Wilding v Te Mania Livestock Ltd

[2017] NZHC 649

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-899 [2017] NZHC 649

BETWEEN

TIMOTHY WILDING

First Plaintiff

TE MANIA PROPERTIES LIMITED Second Plaintiff

AND

TE MANIA LIVESTOCK LIMITED First Defendant

WH HOLDINGS LIMITED Second Defendant

JOHN HARRINGTON Third Defendant

HOONG BEE TECK Fourth Defendant

WONG CHUN WIN Fifth Defendant

HONG WEIGOU Sixth Defendant

Hearing:

21, 22, 23, 24, 27, 28, 29, 30 June 2016, 1, 4, 6, 7, 8 July 2016,

7, 8, 9, 10, 14, 15, 16, 17, 18, 21, 22, 23, 24, 25, 28, 29, 30

November 2016, 1, 2 December 2016 to March 2017 (further memoranda and evidence and submissions)

Appearances:

P J Dale and V E Fletcher for First and Second Plaintiffs
T J Mackenzie for First Defendant
B M Russell and R J Hopkins for Second, Fourth and Fifth
Defendants
I G Hunt and C Light for Third Defendant

Interim Judgment:

5 April 2017

INTERIM JUDGMENT OF NICHOLAS DAVIDSON J (WITH REASONS FOR INTERIM JUDGMENT TO FOLLOW)

WILDING & ANOR v TE MANIA LIVESTOCK LTD & ORS [2017] NZHC 649 [5 April 2017]

Introduction

[1]      Te Mania Livestock Limited (“TML”) owns the famous Te Mania Aberdeen Angus Stud in North Canterbury.  This litigation concerns the future of TML, and thus the Stud.

[2]      The principal issue in the litigation is whether the first plaintiff, Timothy Wilding (“Mr Wilding”), should have the opportunity to acquire the shares of the defendant shareholders, or whether, as the third defendant John Harrington seeks, TML should be liquidated.  The other defendants, bar the sixth defendant, prefer that their shares be purchased by Mr Wilding at a fair value determined by the Court.  If liquidation  is  not  ordered,  Mr Harrington  adopts  the  same  position.  The  sixth defendant has taken no part in the litigation.

[3]      There are multiple issues for determination relevant to the principal issue, and valuation. This Interim Judgment is delivered shortly before the Reasons for Interim  Judgment,  because  of  the  governance  and  operational  exigencies  facing TML, and the unavoidable length of the Reasons for Interim Judgment.   TML, and the parties, must know now the outcome of the litigation.   That outcome is as follows.

Disposition

Election

[4]      The  first  plaintiff,  Timothy Wilding  has  the  opportunity  to  purchase  the shareholding of the defendants at a fair value which is for immediate “first phase” calculation pursuant to the Schedule to this Interim Judgment, but which will require a “second phase” of consideration if Mr Wilding elects to purchase the shares.

Value of shares – “first phase”

[5]      The “first phase” valuation requires some minor calculations and reflected as requiring such in the Schedule, which should be agreed, or the parties may revert to the Court for direction. The parties have expert assistance available to them.

The Lansdowne Lease Settlement

[6]      The settlement leaves money which was held in trust for inclusion in the balance sheet reflected in the Schedule, and the plant valuation may require adjustment. The parties should be able to agree on this.

Go Beef

[7]      No adjustment is made.

An adjustment for the seasonal nature of valuation outcomes

[8]      The defendants sought adjustment for the spring planting programme costs, and a revaluation of cattle after weaning.  The latter would require further valuation evidence to revisit that given by the appointed valuers, Mr Stewart and Mr Cox.

[9]      These valuation issues are raised by the defendants in the context of the notional liquidation value of TML, based on a certain date in the farming cycle. Evidence  discussed  in  the Reasons  for  Interim  Judgment  demonstrates  that  this influences  the net  valuation.   These elements  warrant  some  adjustment,  and  an overall adjustment of $200,000 is made as a matter of fairness to comprehend both items *2 and *6 in the Schedule.

[10]     The Court declines to go further because TML has run on, incurring high costs which will fall to Mr Wilding, should he elect to purchase the shares and there is no evidential basis to make all other adjustments required on a revaluation of cattle, including other operating costs incurred by TML.   A line is drawn but the exercise of discretion to reach a fair value results in this adjustment.

Further “second phase” judgment

[11]     Some very significant elements of the litigation do not reflect in the Schedule at all, as they do not bear on the valuation given the judgment reached, except as to costs. However, the following elements all require further judgment in the “second phase” of valuation, unless agreed:

(i)       Semen Valuation

There will be further evidence and submissions as to the fair value of semen.  The figure in the Schedule is the rounded minimum figure, being that advanced for Mr Wilding.  The defendants contend for a fair value of approximately $115,000 so approximately $70,000 is in issue.  As the defendant shareholders hold about a 50 per cent interest in TML, their interest in the disputed component is some $35,000.

(ii)      Costs

Costs as they affect TML are not determined.  Costs in favour of, or against, TML must be brought to account.  Costs between the parties which do not reflect in the TML balance sheet, will not reflect in the share value.  All costs are reserved.

(iii)      Other

There may be other components for further determination, not specifically identified in this Interim Judgment. They should not have a significant effect on the balance sheet and thus fair value for the purpose of this Interim, or Further or Final Judgment.

Implementation

[12]     To implement this Interim Judgment, Mr Wilding has the right to elect to acquire the shares of the defendants on terms, as follows:

(a)      Mr Wilding must make an election within 10 working days, based on this Interim Judgment.   The election must be made in writing, and advised to the Court and the other parties.

(b)If Mr Wilding elects to acquire the shares at fair value he must pay for them, at a price calculated according to the Schedule attached, and the minor adjustments agreed, or further directed, within 10 working days of election. If directions are needed this may be extended, but

the intent of this Interim Judgment is that election and payment be made at or close to the timetable dates ordered.

(c)      Mr Wilding must undertake to the Court that if any further payment is required after all residual issues are determined by Further or Final Judgment, that he will make such further payment required of him within 10 working days of Further or Final Judgment.

(d)It is an express condition of this Interim Judgment that if Mr Wilding elects to purchase the shares, he will not bring any claim in the name of TML, or Te Mania Properties Limited, against any of the defendants, and it is a further condition that all disputes or potential disputes arising out of the relationship between the parties are at an end.  This condition requires Mr Wilding to ensure that no other party acquires an interest in TML, or could take any steps which would breach this condition as if it applied to them.

(e)      It is a further express condition of this Interim Judgment that none of the  defendants  will  have  any  liability  under  any  guarantee  or otherwise in relation to the liabilities of TML and that must be established  to  the  satisfaction  of  the  Court  before  Mr Wilding’s election becomes operative.  This may be effected by any guarantees being cancelled, or by indemnity or otherwise.

(f)      Should Mr Wilding elect to purchase the shares then a teleconference will be convened to fix a timetable to address residual issues relevant to share value in “phase one” or “phase two”, implementation, and costs.

(g)Should Mr Wilding not so elect, then an in-person conference will be convened with urgency.

(h)Any party may revert to the Court for urgent clarification or direction as  required  to  effect  this  Interim  Judgment.  The  timetable  may

warrant variation, as a matter of fair process or necessity, if a third party is involved in the implementation process, or some unforeseen event arises.

Substantive Issues

[13]     The Schedule to this Interim Judgment reflects the outcome of the valuation related issues without elaboration, other than by short notes and this Interim Judgment. To assist the parties, I record other outcomes explained in the Reasons for Interim Judgment to follow:

(a)       Section 174 of the Companies Act 1993 is engaged on several fronts.

One of those is the likelihood, indeed certainty, that the affairs of TML will be concluded in an oppressive, unfairly prejudicial or unfairly discriminatory way, as the parties are so at odds, as to the very survival of TML and most issues relevant to governance and management.   Section 174 is engaged at other levels as well.    The Court  has  determined  that  Mr Wilding  should  have  the  right  to purchase the shareholding of the defendants as reflected above.  It is in the interests of all parties that he do so.

(b)      TML is not liable to Te Mania Properties Limited.

(c)       No defendant is liable to TML in respect of the property owned by the second defendant, Lagoon Flat, not being leased to TML in 2014 –

2015.

(d)      No defendant is liable to TML arising from stock mismanagement.

The Court finds that no loss has been caused TML, and no claim should reasonably have been brought by TML against the third defendant arising from alleged stock mismanagement.

(e)       The land held under licence by Mr Wilding is held in trust for TML

and has the value to TML attributed in the Schedule attached.

(f)      Mr Wilding is not liable to Mr Harrington in the torts of malicious prosecution or abuse of process.

(g)There was no overall strategy adopted by the defendants in breach of their obligations to TML, but elements of conduct by all parties are reviewed in the Reasons for Interim Judgment.

…………………………………………

Nicholas Davidson J

Solicitors:

Lane Neave (Christchurch) Young Hunter (Christchurch) Ewart & Ewart (Auckland)

cc:  Counsel PJ Dale, Chancery Street Chambers (Auckland)

SCHEDULE

TML Balance Sheet as at 18 November 2016

With adjustments determined by the Court

(“TBD” = to be decided)

Notes

Current Assets	Agreed between parties	Judgment
Accounts Receivable	4,137.00	Yes	4,137.00
Livestock on Hand	2,437,515.00	Yes	2,437,515.00
Less Commission on Hand	6.9% of above	No	TBD *1
Calves after weaning	No	See *2
Shareholders Advance Account: T Wilding	104,012.00	No	104,012.00
Te Mania Properties Limited receivable	113,417.00	No	113,417.00
Income tax receivable	565.00	Yes	565.00
Solicitors Trust Account	49,509.00	Yes	TBD * 3
Semen	44,654,00 – 115,000	No	TBD 41,594.00 *4
Total Current Assets
Non Current Assets	Agreed between parties	Judgment
Property, Plant and Equipment	144,412.00	Yes	144,412.00
Property, Plant and Equipment on TMPL Land	147,897.00	No	147,897.00 *5
Crops Planted	155,232.63	No	See *6
Farmlands Shares	1,090.00	Yes	1,090.00
Alliance Group Shares	17,724.00	Yes	17,724.00
Balance Agri-Nutrients Shares	18,241.00	Yes	18,241.00
Ravensdown Shares	10,474.00	Yes	10,474.00
Silver Fern Farm Shares	1,070.00	Yes	1,070.00
Farmpure Investment Account	0.00	Yes
Bailed stock returned	8,629.00	No	Nil
DOC Licence	14,000.00	No	14,000.00
Interest on current accounts	TBD *7
Items *2 and *6	200,000.00
Costs awarded	TBD *8
Total Non Current Assets	TBD
TOTAL ASSETS
Current Liabilities	Agreed between parties	Judgment
Heartland Current Account	292,031.00	No	292,031.00
Accounts Payable	207,737.00	No	207,737.00
GST Payable	-18,761.00	Yes	-18,761.00
Employee redundancy and notice period costs	11,012.00	No	Nil
Employee holiday leave owing	11,727.00	Yes	11,727.00
Costs awarded	TBD *9
Total Current Liabilities
Non Current Liabilities	Agreed between parties	Judgment
PGG Wrightson Loan	450,000.00	Yes	450,000.00
TMPL – proportion of rates payable	No	Nil
Total Non Current Liabilities
TOTAL LIABILITIES
Net Assets	Agreed between parties	Judgment
Less Liquidation Costs	15,000-$40,000	No	Nil
VALUE	TBD

NOTES

*1

Notional liquidation value would include commission but

not all stock will be sold as on a liquidation.  One half of the commission on realisation  is to apply.   The Court understands the rate is agreed.

*2

The Court regards the valuation of the cattle as fairly

fixed without further valuation, but recognises that costs incurred in the seasonal cycle and the timing of valuation, have an effect and this is recognised with *6 below.

*3

The settlement of Lansdowne is understood to reflect on

this figure, and may also reflect in plant.

*4

The semen is included in Mr Wilding’s value for Interim

Judgment, but the disputed value will be determined and brought to account on the “second phase” valuation.

*5

This  plant  is  at  the  historical  expense  of  TML.    The

feedlot was treated as a TML asset.  Depreciation values treated as fair value.

*6

The overall allowance made is based on judgment that

this item is better addressed in the share valuation as it is a benefit to TML although on land TML does not own.  It reflects in the overall financial position of TML and represents a seasonal adjustment.

*7

Interest  is  to  be  calculated  at  the  rate  agreed  and

previously applied in the accounts.

*8

Costs relevant to valuation.

*9

Costs relevant to valuation.