Vance v Vey Group Limited

[2020] NZHC 245

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 245

UNDER

The Companies Act section 174

IN THE MATTER OF

Vey Group Limited

BETWEEN

DAVID VANCE and IAN MILLARD

Plaintiffs

AND

VEY GROUP LIMITED

First Defendant

LESLIE WILLIAM FUGLE

Second Defendant

On the papers
Judgment:	21 February 2020

JUDGMENT OF MALLON J

(Costs)

[1]    In this proceeding the plaintiffs claimed that Vey Group Limited (Vey) (the first defendant) (through the conduct of Leslie Fugle (the second defendant)) was being operated in a manner that was oppressive, unfairly discriminatory or prejudicial to them (as trustees of a minority shareholder). They sought relief under s 174 of the Companies Act 1993 in the form of an order placing Vey in liquidation.

[2]    Mr Fugle was the sole director of the company. He was the registered shareholder of just one share in the company (held on trust for another shareholder) but the plaintiffs’ enquiries indicated that the remaining shareholders were associated with Mr Fugle. In any case, the evidence established that Mr Fugle was able to control

VANCE v VEY GROUP LIMITED [2020] NZHC 245 [21 February 2020]

Vey and that he did so in a manner that was oppressive, unfairly discriminatory and unfairly prejudicial to the plaintiffs.1

[3]    The plaintiffs succeeded in establishing that relief ought to be granted. Although the statement of claim specified a range of relief the Court might order, in their submissions the plaintiffs concentrated on an order placing Vey in liquidation. That relief was not granted. I ordered a process intended to provide a mechanism by which the majority shareholders would have the opportunity to buy the plaintiffs’ shares at a fair price or for the plaintiffs to sell to any other person.2 If this process did not result in a sale of the plaintiffs’ shares, the parties had leave to apply for further relief and this might be for Vey to be placed in receivership or liquidation.3 These orders were stayed by consent following an appeal against my judgment brought by Vey and Mr Fugle as appellants.4

[4]    The plaintiffs seek an order for costs. They seek costs on a 2B basis and reasonable disbursements. They have provided a schedule that calculates costs at

$39,694 and disbursements at $13,929.34. They seek an order that the costs be ordered against Mr Fugle personally, or alternatively against Vey. The order is sought against Mr Fugle because the plaintiffs will bear a portion of the costs as a 49 per cent shareholder of Vey if costs are ordered against Vey. They say this would be unfair to them because it was Mr Fugle’s actions that required their application for relief.

[5]    The defendants oppose the Court making an order for costs at this stage. This is because of two offers Mr Fugle made to purchase the plaintiffs’ shares. One of those was for $100,000 and was made six months prior to the commencement of proceedings. The other was for $150,000 and was made six months prior to the hearing. The defendants say it will not be known whether the plaintiffs obtained a more or less advantageous outcome from declining these offers and proceeding to hearing until the independently appointed accountant (as part of the relief ordered) has

1      Vance v Vey Group Limited [2019] NZHC 1676 at [66]-[72].

2      At [82]-[85].

3 At [86].

4      Vance v Vey Group Limited HC Wellington CIV-2018-485-505, Minute of Churchman J (28 August 2019).

valued the shares. They say the Court should reserve costs until the accountant has valued the shares.

[6]    I decline to reserve costs at this stage. One of the ways in which Mr Fugle conducted Vey’s affairs with oppression, unfair discrimination or unfair prejudice was through not preparing financial accounts for Vey and not engaging with the plaintiffs to resolve the issue over an alleged debt. This meant the plaintiffs were not able to assess the value of their shareholding and therefore whether the offers Mr Fugle made were reasonable.5 Further, offers made in an exchange of emails shortly after my judgment was issued, suggest the earlier offers were well below their value. I am therefore not persuaded that Mr Fugle’s earlier offers warrant a reduction in the costs order nor a refusal of an order.6

[7]    The defendants submit costs should lie where they fall if a costs order is to be made now. They accept the plaintiffs had some measure of success because the Court found the affairs of Vey were being conducted with oppression, unfair discrimination or unfair prejudice. They submit this success was tempered by the Court rejecting the relief the plaintiffs sought and instead favouring a remedy closer to that pleaded by Vey and Mr Fugle in their defence.

[8]    I consider costs should not lie where they fall. The plaintiffs succeeded in establishing that relief should be granted because of the manner in which the affairs of Vey were being conducted. The defendants opposed this. While the plaintiffs did not get their preferred relief, they nonetheless obtained orders. It is true that those orders were closer to the remedy pleaded by the defendants, but that pleading was not advanced until an amended defence was filed shortly before the hearing.

[9]    I am satisfied the plaintiffs should be awarded costs on a 2B basis. The remaining issue is whether an order should be made against Mr Fugle personally. The liability of two or more parties ordered to pay costs is joint and several unless the Court otherwise directs.7 The Court may exercise its discretion to order costs against

5      Vance v Vey Group Limited, above n 1, at [72].

6      High Court Rules 2016, r 14.7(f)(v).

7      Rule 14.14.

a director personally in a case of this kind if there has been impropriety or the litigation was conducted for the director’s personal benefit.8

[10]   I am not satisfied I should make an order that Mr Fugle solely bear the costs of the litigation. His conduct was unreasonable and unhelpful but it has not been established that he acted solely to benefit himself. I consider that a costs order against both defendants, with joint and several liability, is the appropriate one.

[11]   There has been no challenge to the scale costs or the disbursements that are claimed. Accordingly, I order costs of $39,694 and disbursements of $13,929.34 against the defendants.

Mallon J

8      Rule 14.1; Totara Properties Whangarei Ltd v Cochrane [2013] NZCA 283 at [36]; Kidd v Equity Realty (1995) Ltd [2010] NZCA 452 at [16]; Re D G Brims & Sons Pty Ltd [1995] 16 ACSR 559.