Viranda Partners Limited v Guest - [2022] NZHC 2957

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2376

[2022] NZHC 2957

BETWEEN
VIRANDA PARTNERS LIMITED

Plaintiff

AND

AND

ANDREW JOHN DEXTER GUEST

First Defendant

STEPHEN PATRICK DONOVAN

Second Defendant

Hearing: 1 November 2022

Appearances:

J Ryan for Plaintiff

A Butler KC and W Gambrill for First Defendant Appearance excused for Second Defendant (who abides)

D McLellan KC for Applicant (Veritas Capital Company Limited) B Prewett for Veranda Holdings Ltd (Non-party)

Judgment:

14 November 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

VIRANDA PARTNERS LIMITED v GUEST [2022] NZHC 2957 [14 November 2022]

[1] Veritas Capital Company Limited (Veritas) and Veranda Holdings Limited (VHL) are equal shareholders of Viranda Partners Limited (VPL). The defendants, Mr Guest and Mr Donovan, are the shareholders and directors of VHL along with Mr Bridgman. Mr Guest and Mr Bridgman are also directors of VPL (being two of the four directors). Mr Donovan was purportedly appointed a director of VPL but such is not reflected on the Companies Office Register, albeit Mr Donovan acted as a director.

[2] Veritas has two directors on the board of VPL (Mr Tim Chen and Mr Patrick Pan), the remaining two of the four directors. VPL claims Mr Guest, aided by Mr Donovan, diverted a valuable business opportunity VPL owned to another company which in turn gave Mr Guest an interest in that business opportunity. VPL brought this claim against Messrs Guest and Donovan in December 2021 alleging breaches of directors duties and breaches of fiduciary duties. A 10 day hearing is scheduled for August 2024. VPL is not trading. Mr Butler KC, counsel for Mr Guest, accepts: “There is undoubtedly dysfunction between VPL’s directors and VPL’s shareholders”.

Veritas seeks leave to pursue the present claim

[3]Veritas seeks the following orders:

(1)Granting Veritas leave to intervene for the purpose of continuing the proceedings on behalf of the plaintiff.

(2)Authorising Veritas to control the conduct of the proceeding on behalf of the plaintiff.

(3)Requiring the plaintiff to give Veritas any assistance it may reasonably require to continue the proceedings.

[4] The application is brought pursuant to s 165 of the Companies Act 1993 (the Act) which provides:

165 Derivative actions

(1)Subject to subsection (3), the court may, on the application of a shareholder or director of a company, grant leave to that shareholder or director to—

(a)bring proceedings in the name and on behalf of the company or any related company; or

(b)intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or related company, as the case may be.

(2)Without limiting subsection (1), in determining whether to grant leave under that subsection, the court shall have regard to—

(a)the likelihood of the proceedings succeeding:

(b)the costs of the proceedings in relation to the relief likely to be obtained:

(c)any action already taken by the…

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.

Keep reading for free

Create a free CaseChat account to read Viranda Partners Limited v Guest and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2022] NZHC 2957
Decision Date: 14 November 2022

CaseChat Overview and Summary

Viranda Partners Limited (VPL) filed a lawsuit against Andrew John Dexter Guest and Stephen Patrick Donovan, alleging breaches of directors' and fiduciary duties. Veritas Capital Company Limited (Veritas) sought leave to intervene and continue the proceedings on behalf of VPL. The court considered whether Veritas satisfied the threshold requirements under s 165 of the Companies Act 1993, as well as other relevant factors, to grant leave.

The court found that Veritas satisfied the threshold requirements, as it was in VPL's interests for the proceedings to continue, considering factors such as the likelihood of success, cost considerations, actions already taken by VPL, and the overall interests of the company. The court also considered other relevant factors, such as the need for certainty in funding and the avoidance of potential delays in the proceedings. The court was satisfied that Veritas would act in VPL's interests and that there would be no prejudice to the defendants or VPL.

The court granted the orders sought by Veritas, allowing it to intervene and continue the proceedings on behalf of VPL. The court also imposed conditions to limit the scope of the proceedings and required Veritas to provide regular reports to VPL and fund the litigation. Andrew John Dexter Guest was ordered to pay Veritas' costs on a 2B basis, together with disbursements.

This case demonstrates the importance of considering various factors when deciding whether to grant leave for a shareholder or director to intervene in proceedings on behalf of a company. The court balanced the interests of the company, the applicant, and the defendants in making its decision.

Orders