Vance v Vey Group Limited

[2018] NZHC 1994

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2018-485-505 [2018] NZHC 1994

BETWEEN

DAVID VANCE AND IAN MILLARD

Plaintiffs

AND

VEY GROUP LIMITED First Defendant

AND

LESLIE WILLIAM FUGLE Second Defendant

Hearing:	2 August 2018
Appearances:	R Roff for Plaintiff C Wilkinson-Smith for Defendants
Judgment:	7 August 2018

JUDGMENT OF GRICE J

(Order transferring rights in shares to court appointed trustees)

[1]      The plaintiffs are the trustees of Orana Trust (the Trust). They sought an order restraining the sale of a property at 72 Webb Street, Wellington (the property), to R Pratt until further order of the Court (the interim injunction). The Trust says it is the owner of 49 shares in Vey Group Limited, which in turn owns the property. The shares however  remain  registered  in  the  name  of  the  former  trustees,  Patricia  and Daryn Turvey.

[2]      While orders were made for the removal of Patricia and Daryn Turvey as trustees and the plaintiffs appointed in their stead in 2017, no order was made vesting the Vey Group Ltd shares in the plaintiffs.   The plaintiffs now seek by way of interlocutory application the transfer of those shares to them.  That application was

made in response to a proposed sale of the property.  It was only at the last moment

DAVID VANCE AND IAN MILLARD v VEY GROUP LIMITED [2018] NZHC 1994 [7 August 2018]

the plaintiffs realised that the shares were still registered in the name of the previous trustees.

The short history of this dispute

[3]      The Trust was established by deed dated 1 July 1996 as a family trust.1  When the trust was created Daryn and Patricia Turvey were the two trustees.

[4]      Vey Group Ltd (the first defendant) is a limited liability company that was incorporated on 24 April 1996.  It was established for the purpose of managing and owning the property.  Initially Patricia and Daryn Turvey were the directors of the company until November 2014 and September 2016 respectively. The Trust originally owned all the shares in Vey Group Ltd, until 2016 when 51 per cent of the shares were sold.

[5]      Mr Fugle (the second defendant) is Ms Turvey’s cousin and the only director of Vey Group Ltd at present. He was appointed on 16 September 2016 at Ms Turvey’s invitation.  Ms Turvey resigned from her role as a director in Vey Group soon after appointing Mr Fugle.

[6]      In  2017  Patricia  and  Daryn Turvey had  some  disagreements  resulting in litigation between them.  Eventually, they both agreed to being removed as trustees and  replaced  by  two  independent professional trustees  in September  2017.    By consent, the Court ordered both parties be removed as trustees, that they were ineligible for reappointment, two new independent trustees be appointed (an accountant and a solicitor) and that they had 15 working days to file the consent order confirming the independent trustees. If this was not done, the Court indicated it would appoint the independent trustees.2   On 27 October 2017, the plaintiffs were appointed by the Court as independent trustees. This appointment resolved the litigation between

the Turveys.3

1      The beneficiaries of this trust includes Patricia and Daryn Turvey and other family members.

2      Turvey v Turvey CIV-2017-485-150.  Minute of Cull J dated 4 September 2017.

3      Minute of Cull J dated 27 October 2017.

The proposed sale of the Wellington property

[7]      The plaintiffs were never registered on Vey Group Ltd’s share register as owners of the Trust shares.  They believed they had been and were treated as such in relation to various matters by Mr Fugle.

[8]      On 20 June 2018, Mr Fugle told the plaintiffs that he had a conditional offer of

$1.525 million for the Wellington property.  On 25 June 2018, the plaintiffs received an emailed draft notice of the special general meeting to be held on 13 July 2018. The potential sale of the property was to be discussed at this meeting. The plaintiffs were on the party list but so were Patricia and Daryn Turvey.  When Mr Fugle was asked why Daryn Turvey was on the list, he responded he was taking a “scatter gun” approach to ensure no one could later challenge the decision on the grounds they were unaware.

[9]      On 10 July 2018, the plaintiffs sent Mr Fugle a signed proxy in Ms Wulff’s favour to the business address of Vey Group Ltd and an email address they had previously used to correspond with Mr Fugle.4

[10]     On 13 July 2018, Ms Wulff attended the special general meeting. She was told by Mr Fugle that the proxy she presented was not received properly and was invalid. This was because it had to be received 48 hours beforehand and the plaintiffs were not registered shareholders.   Ms Wulff left the room and the special general meeting commenced. According to Mr Fugle, there was a unanimous vote to pass the motion of the shareholders present and wishing to vote. The motion in question stated:

That a sale price of $1,525,000 for 72 Webb Street [Lot 5, DP 5287] be approved, and that the director be authorised to enter into and give effect to that agreement for the sale and purchase of Vey Group Limited’s interest in the property at 72 Webb Street…in the terms of that agreement for sale and purchase agreement…

[11]     On or about 13 July 2018, Mr Fugle signed the offer made by the purchaser, Mr Pratt, but had not communicated acceptance to the purchasers. After liaison with the plaintiffs and their lawyers, on 15 July 2018 Mr Fugle gave a personal undertaking

4      Ms Wulff is a manager in the Recovery Team at Deloitte a consultancy/accountancy firm which has had the day-to-day management of the Trust affairs on behalf of the plaintiffs.

that he would withhold the signed contract from Mr Pratt or his representative until issue of the poll/vote standing was clarified.   This undertaking was withdrawn, however, on the afternoon of 17 July 2018 when Mr Fugle indicated he would be releasing the contract to Mr Pratt on 18 July 2018 at 4.45 pm.

The present application

[12]     On 18 July 2018 the plaintiffs filed the present application without notice and served the defendants on a Pickwick basis. Initially the plaintiffs sought that the matter be dealt with urgently due to the matters discussed above.  Counsel was instructed by the defendants but the matter was ultimately resolved on a short-term basis by the defendants undertaking not to proceed with the sale until further order of the court.

The interim injunction application

[13]     The plaintiffs applied for an injunction in the following terms:

That the first and second defendant be restrained from taking any steps to confirm or complete the sale of the property at 72 Webb Street Wellington under an agreement for sale and purchase with R Pratt until further order of the Court;

[14]     They also filed substantive proceedings under s 174 of the Companies Act

1993 together with the interlocutory applications.  Those proceedings seek various remedies and remain extant.  A direction that they be served on the former trustees, Patricia and Daryn Turvey, and the present shareholders was made on 23 July 2018.5

[15]     When the matter came before me for hearing on 2 August 2018, counsel indicated that they had reached agreement on the matters insofar as the application for interim injunction was concerned. The agreement and undertakings and consequential orders are set out in my minute of 2 August 2018.   The application for interim injunction was therefore dismissed by consent.

5      Vance v Vey Group Ltd CIV-2018-485-505. Minute of Clark J dated 23 July 2018.

The vesting order application

[16]     Due to the initial urgency of this application, the plaintiffs sought not only the interim injunction but a vesting order for the shares. The vesting order was sought by interlocutory application without any relevant underlying proceedings or applications.

[17]     The plaintiffs seek the orders in relation to the shares urgently to ensure they are able to deal with the Trust property in a timely manner. They point to the fact that the Court has already appointed them and all that is necessary is the passing of the legal title or interest in the shares. The defendants initially opposed the making of the vesting order as part of their opposition to the interim injunction application. However, they now consent to the orders sought in an amended application in which the trustees seek the right to transfer the shares and they will transfer them to themselves.

Procedural issues

[18]     Section 59 of the Trustee Act 1956 says:

Vesting orders as to stock and things in action

(1) …

(a)Where the Court appoints or has appointed a trustee, or where a trustee has been appointed out of Court under any statutory or express power:

…

the Court may make an order vesting the right to transfer or call for a transfer

of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action in any person as the Court may appoint.

(2)       Where any such order is consequential on the appointment of a trustee, the right shall be vested in the persons who, on the appointment, are the trustees.

…

(6)The person in whom the right to transfer or call for the transfer of any stock is vested by an order of the Court under this Act may transfer the stock to himself or any other person, according to the order, and all banks, societies, associations, companies,  and persons  shall obey every order under  this section according to its tenor.

(8)      The Court may make declarations and give directions concerning the manner in which the right to transfer any stock or thing in action vested under the provisions of this Act is to be exercised.

[19]     The plaintiffs brought this application by way of an interlocutory application. The usual way to bring such applications is by way of an originating application or other substantive proceedings.   In this case, there is no underlying substantive application.  The plaintiffs have filed applications but they are in relation to matters under the Companies Act 1993, including a claim under s 174 of the Act seeking various forms of relief including the appointment of a liquidator to the company.

[20]     The plaintiffs nevertheless seek orders in relation to the 49 shares in the company based on an amended interlocutory application as follows:

The Plaintiffs seek an order under s 59 of the Trustee Act 1956 that the right to transfer the 49 shares in the first defendant is vested in the Plaintiffs in their capacity as trustees of the Orana Trust as duly appointed by Court order on 27

October 2017, together with a direction pursuant to s 59(8) that the Plaintiffs are to transfer the shares to themselves immediately and upon notice of the order the second defendant will update the share register with the Plaintiffs’ names accordingly.

[21]     In addition, there has been no application for directions as to service of the application for vesting orders.  Vey Group Ltd and Mr Fugle have been served and have indicated their consent to the application.  However, Patricia and Daryn Turvey, the replaced trustees, will not be aware of the application.

[22]     In the circumstances, the plaintiffs point to a number of factors which they say supports the making of the orders without further directions or the requirement to file a new application. These are:

(a)Patricia and Daryn Turvey consented to the making of the orders for the removal and the appointment of the plaintiffs as trustees in their place.

(b)An order vesting the shares in the plaintiffs as new trustees could have been made at the time they were appointed by the court without objection.  It is only an oversight that the plaintiffs did not seek the vesting of the shares in them by court order earlier.   The urgency surrounding the present application to restrain the sale of the property

brought to their attention the fact that the shares were not registered on the company register.

(c)All parties, including Patricia and Daryn Turvey, have been sent reports from the new trustees.  The most recent being a letter from Deloitte (acting for the plaintiffs) dated 9 July 2018. This was a detailed outline of progress and issues facing the trust.   It included the following updates in connection with the shares in the company as follows:

Orana owns 49 of Vey shares. To develop an understanding of the value of these shares, we requested Les Fugle, the Director of the Company, to provide us with financial information. Aside from Vey’s minute book, these requests have been declined, sometimes with  an  explanation that  some of  the information requested does not exist. We note that a Company Director has a responsibility (amongst others) to have financial records kept and financial statements prepared in a  timely manner. We will continue to liaise with Mr Fugle in an attempt to access Vey’s financial information.

Mr Fugle notified shareholders last week that Vey proposed to sell the 72 Webb Street property to Russell Pratt (or nominee) for $1.525 million.  We are awaiting details on this proposed transaction from Mr Fugle in his capacity as Vey’s Director. Further  to  this,  we  have  engaged  Colliers  International to prepare a valuation of the 72 Webb Street property.

That update was sent to both Patricia and Daryn Turvey by email.  In addition, a hard copy was sent to Mrs Turvey by post.  There is no reason to believe the emails did not reach the addressees. No feedback has been received.

(d)The  substantive  proceedings  under  the  Companies Act  have  been directed to be served on Patricia and Daryn Turvey by registered post.6

(e)The  Wellington  property,  (through  the Trust’s  shareholding  in  the owner of that property, Vey Group Ltd) is the main asset of the Trust. It is in the interests of the beneficiaries of the Trust that the property is dealt  with  in  a  timely  manner.    Further  delays  occasioned  by  a

6      Vance v Vey Group Ltd, above n 5.

requirement that a new application be filed and directions made as to service will only delay matters unnecessarily.

(f)The above outline also shows that the Turvey’s have been kept up-to- date with Trust matters including the shareholding and would likely have been under the impression that the shares had already vested in the plaintiffs.

[23]     Accordingly, I am of the view that it is appropriate to make an order vesting the right to transfer the 49 shares presently registered in the name of Patricia and Daryn Turvey, to the name of the plaintiffs as trustees of the Orana Trust pursuant to section 59(1) and (2) of the Trustee Act 1956.

Result

[24]     Orders and directions are made as follows:

(a)The right to transfer the 49 shares in Vey Group Ltd presently owned by Patricia and Daryn Turvey is vested in the plaintiffs in their capacity as trustees of the Orana Trust appointed by Court order on 27 October

2017;7

(b)      The plaintiffs are to transfer the shares to themselves as trustees;8

(c)Upon receipt of such transfer the second defendant will update the share register with the plaintiffs’ names accordingly.9

[25]     The parties have indicated that no orders are sought as to costs.

Grice J

Solicitors:

JAG Legal, Lower Hutt

Dewhirst Law, Wanganui

7      Trustees Act 1956, ss 59(1) and 59(2).

8      Section 59(8).

9      Section 59(6); Companies Act 1993, s 91.