The Orthodontic Centre Ltd v M D Courtney Orthodontics Ltd HC Palmerston North CIV-2006-454-238

[2007] NZHC 2099

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2006-454-238

BETWEEN  THE ORTHODONTIC CENTRE LTD Plaintiff

ANDM D COURTNEY ORTHODONTICS LTD

First Defendant

ANDMICHAEL DAVID COURTNEY Second Defendant

CIV-2006-454-365

BETWEEN  M D COURTNEY ORTHODONTICS LTD

Plaintiff

ANDTHE SPECIALIST ORTHODONTIC CENTRE LTD

Defendant

CIV-2006-454-419

BETWEEN  N M TOBIN ORTHODONTICS LTD Plaintiff

ANDTHE SPECIALIST ORTHODONTIC CENTRE LTD

First Defendant

ANDM D COURTNEY ORTHODONTICS LTD

Second Defendant

THE ORTHODONTIC CENTRE LTD V M D COURTNEY ORTHODONTICS LTD AND ANOR HC PMN CIV-2006-454-238  5 September 2007

Hearing:         5 September 2007

Appearances: D J Chisholm for Plaintiff in proceedings CIV-2006-454-238 and

CIV-2007-454-419

G A Paine for First Defendant in CIV-2006-454-238;  Plaintiff in proceedings CIV-2006-454-365 and Second Defendant in proceedings CIV-2007-454-419

Judgment:      5 September 2007

ORAL JUDGMENT OF ORDERS AND REMARKS OF GENDALL J

[1]      I propose to make certain orders now and will give some reasons in writing for them.  But the reason for making the orders now is that the time has well come for the two parties (although there are more than two) which represent however competing interests of Mr Tobin and Mr Courtney to end the conflict.   It is other than of course for one party, that being the Tobin interests, to proceed to trial under action CIV-2006-454-238.

[2]      The application for summary judgment is dismissed.   Costs are reserved. Those proceedings are to be placed before an Associate Judge within one month. The defendants are to file statements of defence before then.  The Associate Judge is to fix a timetable for advancement of those proceedings to trial.  A fixture date is to be allocated at that time.

[3]      I will give reasons in writing for declining to order summary judgment but I am satisfied by a wide margin that it is not appropriate in a case such as this.  It may be in the end the plaintiff succeeds but I am not able to conclude that the first and second defendants do not have arguable defences, or for that matter, that they do not have an entitlement to issue third party proceedings against some other party.  There are such evidential matters which are clearly in dispute and whilst Mr Chisholm submits that those are not relevant to the legal issues involved I do not necessarily share that view.  This is not a case in my view where a plaintiff is entitled to obtain judgment where there is plainly no defence.   For that reason I am not prepared to grant summary judgment.

[4]      Insofar as the application for liquidation of The Specialist Orthodontic Centre Ltd is concerned that is CIV-2006-454-365, that application is dismissed.   It is a blunt and drastic remedy to order liquidation of a company particularly when it is solvent and has no creditors.   There have been occasions such as in Vujnovich v Vujnovich [1988] 2 NZLR 129 where the depth of disagreement between directors and shareholders has been such that the company should be wound up. But I accept the argument advanced by Mr Chisholm on behalf of the company that liquidation is not a proper remedy to grant to the Courtney interests. The type of strong case necessary to justify an order for liquidation of a viable company has not been established.

[5]      That leaves the application under s174(2)(a).  There exists good reasons why an order should be made.  The parties have divorced their interests and gone their separate ways.  The battle has been contested now for 18 months at great expense to them and no doubt to the use of the Court’s resources.  Whatever the outcome of the substantive proceedings in relation to the release of the Courtney interests from obligations under the lease, finality in terms of the Courtney interests in the service company must be reached.

[6]      I order under s174(2)(a) that Mr Tobin or some other person or body as he shall direct is to acquire the shares of M D Courtney Orthodontics Ltd and The Specialist Orthodontic Centre Ltd at a fair market price.  If the shareholders and the directors (who though legally different are factually the same) cannot agree within

14 days as to the identity of an expert to fix the fair market price of those shares (that is,  14  days  from  now)  that  expert  is  to  be  appointed  by  the  President  of  the New Zealand Society of Accountants.  Costs of the expert in assessing a fair market value of the shares to be shared equally between the plaintiff and the second defendant.   The valuation date to be taken for fixing the value of the shares is 1

February 2006.  Whilst the expert is to value the shares in his or her capacity as an expert and not as an arbitrator nevertheless each shareholder shall have the right to make such submissions or representations as it thinks appropriate to the valuer but the valuer is entitled to decide in his or her discretion when any further submissions are assessed.

[7]      Upon the fixing of the fair market value of the shares by the valuer then payment for those shares and the transfer of them is to be made no later than 28 days after the value as fixed.

[8]      Costs in respect of the liquidation application and the orders made under s174(2)(a) are also reserved.

[9]      I grant leave to the parties if necessary to apply to the Court for further directions or orders but I trust that that would not be necessary.

[10]     As soon as time permits I will provide some reasons for the decision in declining to order summary judgment as counsel sought and for the orders that I have made in terms of s174(2)(a) although I would think it will be fairly obvious to the parties why that s174(2)(a) order is made rather than an order for liquidation.

ADDENDUM:

[11]     In making these orders and delivering these oral remarks I have overlooked the prayers for orders in terms of paras (e), (f) and (g) of the statement of claim. They are all to the benefit of the Courtney interests.  It is proper that they be made. Accordingly, I make the following orders additional to that contained in these orders:

(1)The plaintiff is to provide to M D Courtney Orthodontics Ltd a shareholder indemnity with regard to the conduct of the affairs of The Specialist Orthodontic Centre Ltd since 1 February 2006.

(2)The plaintiff is likewise to provide to M D Courtney as director of The Specialist Orthodontic Centre Ltd an indemnity in respect of the conduct of the affairs of the company since 1 February 2006 and M D Courtney is to resign as a director consequent upon the sale by M D Courtney Orthodontics Ltd of its shares at fair market value.

……………………………….

J W Gendall J

Solicitors:
D J Chisholm, Auckland for Plaintiffs in proceedings CIV-2006-454-238 and CIV-2006-454-419

G A Paine, Palmerston North for First Defendant in proceedings CIV-2006-454-238, Plaintiff in proceedings CIV-2006-454-365 and Second Defendant in proceedings CIV-2007-454-419