Vance v Vey Group Limited - [2020] NZHC 2592

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV 2018-485-505

[2020] NZHC 2592

UNDER the Companies Act 1993

IN THE MATTER OF

Vey Group Limited

BETWEEN

DAVID VANCE and IAN MILLARD AS TRUSTEES OF THE ORANA TRUST

Plaintiffs

AND

VEY GROUP LIMITED

First Defendant

LESLIE WILLIAM FUGLE

Second Defendant

Hearing: 22 September 2020 (further submissions received on 25 September 2020 and 1 October 2020)

Counsel:

R A Kirkness for Plaintiff

J K Mahuta-Coyle for Defendants R L Pinny for Receivers

Judgment:

2 October 2020

JUDGMENT OF MALLON J

Introduction

[1] The plaintiffs are the independent trustees (the trustees) of the Orana Trust (Orana). Orana holds 49 per cent of the shares in the first defendant (Vey). The second defendant, Mr Fugle, is the sole director of Vey. The plaintiffs alleged unlawful oppression in the conduct of Vey and applied under s 174 of the Companies Act 1993 for relief in the form of an order placing Vey in liquidation.

VANCE v VEY GROUP LIMITED [2020] NZHC 2592 [2 October 2020]

[2] In the High Court I was satisfied that the grounds for relief were made out.1 As to the appropriate relief, the defendants submitted that liquidation was not the appropriate remedy because the majority shareholders were strongly opposed to it and, as recorded in my judgment, they “would willingly participate in a buy-out process of the Orana shares”.2

[3] An issue with determining the fair price for a buy-out of the minority shareholding was a debt claimed by Orana but disputed by Mr Fugle. Mr Fugle had concerns about the debt because of the intertwined financial affairs of Vey and interests associated with Daryn Turvey prior to Mr Fugle’s involvement. Mr Fugle said he had not signed the 2015 financial statements or prepared financial statements for subsequent years because of these concerns.

[4] I granted relief setting out a process that would have allowed (via the preparation of independently prepared financial accounts for Vey from 2015, with the independent accountant also forming a view on the Orana debt as part of that) the value of the Orana shareholding to be fairly assessed, and for the majority shareholders to have the opportunity to purchase the shareholding on a fair basis. I concluded:3
If Mr Fugle does not cooperate in the process to be carried out by the independent accountant, or the above process does not result in the sale of the Orana shares, the parties have leave to apply for further relief under s 174 if this is necessary. Such relief may be for Vey to be placed in receivership (to manage Vey with a view to remediating the Wellington property or selling it on an “as is” basis) or liquidation.

[5] My judgment was delivered on 18 July 2019. Had that process been followed, either the minority shares would have been purchased by one or more of the majority shareholders or the shares could have been offered for sale…

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 Vance v Vey Group Limited

Details

AGLC: Vance v Vey Group Limited [2020] NZHC 2592
Case: [2020] NZHC 2592
Decision Date: 2 October 2020

CaseChat Overview and Summary

The case of Vance v Vey Group Limited involves a dispute between the plaintiffs, who are the independent trustees of the Orana Trust, and the defendants, Vey Group Limited and its director Leslie William Fugle. The plaintiffs, who hold 49 per cent of the shares in Vey, alleged unlawful oppression in the conduct of Vey and sought relief in the form of an order placing Vey in liquidation under s 174 of the Companies Act 1993. The central legal issue was whether the court should order the liquidation of Vey, and if so, under what conditions. The court had to determine the appropriate relief after considering the defendants' opposition to liquidation and their proposal for a buy-out process. The High Court initially granted relief that would allow for the fair assessment of the Orana shareholding value and a potential buy-out by the majority shareholders. However, the Court of Appeal found that more intrusive orders were required due to mismanagement and the interconnected debt between Orana and Vey. The Court of Appeal ordered the appointment of receivers to ascertain the true liabilities of Vey, including the debt due to Orana, and to report on the best means of realising the assets of the company. The receivers recommended a period of three months for the shareholders to agree on next steps, after which a liquidator should be appointed if no agreement was reached. The parties are now back before the court seeking determination of the relief that should be ordered. The plaintiffs argue for liquidation, while Mr Fugle proposes an alternative relief involving arbitration to determine the value of the disputed debt and the fair value of the plaintiffs' shares. The court found that the only appropriate relief that would be fair and reasonable is that recommended by the receivers, which involves a liquidation order that lies in court, providing an incentive for the parties to negotiate a settlement. The court made an order placing Vey into liquidation but specified that the order would lie in court and not take effect until midday on 9 December 2020. The court-appointed receivers would become the liquidators, and their receivership would terminate upon the commencement of liquidation. The court also allowed for the possibility of vacating the liquidation order if the parties filed a joint memorandum seeking alternative orders by consent before 9 December 2020.

Orders