PURE ELITE HOLDINGS LTD v BODCO LTD [2019] NZHC 2191

PURE ELITE HOLDINGS LTD v BODCO LTD [2019] NZHC 2191

The Danpac heads of agreement was, in material respects, an unenforceable agreement to agree because essential matters (revised business plan, budget, capitalisation timetable and milestones) remained for future agreement without objective machinery; although a joint venture existed it did not give rise to fiduciary duties between the parties; the 51% share transfers to EHNZ/PEHNZ were made in expectation of imminent funding and, on failure of that basis and termination of the joint venture (by 24 December 2014), it was inequitable for PEHNZ to retain the shares — declaration made that PEHNZ had no entitlement to retain 51% from 24 December 2014.

Citation
[2019] NZHC 2191
Parties
First Plaintiff/first Counterclaim Defendant: Pure Elite Holdings Limited; Second Plaintiff/second Counterclaim Defendant: PEH New Zealand Limited; Third Plaintiff/third Counterclaim Defendant: Ever Health New Zealand Limited; First Defendant/counterclaim Plaintiff: BODCO Limited; Second Defendant/counterclaim Defendant: Brian Noel Wagstaff; Third Defendant/counterclaim Defendant: Richard Chew Young; Fourth Counterclaim Defendant: Randolph Edward Casimir Vander Burgh; Fifth Counterclaim Defendant: Geoffrey Ian Pollard
Court
High Court
Jurisdiction
New Zealand
Judgment Date
3 September 2019
Procedural Posture
Commercial Dispute (company/shareholder) / Liability Hearing (split Trial)
Outcome
Declaration: PEHNZ had no entitlement to retain the 51% shareholding in Danpac from 24 December 2014; Danpac heads of agreement unenforceable in key respects; joint venture existed but was not fiduciary in character; costs to defendants; further directions for quantum and possible referral to Registrar of Companies.
Legal Topics
Heads of Agreement, Joint Venture, Fiduciary Duty, Share Transfers and Register Rectification, Misleading and Deceptive Conduct, Restitution / Failure of Basis, Constructive Trust, Damages and Quantum
Company Law Contract Law Equity and Trusts Commercial Law Fair Trading Act Heads of Agreement Joint Venture Fiduciary Duty +5 more

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Parties

Pure Elite Holdings Limited

First Plaintiff/first Counterclaim Defendant

PEH New Zealand Limited

Second Plaintiff/second Counterclaim Defendant

Ever Health New Zealand Limited

Third Plaintiff/third Counterclaim Defendant

BODCO Limited

First Defendant/counterclaim Plaintiff

Brian Noel Wagstaff

Second Defendant/counterclaim Defendant

Richard Chew Young

Third Defendant/counterclaim Defendant

Randolph Edward Casimir Vander Burgh

Fourth Counterclaim Defendant

Geoffrey Ian Pollard

Fifth Counterclaim Defendant

Procedural Posture

Commercial Dispute (company/shareholder) / Liability Hearing (split Trial)

Legal Issues

  1. 1 Did the Danpac heads of agreement create binding legal obligations?
  2. 2 Did the parties form a joint venture and, if so, did fiduciary duties arise?
  3. 3 Why were Danpac shares transferred to EHNZ/PEHNZ and could PEHNZ retain them?

Ratio Decidendi

The Danpac heads of agreement was, in material respects, an unenforceable agreement to agree because essential matters (revised business plan, budget, capitalisation timetable and milestones) remained for future agreement without objective machinery; although a joint venture existed it did not give rise to fiduciary duties between the parties; the 51% share transfers to EHNZ/PEHNZ were made in expectation of imminent funding and, on failure of that basis and termination of the joint venture (by 24 December 2014), it was inequitable for PEHNZ to retain the shares — declaration made that PEHNZ had no entitlement to retain 51% from 24 December 2014.

Court Disposition

Declaration: PEHNZ had no entitlement to retain the 51% shareholding in Danpac from 24 December 2014; Danpac heads of agreement unenforceable in key respects; joint venture existed but was not fiduciary in character; costs to defendants; further directions for quantum and possible referral to Registrar of Companies.

Orders

  • Declaration that PEHNZ had no entitlement to retain 51% of Danpac shares as from 24 December 2014
  • Costs: defendants entitled to costs; parties to file costs memoranda (15 working days) and any reply (further 15 working days); memoranda limited to five pages