HARICOT INVESTMENTS LIMITED v MAEREWHENUA DISTRICT WATER RESOURCE COMPANY LIMITED [2014] NZHC 2781

HARICOT INVESTMENTS LIMITED v MAEREWHENUA DISTRICT WATER RESOURCE COMPANY LIMITED [2014] NZHC 2781 [7 November 2014]IN THE HIGH COURT OF NEW ZEALANDTIMARU REGISTRYCIV-2013-476-000193[2014] NZHC 2781BETWEEN HARICOT INVESTMENTS LIMITEDPlaintiffAND MAEREWHENUA DISTRICT WATERRESOURCE COMPANY LIMITEDDefendantHearing: 19 - 24 October 2014Appearances: C S Withnall QC and R M Reeve for PlaintiffR W Raymond and V M Heward for DefendantJudgment: 7 November 2014RESERVED JUDGMENT OF DUNNINGHAM JContentsIntroduction .......................................................................................................... [1]How did the stand-off between Haricot and Maerewhenua arise? ............... [14]The Memorandum of Encumbrance [16]The new spray consent [19]The review of the company documentation [23]The Limitation on Directors [34]Issue of further shares [40]Deciding on a structure for the spray irrigation extension to the scheme [46]Issue of new shares on 16 August [54]Pressure is placed on Haricot [56]Relief under s 174 of the Companies Act 1993 ................................................ [69]Have the actions of the Company been "oppressive, unfairly discriminatoryor unfairly prejudicial? ...................................................................................... [76]Introducing a new constitution containing the provisions in cls 3.1, 3.3, 4.2 and 10.4(f) [76]Requiring Haricot to enter into the new Water Supply Agreement [94]Threatening to forfeit Haricot's shares for non payment of disputed watercharges and threatening to redeem Haricot's shares for refusal to sign the WaterSupply Agreement [113]Issuing shares to Meridian Energy Limited and Mr Dogterom at a consideration of $1.00 per share [116]Threatening to discontinue, then discontinuing, the supply of irrigation water for failure to sign the new Water Supply Agreement [125]Enacting r 3 under cl 8 of the Memorandum of Encumbrance to enforce the requirement to sign the Water Supply Agreement [132]Conclusion ......................................................................................................... [136]Introduction[1] In 1969, Mr Alistair Wills was a progressive farmer who could see the benefits of irrigating his land. In that year he commenced lobbying the District Commissioner of Works to set up an irrigation scheme for farmers in the Duntroon–Bortons area on the south bank of the Waitaki River. His persistence eventually paid off and, in 1977, that scheme was constructed to serve 14 farm properties by gravity supply.[2] In 1989 the government decided to vest this, and other irrigation schemes, in the users of those schemes. Maerewhenua District Water Resource Company Limited (Maerewhenua) was incorporated by the scheme users to acquire and operate the scheme. In 1990, the scheme vested in Maerewhenua and scheme users subscribed to shares in the company at $1.00 per share per assessed irrigable hectare.Mr Wills' farming company, Haricot Investments Limited (Haricot) was one of those shareholders. The respective obligations of the company and the scheme user were recorded in a Memorandum of Encumbrance which was registered on the title to the scheme user's land.[3] Once in Maerewhenua ownership, the scheme continued to operate much as it had done under government ownership. However, that all changed when, in 2001, a new power project on the Waitaki River, Project Aqua, was proposed by Merdian Energy Limited (Meridian). The construction of the project's canal would disrupt irrigation supply to three of the Maerewhenua farmers. Meridian was willing to provide an alternative water supply and this led to Maerewhenua applying for a new water consent to serve these farmers.[4] However, this consent application, along with all others relating to the Waitaki catchment, was "called in" while a statutory hearing process was undertaken to create a new Waitaki Catchment Water Allocation Plan. Even though Project Aqua was called off, Maerewhenua decided to pursue the consent, and, despite the challenges of the constantly evolving planning regime for the Waitaki River, Maerewhenua was eventually granted consent in 2010 (albeit subject to its own appeal of conditions). It then had to turn its attention to using the consent, so that it did not lapse.[5] It was then that factions developed in Maerewhenua. Haricot was content with the status quo, while other shareholders were keen to expand the shareholder base, particularly when they were faced with the cost of replacing the damaged intake in early 2011.[6] The directors sought professional advice on changing Maerewhenua'sconstitution and water supply arrangements so that the company could take on new shareholders. They also decided to borrow money to upgrade and expand its water supply network in order to utilise the new consent. Those changes were approved by special resolutions of the shareholders.[7] Haricot resisted these moves. It refused to sign the new Water Supply Agreement, or to pay water charges on the 16 shares it held, but was not using.[8] The directors of Maerewhenua retaliated with threats to redeem Haricot'sshares and to stop Haricot's water supply. Eventually, in the autumn of 2013, Maerewhenua stopped Haricot's water supply.[9] Haricot responded by issuing these proceedings, claiming that the company'sactions were ultra vires and/or oppressive, unfairly discriminatory or unfairly prejudicial to it, and seeking relief under s 174 of the Companies Act 1993 (the Act).[10] The relevant actions which are claimed to be ultra vires and/or to constitute oppressive, unfairly discriminatory or unfairly prejudicial actions under s 174, are:(a) introducing a new constitution containing the provisions in cls 3.1, 3.3, 4.2 and 10(4)(f);(b) requiring the plaintiff to enter into the Water Supply Agreement in the form proposed;(c) threatening to forfeit Haricot's share for non payment of disputedwater charges;(d) issuing shares to Meridian Energy Limited and Mr Dogterom at a consideration of $1.00 per share;(e) threatening to redeem Haricot's shares at a nominal value of $1.00 per share because it refused to sign the Water Supply Agreement;(f) discontinuing the supply of irrigation water for failure to sign the new Water Supply Agreement;(g) enacting r 3 under cl 8 of the Memorandum of Encumbrance as an alternative way to enforce the requirement to sign the Water Supply Agreement.[11] By the close of the hearing, the relief sought by Haricot was confined to the following:(a) a declaration that the purported redemption of Haricot's shares was invalid (because there was a failure to comply with s 68(b) of the Act), even though the company has now rescinded that resolution;(b) a declaration that "rule 3", making it a condition of supply of water that the shareholder enters into the company's then Water Supply Agreement, is not authorised under cl 8 of the Memorandum of Encumbrance and is of no effect;(c) a declaration that cl 3.1 of the new constitution (which provides that there is to be only one class of shares, namely water shares) is ineffective to alter or revoke the rights attaching to the original shareholding of Haricot because it does not comply with s 117 of the Companies Act 1993;(d) a declaration that cl 3.3 of the constitution (which allows the company to recover its operating and capital costs on a per share basis) is unenforceable against Haricot by virtue of s 101 of the Companies Act 1993, and attempts to enforce it are oppressive under s 174;(e) a direction to amend cl 4.2 of the constitution to place limits on the matters which the directors can require to be included in Water Supply Agreements to those matters which are required to be included pursuant to any resource consent condition or are reasonably necessary to ensure the orderly, efficient and environmentally acceptable use of the scheme by farmers;(f) clause 14.4 of the Water Supply Agreement (which requires shareholders to indemnify the company in specified circumstances) be"struck down" as being oppressive and beyond the powers of the directors;(g) an inquiry into damages over losses suffered by Haricot as a consequence of having its water supply turned off during part of 2013.[12] The issues for me to determine are:(a) whether the actions listed in [11] above are ultra vires and/orconstitute conduct which is "oppressive, unfairly discriminatory or unfairly prejudicial" under s 174; and(b) if they are, whether it is appropriate to grant the relief sought.[13] While the defendant has counterclaimed against the plaintiff seeking certain mandatory orders and damages, it appears that the defendant's concerns will beaddressed by determining the extent to which the new constitution and Water Supply Agreement are enforceable against Haricot.How did the stand-off between Haricot and Maerewhenua arise?[14] It is necessary to review the background to the claim in more detail in order to understand why Haricot has resisted the changes the directors have sought to introduce to the company, and also to understand why the directors have taken the steps they have against Haricot.[15] As outlined above, Haricot's director, Alistair Wills, was heavily involved in the inception of the irrigation scheme. He was also a director of Maerewhenua in its early stages. He initially irrigated 55 hectares of his land with border dyke irrigation and, in 1980, obtained approval which allowed for pumped spray irrigation of another eight hectares.The Memorandum of Encumbrance[16] Once Maerewhenua was established, and the scheme infrastructure and consent transferred to it, the directors investigated the appropriate legal structure to record water supply arrangements between the company and each shareholder. Thecompany's lawyer recommended a Memorandum of Encumbrance, which gavesecurity for payment of charges for water and also gave notice of the existence of the scheme, and the requirements to pay rates before water is supplied to any purchaser of the irrigated land.[17] Two key provisions in the Memorandum of Encumbrance were cl 2(c), which provided that:The Grantor will pay a proportionate share (being the ratio of the assessed area divided by the number of hectares of assessable area in the irrigation scheme owned by the Grantee) of the cost of: any surcharge fixed by the Grantee in respect of any unbudgeted cost of any emergency repairs required to ensure the supply of water to all or any of the users of water in the scheme; of purchase of any capital equipment as may be necessary to ensurethat the scheme remains operative; of purchase of the scheme or repayment of any debt.and cl 8, which provided:Any conditions or rules laid down by the Grantee from time to time relating to the operation and use of the scheme by the Grantor (and other users) shall be observed by the Grantor. Failure to observe such rules shall give rise to a right for the Grantee to withdraw its consent for the Grantor to use water from its scheme.[18] When the encumbrance was executed the number of shares issued to each shareholder was intended to reflect the number of hectares the farmers proposed to irrigate and Haricot was issued 81 shares. In April 1994, Haricot's assessed area wasincreased a further 10 hectares, to 91 shares, at a payment of $1.00 per share. Two other farms received additional shares at the same time. Mr Wills' evidence was thatthe allocation of the new shares was to reflect the areas that the shareholders wished to irrigate and was entirely based on the recommendations of a Mr Hurst, who had been engaged by the board to advise on this issue. However, it was common ground that Haricot in fact only irrigated (and still irrigates), 75 hectares using water supplied via the Maerewhenua consent.The new spray consent[19] Maerewhenua's existing resource consent allowed it to take 900 l/s from theWaitaki River. However, in early 2004, as a consequence of Meridian's Project Aquaproposal, the company applied to take a further 468 l/s from the Waitaki River for spray irrigation (the spray consent). Even when Meridian's plans changed, so that its proposed canal would not directly affect any Maerewhenua farmer, the spray consent was pursued and several other shareholders in the company (including Haricot) expressed an interest in using the spray consent, if granted.[20] However, when Project Aqua was cancelled, and all the existing consentapplications had become part of a "call-in" by the Minister, the shareholder applicants had to decide whether they wanted to continue. Some, including Haricot, did not, and so there was spare capacity in the spray consent. It seems that different farmers showed an interest in the spray consent at different times, and at any givenstage, the company billed the costs of pursuing the spray consent application to the farmers currently expressing an interest in it, on a pro-rata basis.[21] Although the spray consent was applied for in Maerewhenua's name, fromHaricot's perspective, it was always intended to be a standalone consent and the costs of obtaining it were to be fully funded by the new spray irrigators who intended to use it. It was also Haricot's understanding that all costs for expanding the scheme to supply new spray irrigators would be met by those irrigators concerned. Indeed, in 2007 Mr Wills' brother, Errol Wills, drafted a cost sharing agreement between the company and the prospective spray irrigators which, although never signed, proposed that the costs of obtaining the consent and of supplying irrigation water to the new irrigators, would be the sole responsibility of the new irrigators.[22] The new spray consent was granted in May 2010. Although Maerewhenua appealed an aspect of the conditions, so use of the spray consent could not commence at that point, it did bring to a head the need to consider how the company was going to enable the use of the consent, and bring in new shareholders to take up the additional water the consent permitted.The review of the company documentation[23] In late November 2010, the Board of Maerewhenua began planning for how they would introduce new shareholders into the scheme. They decided to engage Mr David Goodman, a lawyer from Goodman Tavendale Reid, to advise on a share structure and constitution which would facilitate the addition of new spray irrigation shareholders.[24] Mr Goodman familiarised himself with the scheme, and provided a preliminary discussion paper to the shareholders on 10 February 2011.[25] At that point his advice was:(a) the existing constitution had been adequate, but a new constitution, which covered the issues which affected the company going forward and gave it some flexibility to evolve over time, was required;(b) the constitution need not distinguish between spray irrigation and border dyke irrigation in its share structure, but should consider a distinction between property shares and water shares, with property shares being voting shares with one share issued per farmer and water shares being issued relative to the volume of water taken and/or irrigated hectares;(c) an updated water supply agreement should be prepared to cover a range of issues;(d) there were some issues to consider regarding the alignment of the existing and the new spray consent, including having a single intake for both consents.[26] At the end of the meeting with shareholders, it was agreed that Maerewhenua would proceed with instructing Mr Goodman to draw up a new constitution and water supply agreement, and that proposed new shareholders would have a say in the drafting of those documents.[27] One of the directors, Mr Weir, sought feedback from the shareholders following the meeting attended by Mr Goodman on the proposals for receiving thecompany's documentation. Comments were received back from two shareholders, including Mr Errol Wills, but not from Haricot.[28] At around the same time, the directors were dealing with the issue of reinstating the scheme intake which had been damaged by flooding in February 2011. The directors sought tenders for rebuild of the intake. Only two tenders were received, one of which also proposed construction of a new intake upstream from the existing intake. The proposals were reviewed by an independent irrigation specialist, Mr Terry Heiler. In July 2011, he recommended construction of a new intake at the upstream site over repair of the existing intake.[29] At the same time, the Board considered increasing the size of the pipes taking water from the new intake from 1200 millimetre pipes to 1350 millimetre pipes sothat water for both consents could be accommodated within them. The directors, eventually, decided to proceed with increasing the size of the pipes.[30] A special meeting of shareholders was held on 24 August 2011 where the draft constitution and water supply agreement, prepared by Mr Goodman in consultation with the directors, were discussed and voted on. Prior to the meeting both documents had been circulated to all shareholders, along with explanatory notes, for their consideration.[31] The minutes of that meeting record that Mr Errol Wills, of Downland Farms Limited, was concerned that the Water Supply Agreement gave more power to directors and Meridian's representative commented on the breadth of shareholder liability. However, the motion to adopt the new constitution and Water Supply Agreement was passed. Only Haricot and Downland voted against it.[32] At the same meeting, the directors sought approval to proceed with construction of the new intake including their recommendation to use larger 1350 millimetre pipes in building the new intake to "future proof" the scheme. They said that other users could be brought in with the additional capacity; for example, farmers taking from the Maerewhenua River could shift their consent down to thecompany's river intake. The shareholders were advised that the use of the wider pipe size would require funding an extra $50,000. A shareholder resolution approving the contract to build the new intake structure and pipe work, including the variation of cost in pipe size, was passed by the requisite 75 per cent majority on 1 September 2011.[33] The new constitution was then formally adopted on or about 3 November 2011 following the passing of a special resolution by shareholders.The Limitation on Directors[34] On 30 November 2011, Maerewhenua's AGM was held. Under the newlyadopted constitution a minimum of three, and a maximum of six, directors was permitted, whereas under the previous constitution, a minimum of three and a maximum of four directors was permitted.[35] There were seven nominees for the board, two of whom were continuing directors and five who put themselves forward for election. With six directors permitted, all but one nominee could be appointed.[36] However, Mr Weir (who was at the time the chairman of the Board), said that the facility for having six directors was intended to provide for when the company had an expanded shareholder base once the company was using the spray consent. With only nine farmers currently members of the scheme, he thought it cumbersome to have any more than the four directors in the interim, which was the maximum permitted under the previous constitution.[37] Prior to the AGM, the directors had sought legal advice on this. The advice was that the Board itself could not dictate how many directors there were. However, it could put it to the shareholders to resolve to limit the number of directors, while still being within the parameters provided for in the constitution. A recommended wording for this resolution was proposed and that resolution was put to the shareholders at the AGM and passed. In light of it, Mr Dogterom withdrew his nomination as a director, leaving four nominations for the two vacant positions to be voted on.[38] Mr Wills was concerned at the legality of limiting the directors to four. Mr Weir offered to adjourn the vote if the shareholders were not in agreement with proceeding in that way. However, the majority agreed to carry on. Mr Keeling and Mr Weir were appointed with Mr Hurst and Mr Richard Wills continuing their appointments as they had not yet served a full term. Mr Alistair Wills and the remaining candidates were unsuccessful.[39] Mr Alistair Wills' view was that the whole process was "unfair" andeffectively amended the constitution by a simple majority vote. Without his voice on the Board as a director he considers that the subsequent extension of the scheme to accommodate spray irrigators, at all irrigators' cost, would not have gone ahead, or would have only gone ahead on the basis that the new shareholders bore the actual cost of their involvement.Issue of further shares[40] The next issue which created concerns for Haricot was the issue of additional shares to Mr Dogterom and Meridian.[41] For some time the directors had been concerned about the discrepanciesbetween some farmers' shareholding and the area they actually irrigated. At leasttwo shareholders, Mr Dogterom and Meridian, irrigated more area than they had shares for, whereas Haricot irrigated less land than it had shares for. The new constitution provided for the shares to be water shares which directly related to the right to take a volume of water to irrigate a hectare. It was important, therefore, that the shares accurately reflected the irrigated area so that the charges paid, and the voting rights accorded to the shareholder, were consistent with that.[42] In May 2012, the directors decided to issue Mr Dogterom and Meridian Energy with additional shares. At that time Mr Dogterom held 155 shares in the company but in fact irrigated 390 hectares, while Meridian held 20 shares but irrigated 34 hectares. The directors resolved to issue a further 139 shares to Mr Dogterom and a further 14 shares to Meridian. The stated reason was to align the shareholding with the actual number of hectares they irrigated.1[43] A shareholders' special meeting was held on 12 April 2012 where a specialresolution to issue those shares was passed. The special resolution was then sent to those shareholders not present, which included Mr Wills, for signing. On 17 April 2012, he signed the resolution, although as he notes, the share price was notaddressed in the covering letter, nor does it appear, at that stage, that the directors'resolution resolving to issue the shares at $1.00 per share had been passed. Thatoccurred at a directors' meeting on 10 May 2012.[44] However, once the directors' resolution approving issue of the shares at $1.00 per share was passed, the shareholder resolution referring to the Board resolution was again circulated to shareholders, with a request to read it carefully, sign it and return it to the office. No shareholder advised that they resiled from their1 It remains unclear why only 139 shares were issued to Mr Dogterom if the intention was to align the shareholding with the area irrigated, as 235 shares would have been required to do that.earlier support of the resolution, when the shares were to be issued at $1.00, being the same price all the original shares were issued at.[45] Mr Wills now says that although he signed the resolution agreeing to the share issue, he "signed it thinking that all was in order as it was consistent with whatwe had previously agreed to, i.e., that there would be a bonus issue of shares to allexisting shareholders". It is not clear how this understanding arose.Deciding on a structure for the spray irrigation extension to the scheme[46] In April 2012, the Board formally engaged Mr Matt Ross to advise the directors on development of the scheme. Mr Ross was a former chairman of the Board (although not a shareholder at the time), and had been heavily involved in the Waitaki Catchment Water Allocation Plan process. He also had extensive experience serving on the boards of irrigation related entities, including as a director of Irrigation New Zealand from 2008 to 2011.[47] Mr Ross assisted by preparing a schematic proposal for infrastructure to amalgamate the existing scheme with staged developments to extend the scheme, including to the new spray irrigators. The various stages proposed were:(a) constructing the new intake and upgrading the capacity of the existing primary race, which was already underway (stage 1);(b) constructing a new pressurised pipe system to service the new shareholders (stage 2(a));(c) upgrading a further part of the existing race and acquiring and upgrading a privately owned storage pond to become part of the Maerewhenua infrastructure (stage 2(b)); and(d) a further upgrading of the race system, which could facilitate further spray irrigation in the lower reaches of the scheme area (stage 3).[48] Mr Ross also recommended that the scheme be valued and that new shareholders provide capital in accordance with the proportion of their ownership of the current scheme valuation, which would help offset some of the capital requirements for the proposed scheme development. The Board would then establish and set a capital charge for the design and build processes for the further stages of the concept to be implemented.[49] Around the same time, in June 2012, Mr Goodman was also advising the directors on options for introducing new shareholders to the scheme. Two options were proposed. One option was to retain the existing structure and issue shares based on a valuation obtained by the company of around $3,500 per share. Any shortfall for the 2(a) stage would be met by the company borrowing and recoveringthe cost of that loan through operational charges. As Mr Goodman said "an issue remains [as] to whether that should be an operational charge across all shareholders or just the 2(a) shareholders". The second option was to create two classes of shares,ownership or capital shares and water shares.[50] At the time Mr Goodman's recommendation was to opt for the status quo, the first option, but, at a meeting held on 18 July 2012, attended by two of the directors and Mr Ross with Mr Goodman and the company's accountant Mr Chisholm, thoseoptions were again debated. By the end of the meeting, the company's advisers wereasked to prepare a presentation on a two class share structure to be presented to a meeting of shareholders (existing and new). It proposed that existing shares were reclassified as capital shares preserving the existing shareholders' ownership of the company, and which would carry a right to vote, whereas the new water shares would carry the right to irrigate, at the applicable rate, one hectare and would be issued based on the number of hectares irrigated.[51] However, after that meeting, Mr Ross and the two directors who attended had growing reservations about the two share structure and Mr Chisholm was contacted by Mr Weir about the company taking the alternative option of retaining one class of shares and issuing additional shares per hectare at the set market value. That meant that any shortfall in funding the scheme upgrades and extension would be met by borrowings paid for by all shareholders, existing and new.[52] At a meeting on 7 August 2012, a slide presentation was presented to existing and new shareholders by Mr Chisholm setting out four options. The first was for existing shareholders to fund all; the second was to issue shares at $1.00 with a capital charge; the third was a two share class structure of capital and water shares, and the fourth option was to issue additional shares at market value on a per hectare basis and then all shareholders fund capital development as required. The directors favoured option four and, although no formal vote was held on the proposal, on a show of hands, option four was favoured.[53] Haricot's concern was that it had always understood that the cost of the extension to service irrigators using the spray consent would be met by new shareholders, but the option being voted for required all shareholders to share equally in the costs of the infrastructure development required. Haricot considered this put an unfair burden on existing shareholders but especially Haricot, given that the company wanted to charge on a per share basis. There would be a shortfall between the new capital raised from the share issue, and the cost of the extensions, which would have to be funded by higher debt than would be carried otherwise. AsMr Wills put it, "the existing shareholders were being asked to vote for a proposal that was the most expensive option for us and the cheapest option for thenewcomers".Issue of new shares on 16 August[54] Following the 7 August meeting the company sought approval for a special resolution increasing the shareholding of the company to bring the new spray shareholders in as shareholders, and to issue a further additional 126 shares to Mr Dogterom so that he had sufficient shares to irrigate his 420 hectares, at a share price of $2,675 per share. All shareholders, with the exception of Haricot and Downland, resolved to approve the issue of shares as described in the Board resolution.[55] Once the new shares had issued, a second shareholder meeting was held on 1 November 2012 to approve the company borrowing $4 million to fund the extension of the scheme.Pressure is placed on Haricot[56] It is clear from the above, Haricot generally opposed the steps taken by the company to revise its constitution, to alter the terms and conditions of water supply with the shareholders, and to share the cost of expanding the scheme to accommodate new shareholders with the existing shareholders. However, while all other shareholders had eventually accepted the decisions made by the company, Haricot did not and was becoming an increasing problem for the directors.[57] On 31 August 2012 the company wrote to Haricot enclosing its copy of the new Water Supply Agreement and asked for it to be signed and returned. Haricot was not prepared to do this. Furthermore, from the period 20 June 2011, it refused to pay water charges on the 16 shares of spray irrigation which it was not using.[58] By late November 2012 Haricot owed Maerewhenua $10,561 in outstanding water charges. On 22 November 2012, Goodman Tavendale Reid wrote to Haricot saying that Haricot was liable to pay its proportionate share of annual charges as determined by the directors and if it did not make payment, the 16 shares it was not using would be forfeited in accordance with cl 10.4(f) of the constitution. It alsoagain reminded Haricot that it had not signed the company's current Water SupplyAgreement. The letter required Haricot to sign and return it by 4 January 2013,failing which the company would "exercise its right in accordance with cl 4.2 to redeem your shares par value being $1.00".[59] The matter became more pressing because the bank required the provision of executed Water Supply Agreements as a term of its lending. In November 2011 it had asked for copies of the signed agreements to be supplied to it by 31 May 2012. Then, in January 2013 when the further borrowing was undertaken to complete stage 2(a), the bank again asked for confirmation that all Water Supply Agreements had been executed, as it was "the key agreement that underpins our lending".[60] In December 2012, Haricot did pay the $10,561, albeit under protest as it did not want the 16 shares to be forfeited, particularly not for the sum of $16.00.[61] On 18 December 2012, Goodman Tavendale Reid again wrote to Haricot noting the payment of the outstanding water charges but, again, requiring the return of the signed Water Supply Agreement by 4 January 2013, saying that "no extensionswill be given".[62] Haricot's lawyers responded, saying their client's liability was pursuant tocl 2 of the Memorandum of Encumbrance and the agreement did "not extend tocover the costs of an extended scheme with a proportion of such costs being attributed on an equalisation basis". They warned that any purported attempt to redeem shares would be firmly opposed.[63] Goodman Tavendale Reid replied on 14 January 2013 stating that the new Water Supply Agreement replaced the old Memorandum of Encumbrance and that, in any event, Haricot was bound by the constitution which required holders of water shares to enter into the new agreement. It warned that unless the agreement was signed and returned by 25 January 2013, Maerewhenua would take steps to discontinue the supply of water to Haricot.[64] On 8 February 2013 the directors passed a resolution to redeem Haricot's91 water shares at the paid up value of the shares, being $1.00 per share. GoodmanTavendale Reid wrote to Haricot's lawyers on 19 March 2013 saying that Haricot'sshares could now be redeemed although they would not actually be redeemed until"a future date to be determined by the directors". They again referred to the requirements of the constitution and threatened to disconnect the supply of water if the agreement was not signed and returned within seven days from the date of that letter.[65] On 27 March 2013, when the agreement was still not signed, GoodmanTavendale Reid wrote to Haricot's solicitors advising that the company had now instructed the scheme manager to disconnect supply to Haricot. In addition to referring to the constitution, they also referred to cl 8 of the Memorandum of Encumbrance (which required Haricot to be bound by the "rules" of the company) and expressed the view that the constitution and the Water Supply Agreement represented the rules of the company which Haricot was bound to enter into.[66] In April 2013 Haricot received another letter from Goodman Tavendale Reid which explained that rules had now been made by the company regarding the operation and use of the scheme pursuant to cl 8 of the Memorandum of Encumbrance. One of the rules, r 3, stated:It shall be a condition of a supply of water by the company to theshareholder/farmer that the shareholder/farmer enters into the company'sthen current Water Supply Agreement.[67] In that same month, Haricot's water supply was then turned off. Mr Willssays that Haricot had to destock its deer herd and cease all planned and current development on the farm, causing "significant financial loss" to Haricot's farming business.[68] These proceedings issued shortly afterwards, on 19 April 2013, seeking relief under s 174 of the Companies Act 1993, including as described in [12] above.Relief under s 174 of the Companies Act 1993[69] Section 174(1) of the Act provides:A shareholder or former shareholder of a company, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him or her in that capacity or in any other capacity, may apply to the court for an order under this section.[70] The leading New Zealand authority on s 174 is Thomas v H W Thomas Limited,2 albeit the relevant section discussed in that case was the predecessor of s 174, being s 209 of the Companies Act 1955.[71] In Thomas, Richardson J explained that the statutory remedy this section provides is:a remedial provision designed to allow the Court to intervene where there is a visible departure from the standards of fair dealing; and in the light of the history and structure of the particular company and the reasonable expectations of the members to determine whether the detriment occasioned2 Thomas v H W Thomas Limited [1984] 1 NZLR 686 (CA).to the complaining member's interests arising from the acts or conduct of the company in that way is justifiable.In the same decision Richardson J also gives guidance on the meaning of the word"oppressive, unfairly discriminatory, or unfairly prejudicial"; saying:In employing the words "oppressive, unfairly discriminatory or unfairly prejudicial" Parliament has afforded petitioners a wider base on which to found a complaint. Taking the ordinary dictionary definition of the words from The Shorter Oxford English Dictionary: oppressive is "unjustly burdensome"; unfair is "not fair or equitable; unjust"; discriminate is "to make or constitute a difference in or between; to differentiate"; and prejudicial, "causing prejudice, detrimental, damaging (to rights, interestsetc.)".[72] The decision goes on to comment on the relationship between the three expressions saying:I do not read the subsection as referring to 3 distinct alternatives which are to be considered separately in watertight compartments. The three expressions overlap, each in a sense helps to explain the other, and read together they reflect the underlying concern of the subsection that conduct of the company which is unjustly detrimental to any member of the company whatever form it takes and whether it adversely affects all members alike or discriminates against some only is a legitimate foundation for a complaint under s 209.[73] Importantly, the Court emphasised that the section focuses on the outcome of the conduct, as opposed to its motivation, saying that:It follows that it is not necessary for a complainant to point to any actual irregularity or to an invasion of his legal rights or to a lack of probity or want a good faith towards him on the part of those in control of the company.[74] If I find that the affairs of the company have been conducted in a manner thatis "oppressive, unfairly discriminatory, or unfairly prejudicial" to Haricot, s 174(2) of the Court provides extremely wide scope for granting relief. Specifically it provides:(2) If, on an application under this section, the court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order-(a) requiring the company or any other person to acquire the shareholder's shares; or(b) requiring the company or any other person to pay compensation to a person; or(c) regulating the future conduct of the company's affairs; or(d) altering or adding to the company's constitution; or(e) appointing a receiver of the company; or(f) directing the rectification of the records of the company; or(g) putting the company into liquidation; or(h) setting aside action taken by the company or the board in breach of this Act or the constitution of the company.[75] In summary, if the grounds in s 174(1) have been made out, the Court muststill determine whether it is "just and equitable" to grant relief in the circumstances which have arisen and it has significant scope to tailor any relief granted to the facts which are before it.Have the actions of the Company been "oppressive, unfairly discriminatory orunfairly prejudicial?Introducing a new constitution containing the provisions in cls 3.1, 3.3, 4.2 and 10.4(f)[76] Haricot's complaints about the new constitution are grounded in Haricot'sview that it was inappropriate to have a single class of shares for both the old and new irrigators, so that the costs of borrowing for the new stage 2(a) infrastructure (over and above the capital introduced by the new shareholders) was borne by all shareholders.[77] Haricot endeavoured to represent the shift from the earlier understanding that new shareholders would bear the cost of the new infrastructure alone,3 to the single share option structure favoured by the directors in the presentation on 24 August 2011, as:(a) reneging on an understanding the existing shareholders had; and3 As embodied in the draft agreement prepared by Errol Wills in 2007.(b) being driven by parties such as Matt Ross who ended up benefiting from the decision as a new shareholder, rather than by proper independent advice.[78] However, I do not accept Haricot's representation of the position.[79] First, there was never any agreement that new spray irrigators would meet the costs of any scheme extension on their own. They did meet the costs, and risk, of pursuing the new spray consent, but those costs were reimbursed to them by the company when the consent was granted. The question of who would fund the scheme extension was still to be determined at that point.[80] The expert advice to the company traversed several options for bringing in the new shareholders and there were advantages and disadvantages no matter which option was selected. The directors took account of that advice in making a recommendation on how to proceed.[81] Clearly an advantage of having more shareholders was that there were more contributors to the operating costs. Furthermore, if existing shareholders incurred a share of the capital costs of stage 2(a), it was expected they would reciprocally benefit if further development of the scheme proceeded, for example, if the stage 3 development that Mr Ross proposed went ahead.[82] The directors had also received advice that it was advantageous to proceedwith "a minimum of differentiation between services and delivery groups",4 andeven more importantly, they had advice from the company's accountant that the debtservicing cost per hectare which the existing shareholders were taking on was almost entirely negated by the reduction in operating costs per hectare. In other words, overall, existing shareholders would be paying almost the same cost per hectare even though they were funding the infrastructure required for the new shareholders, as they would be without the new shareholders being brought on board.4 See advice from Crombie Projects Ltd to Mr Weir received on 17 December 2011.[83] Haricot takes issue with four clauses of the constitution in particular. The first is cl 3.1 which provides:The Share Capital of the company will initially consist of one class of shares being water shares.Haricot argues that this clause increases its liability to pay charges to Maerewhenua by basing charges on the 91 shares that Haricot has held since 1994, as opposed to its"assessed area" which it says is 75 hectares.[84] However, Haricot cannot have its cake and eat it too. It is clear from the evidence that the assessed area referred to in the Memorandum of Encumbrance was always meant to equate with the area irrigated by the shareholder and in respect of which it paid water charges. Haricot has chosen to hold additional shares as insurance against its separate groundwater consent supplying insufficient water in the future as upstream irrigators apply water more efficiently. It was also content, in the past, to pay both capital and operational charges levied on these shares.[85] As the company always intended that the number of shares should align with the amount of water taken and the charges paid, it was sensible to clarify that in the new constitution. That constitution was approved by a special resolution of all shareholders so, even if it did change Haricot's obligations, it did so in accordancewith the requirements of s 117 of the Act. If Haricot chooses to hold 91 shares (however described) it must pay the charges on those shares, whether or not it takes the water.[86] The next complaint relates to cl 3.3 which provides for how the company may charge the shareholders and gives broad powers to fix water charges to recover operating and capital costs. The discussion above applies equally to cl 3.3.Haricot's complaint that it has been used to to further "an agenda of capital expansion which is at odds with Haricot's basic need to secure a stable and economic irrigation source for its farming activities" is simply not supported on the evidence.Indeed, the evidence is that the directors are satisfied that, with an expanded shareholder base, the scheme is more stable and economic, and the per share costs to individual farmers, including Haricot, are little changed. For this reason, I do notaccept that s 101 (which says a shareholder is not bound by a change which increasesa shareholder's liability) is engaged.[87] The next complaint relates to cl 4.2 which deals with redemption by the company of water shares for specified defaults, including a failure to enter into the current Water Supply Agreement.[88] The company has acknowledged that the redemption clause does not comply with s 68 and will address this by an amendment to the constitution. It has agreed not to proceed with any current action to redeem shares and so no specific relief is sought by Haricot on that aspect of this clause.[89] However, Haricot does ask that the Court direct amendments to the clause to place limits on matters which the directors can require to be included in Water Supply Agreements. It says they should be limited to those matters which are required to be included pursuant to any resource consent condition, and those which are reasonably necessary to ensure the orderly, efficient, and environmentally acceptable use of the scheme by the farmers.[90] While such relief may seem uncontentious, as the company's powers are arguably already limited in this way by implied terms of the constitution, I am reluctant to do this without full debate on the issue. This proposed amendment was only sought at the end of the hearing and the company has not had an opportunity to comment on its appropriateness. There may be good reasons for including matters which fall outside these limits in the Water Supply Agreement. Furthermore, there is still room for debate about what constitutes a provision to ensure the "orderly or efficient" operation of the scheme so disputes may still arise. This is a matter the directors may wish to give further thought to in making the amendments toMaerewhenua's constitution, as the greater clarity there is about what can be included in a Water Supply Agreement that is mandatorily imposed on users would be helpful, and, in any event, the Board can expect resistance from its shareholders if the terms of the agreement are unreasonable or unnecessary.[91] The next challenge is to cl 10.4(f) which deals with forfeiture for non payment of charges fixed by the company. Clause 10.4(f) was relied upon to threaten forfeiture of Haricot's 16 dry shares if Haricot did not pay the charges relating to them.[92] No compelling reason was given as to why shares should not be forfeited in those circumstances. In my view it is appropriate that the company have provision for forfeiture in such cases and, in any event, the question is now moot, as Haricot has paid the charges on those shares. Clause 10.4(f) is therefore not unfairly prejudicial or oppressive in itself, (although I do not rule out the possibility of it being used oppressively or unfairly in a particular set of circumstance) and no relief is warranted in respect of it.[93] In summary, none of the clauses in the new constitution are invalid under the Act or are, in themselves, oppressive, unfairly discriminatory or unfairly prejudicial to Haricot.Requiring Haricot to enter into the new Water Supply Agreement[94] The new Water Supply Agreement was a document recommended by thecompany's solicitors and provision for it was made in cl 3.2(a)(viii) of the new constitution. That clause provided:The holder of water shares shall enter into the company's then current WaterSupply Agreement governing access to water, which shall provide the terms of water supply including the applicable rate of take.[95] Much of the Water Supply Agreement appears innocuous. For example, it sets out the obligation of the farmer to maintain the flow and operation of the water race or pipes by such things as repairing stock damage, clearing noxious weeds, clearing debris from the water race and maintaining fences along the water race.[96] Although a number of clauses in the Water Supply Agreement were referred to in the pleadings, by the close of the hearing Haricot's case focused on cl 14.4 ofthe Water Supply Agreement. It provides as follows:The farmer shall keep the company indemnified against all costs, claims, demands, expenses, losses and liabilities of whatsoever nature, including without limiting the generality of the foregoing, claims for consequential loss (including loss of profits) which may be made against the company and which the company may sustain, pay or incur as a result of or in connection with the supply of services under this Agreement, except where such costs, claims, demands, expenses, losses and liabilities arise as a result of a negligent act or omission of the company or its agents, servants or contractors.[97] The thrust of Haricot's complaint was that this clause increased the liabilityof Haricot to the company compared with its liability under the Memorandum of Encumbrance. The Memorandum of Encumbrance only required the Grantor, under cl 2(c), to pay a proportionate share of specified costs incurred by the company including repairs, purchase of capital equipment or repayment of debt; in addition to the water charges which were payable under cl 2(b).[98] Haricot argued that:(a) under s 101 of the Act, it was not bound by an alteration of the constitution of a company that increased the liability of the shareholder to the company (and cl 14.4 of the Water Supply Agreement did this) unless the shareholder agreed in writing to be bound by the alteration either before, on, or after it is made;(b) the agreement containing this clause could not be justified under cl 8 of the Memorandum of Encumbrance. That was clearly designed to deal with operational issues, not to enlarge a shareholder's liability to indemnify the company;(c) the Water Supply Agreement was not, at that stage, a requirement imposed by the Regional Council on the Maerewhenua consent although the directors had stated it was a requirement; and(d) in any event the Water Supply Agreement in its current form, did not meet the requirement of a Water Supply Agreement as described in the conditions of the new spray consent;(e) it was not clear to Haricot that it was a requirement of the bank that the agreement be entered into, although the directors had said it was.[99] In response, Maerewhenua says shareholders were consulted on the agreement, the vast majority of them approved the new Water Supply Agreement on 24 August 2011, and the concerns raised by Haricot were not raised at any point during that process. Instead Haricot simply insisted it could not be bound by a Water Supply Agreement as the Memorandum of Encumbrance was the only "Water Supply Agreement" required.[100] From Maerewhenua's perspective the real genesis of the problem is thecompany's insistence that Haricot either pay the full charges on its unused 16 shares, or redeem them at $1.00 per share. Once Maerewhenua took steps to enforce that, and to require Haricot to sign the Water Supply Agreement so it could be provided to the bank, Haricot retrospectively raised these issues.[101] The company also points out that, to the extent Haricot seeks the "setting aside of the actions of the defendants", the Water Supply Agreement is not something which can be set aside now. All other shareholders have agreed to it and signed it and the bank has relied on that in advancing funding to the company for the scheme development work. It does say, however, that it is revising the agreement so that it covers the matters required by the conditions of the spray consent and it is open to reviewing the wording of cl 14.4, to make such liability proportionate to auser's shareholding.[102] I am satisfied that the decision to review the constitution, and to include a requirement to enter a Water Supply Agreement, was done in good faith, and with a view to improving the management of the scheme. In particular, it was intended toresolve the historical anomalies over the differences between "assessed area",irrigated area and shares held, to spell out the "terms and conditions" of use whichwere not spelt out in the Encumbrance but left for subsequent determination, and to prepare the company for the more rigorous requirements of the Regional Council expected to be imposed on any review of the consent, which would include a condition requiring a Water Supply Agreement.[103] All of those were legitimate, even commendable, reasons for setting the relationship between the farmers and the company on a more formal structure than in the past.[104] Haricot did not take any opportunity to engage in consultation over the terms of the Water Supply Agreement. Instead it saw this as an implicit criticism of the efficacy of the Memorandum of Encumbrance, which was, of course, adopted when Mr Wills was active in the running of the company. I gained the impression that Mr Wills' opposition was motivated as much by a sense of defending the legal structures he had introduced for the operation of the company, as it was about the specific content of the Water Supply Agreement. As it transpired, during the course of the hearing, most of Haricot's objections to a new Water Supply Agreement evaporated, leaving only the issue of cl 14.4.[105] No real reason for cl 14.4 in its current format was advanced at the hearing,nor was there any real challenge to Haricot's assertion that it did increase farmers'liability, making them jointly and severally liable to indemnify the company, unless the circumstances fell within the exceptions provided for in the clause.[106] However, I do not accept that s 101 of the Act is brought into play. Section 101 provides:101 Shareholders not required to acquire shares by alteration to constitutionNotwithstanding anything in the constitution of the company, a shareholder is not bound by an alteration of the constitution of a company that-(a) Requires the shareholder to acquire or hold more shares in the company than the number held on the date the alteration is made; or(b) Increases the liability of the shareholder to the company-unless the shareholder agrees in writing to be bound by the alteration either before, on, or after it is made.[107] The requirement to enter the Water User Agreement is provided for in cl 3.2(a)(viii) of the constitution. That provision, in itself, does not alter theshareholder's liability to the company. It is the terms of the particular Water Supply Agreement proposed which does this. Such an agreement could equally have beenadopted by special resolution under the former constitution, so it is not the new constitution that creates this extended liability, and s 101 is not engaged.[108] The real issue is whether the particular terms of the Water Supply Agreement are unfairly prejudicial to Haricot.[109] It is reasonable for the company to require a Water Supply Agreement to be entered into, to cover matters which might otherwise be promulgated under cl 8 of the Memorandum of Encumbrance, or which are required to address mattersprescribed by the conditions of Maerewhenua's water take consents, or which areotherwise agreed to be appropriate.[110] Clause 14.4 does not fall into that category and is, in my view, unfairly prejudicial to Haricot (and to other existing water users) as it was formerly only obligated to the company to the extent prescribed in cls 2(b) and 2(c) of the Memorandum of Encumbrance.[111] This leads to the question of relief. It is inappropriate that the Water Supply Agreement itself is set aside as I am satisfied it is required by, and has been relied upon by, the bank.5 Instead, I consider that Haricot is only bound by the company'sconstitution to sign the current Water Supply Agreement, if cl 14.4 is deleted or is substituted with a clause that is co-extensive with Haricot's existing liability under cl 2 of the Memorandum of Encumbrance and the common law.[112] Accordingly, Haricot is entitled to relief as a prejudiced shareholder, albeit only to the extent of the deletion or replacement of cl 14.4 of the Water Supply Agreement as specified. Whether the company chooses to do that universally, or just for Haricot is, of course, for it to determine. If the parties can not agree on changes to the clause to make it co-extensive with Haricot's existing liability, I reserve leave for the parties to apply to this Court for approval of any proposed replacement wording.5 Although it is not clear that the bank appreciated that the Memorandum of Encumbrance alsocommitted the shareholders to liability for the company's debts. Indeed the bank does notappear to have turned its mind to what provisional provisions in the Water Supply Agreement were important to it, and why that was needed in addition to the Memorandum of Encumbrance.Threatening to forfeit Haricot's shares for non payment of disputed water charges and threatening to redeem Haricot's shares for refusal to sign the Water SupplyAgreement[113] Maerewhenua threatened to redeem Haricot's shares at a nominal value of$1.00 per share pursuant to the provisions of the constitution, for failing to pay disputed water charges and for refusing to sign the Water Supply Agreement.[114] This complaint is now moot as the company has, at the hearing, confirmed ithas rescinded resolutions to redeem Haricot's shares, and it accepts that thecompany's constitution does not comply with s 68 of the Act because it did not makeprovision for how consideration was to be paid for the shares on redemption.[115] In my view that was a proper course to take. Given the company's expressacknowledgement that s 68 of the Act was not complied with I see no need to grant declaratory relief to that effect.Issuing shares to Meridian Energy Limited and Mr Dogterom at a consideration of $1.00 per share[116] This complaint relates to the special resolutions which were put to theshareholders at the shareholders' meeting on 12 April 2012, and then sent to thoseshareholders not present for signing following the meeting. Mr Wills signed the special resolution on 17 April 2012, although at that stage it appears that the directors had not formally resolved to issue the shares at $1.00 per share. That was done at the directors meeting on 10 May 2012, and the special resolution was again referred to the shareholders under cover of a letter dated 15 May 2012.[117] Haricot says this issue of shares was at under value, with agreed expert evidence being presented to the Court that the shares were valued at between $2,600.43 and $3,174.26 at the time.[118] Implicit in this is that Haricot has somehow been disadvantaged or prejudiced by the issue of shares.[119] Maerewhenua, on the other hand, explains that the issue of shares was designed to (better) align the shareholdings of these two shareholders with the water they were actually taking. They could then be charged for water taken on these shares (as the company charged on a per share basis). That was clearly for the benefit of the company and the other shareholders.[120] Mr Wills' assertion that he signed the special resolution thinking it was a bonus issue to all the shareholders was illogical. It was inconsistent with the express terms of the resolution, and was not supported by any contemporaneous document.[121] Haricot could show no prejudice whatsoever as a result of this action. While Haricot argued this diluted the share price for the existing shareholders, in the context of the operation of this particular company, where the shares effectively ran with the land and were not tradable or saleable, and the water was being supplied as if the shares were held by these two shareholders, Haricot could not show any detriment. Its own rights to take water were not altered, so the value which theshares gave to Haricot's land was unchanged.[122] Furthermore, issuing these shares to existing shareholders at $1.00 was consistent with the precedent set in 1994 where 43 shares were issued to existingshareholders to align their shareholdings with the area irrigated or, in Haricot's case,the area it wished to irrigate. Haricot had received 10 of those shares at $1.00.[123] Even if I were of the view that this did prejudice Haricot, this would not be a circumstance where it would be just or equitable to provide any relief. The resolution was actioned over two years ago, it affects third party rights and Haricot signed the resolution confirming the share issue. Haricot is therefore now estopped from asserting that the issue of shares to Mr Dogterom and Meridian on the terms approved was unfair and prejudicial to it.[124] In summary, the resolution to issue those shares at $1.00 per share was neither unfairly prejudicial or oppressive to Haricot, and no relief is warranted.Threatening to discontinue, then discontinuing, the supply of irrigation water for failure to sign the new Water Supply Agreement[125] As explained, the directors threatened to, and then did discontinue the supply of irrigation water on 4 April 2013 because Haricot refused to sign the Water Supply Agreement.[126] Mr Wills' evidence for Haricot was that, without certainty of water for the following season, he destocked his farm and suffered financial loss. No further details of the financial loss were provided and, the water supply was reinstated the following irrigation season after these proceedings had been filed. Haricot asked that, if this action is deemed "unfairly prejudicial or oppressive", that the Court orderan inquiry into damages.[127] Under the Memorandum of Encumbrance, the right to receive a supply of water is conditional on the water user complying with the terms and conditions relating to the operation and use of this scheme. While Haricot argues that the Water Supply Agreement was unfairly prejudicial to it, it now appears its only real complaint is in relation to cl 14.4 of the Water Supply Agreement. In general, its terms do relate to the supply of water and the operation of the scheme.[128] The company says the decision to require a Water Supply Agreement followed extensive consultation which Mr Wills did not participate in. The objections Haricot now raises to the agreement really only surfaced during the litigation. When Maerewhenua threatened to turn off the water it was endeavouring to act in the best interests of the company and it used the sanctions it understood were legally available under the Memorandum of Encumbrance when Haricot repeatedly refused to comply.[129] Maerewhenua says water was cut-off, on advice, at the end of the irrigation season and during a period of sustained rainfall. The company says there is no proper evidence before the Court that the plaintiff has suffered a loss as a result of the disconnection of the water over the winter period. A mere statement that Haricot had to destock, without supporting evidence to demonstrate how this caused financial loss, was insufficient.[130] I accept that the directors of Maerewhenua took the steps they did, in good faith, acting on advice, and at a time when, they understood, there would be no practical detriment to Haricot. While some of the communications between directors and their advisers at this time relating to Haricot were a little intemperate, that was largely borne out of frustration at Mr Wills' unwillingness to deal with the issues of concern in a constructive way. The reality is that Haricot, through its lawyers, baldlystated it was "unaffected by the changes to the Companies [sic] constitution" andrefused to countenance a Water Supply Agreement. Despite correspondence betweenthe respective parties' lawyers, where Maerewhenua explained its position fully,Haricot's opposition to the agreement remained firm. In the same period, the bank was pressing for confirmation that all Water Supply Agreements had been signed. It was therefore understandable that the company eventually proposed terminating the supply of water.[131] Haricot's evidence as to this causing financial loss is sparse. It consists of nomore than a bald statement that it had to "destock" its deer herd and this caused "significant financial loss". However, even accepting, at face value that a loss mayhave eventuated to Haricot, this is not a circumstance where I am prepared to grant relief. Haricot acted combatively at all stages and that approach was a major contributing factor to its stand-off with the company. In the end, its objection to the Water Supply Agreement has been whittled down from total rejection to a complaint against one clause. Had Haricot approached the drafting of the Water Supply Agreement as constructively as it has now, rather than as rejecting it in total because it was part of a suite of changes to the company which Haricot was opposed to, the dispute would have been resolved sooner. In these circumstances, it would not be equitable to grant relief when the company endeavoured to explain its position to Haricot and Haricot refused to engage with it.Enacting r 3 under cl 8 of the Memorandum of Encumbrance to enforce the requirement to sign the Water Supply Agreement[132] I have already concluded that it was sensible, and within the company'spowers, to require entry into a Water Supply Agreement, in particular to deal with practical matters related to the running of the scheme, compliance with conditions ofconsent, and financial liabilities and responsibilities as between the company and the water users.[133] Faced with Haricot's rigid view that no Water Supply Agreement was required because the Memorandum of Encumbrance was the Water Supply Agreement, it was unsurprising that the company looked to the terms of the Memorandum of Encumbrance to support and enforce the requirement to sign the Water Supply Agreement.[134] Although Haricot maintained its stance that r 3 (requiring entry into a Water Supply Agreement) was not authorised by cl 8 and accordingly could be of no effect, it was acknowledged that to the extent the terms and conditions of the agreement related to cl 8 matters, it could be used to require entry into such agreement.[135] While the Water Supply Agreement went beyond such matters, this claimed action goes no further than adversely affecting Haricot through the imposition of cl 14.4. As that issue has already been addressed Haricot is not further prejudiced by this, nor is any additional relief required.Conclusion[136] In the end, I have determined that Haricot is entitled to relief on one issue, that is, in relation to cl 14.4 of the Water Supply Agreement. It is not obliged to sign a Water Supply Agreement which contains the clauses currently drafted, but only one where the clause is removed, or revised to reflect liability that is co-extensive with Haricot's liability as stands at present.[137] In respect of the other issue where relief would have been available, being thecompany's purported redemption of all Haricot's shares pursuant to a clause in the constitution which did not comply with s 68 of the Act, no relief is required as the directors have agreed to rescind that resolution and to revise the constitution.[138] Costs are reserved. While Haricot has had only limited success in these proceedings, I do recognise that the key issues of concern to Haricot being, the redemption of shares and the termination of its water supply, were only resolvedonce it issued these proceedings. Indeed the decision to rescind the resolution to redeem the shares was only notified to Haricot in the course of the proceedings.[139] My tentative view, therefore, is that Haricot is entitled to 2B costs notwithstanding the outcome of this proceeding. If costs cannot be agreed:(a) the plaintiff is to file a memorandum as to costs within four weeks of the date of this decision;(b) the defendant is to file a memorandum as to costs within a further two weeks; and(c) any memorandum in reply is to be filed within a further week.Solicitors:C S Withnall QC, DunedinWilkinson Rodgers, DunedinR W Raymond, Barrister, ChristchurchAnderson Lloyd, Christchurch