative interpretation, which would require the Contingent Payments to be made potentially many years after the agreement, as not being commercially sensible. The court found that the implied term was reasonable and equitable and was capable of clear expression and did not contradict any expressed term of the contract. The court therefore implied the term that the mechanics of payment and the timeframe specified in cls 3.5 and 4.5 (the Contingent Sunset Date) must apply to the Exit event in cl 9.8.

Orders