MCCULLOCH & ORS AS TRUSTEES OF TOTARA TRUST V QUINN HC AK CIV-2011-404-003508

MCCULLOCH & ORS AS TRUSTEES OF TOTARA TRUST V QUINN HC AK CIV-2011-404-003508

The strike‑out application was dismissed because the plaintiffs have an arguable cause of action under s174: the sale of shares and the effective compromise of derivative proceedings that the defendants controlled can amount to conduct of the company's affairs that is oppressive or unfairly prejudicial; in the circumstances it is at least arguable that the parties who obtained leave to pursue derivative proceedings (and related shareholder recipients) owed duties and that relief including compensation under s174 is available; the claim should be amended and proceeded with rather than struck out.

Citation
openlaw-b6b95e8d_4060_4d04_8b29_a5091b5d875a.pdf
Parties
Plaintiffs: Donald Aspinall McCulloch; Nola Evans; Peter Glyne Evans as Trustees of Totara Trust; First Defendant: Bernard Paul Quinn; Second Defendant: Ngati Awa Asset Holdings Limited; Third Defendant: Alan Patrick Peters; Fourth Defendant: Peters Capital Limited; Fifth Defendant: William Norman Birnie; Sixth Defendant: Stephen Robert Norrie; Seventh Defendant: Birnie Capital Property Partnership Limited; Eighth Defendant: Picasso Nominees Limited; Ninth Defendant: William Norman Birnie; Stephen Robert Norrie; Richard James O'Bryen Hoare as Trustees of the Paoneone Settlement Trust No. 5; Tenth Defendant: BJF Properties Limited
Court
High Court
Jurisdiction
New Zealand
Judgment Date
23 January 2012
Procedural Posture
Oppression/derivative Claims Under S 174 Companies Act 1993 / Interlocutory Strike‑out Application Dismissed; Leave to Amend; Remitted to Commercial List for Further Directions
Outcome
Strike out application dismissed; plaintiffs granted leave to amend statement of claim; matter remitted to Commercial List for further directions; costs awarded to plaintiffs
Legal Topics
Oppression Under S174 Companies Act 1993, Derivative Proceedings, Compromise/settlement of Derivative Action S168, Fiduciary Duties of Directors/shareholders, Strike Out Test, Knowing Receipt
Company Law Civil Procedure Directors' Duties Fiduciary Law Trusts Oppression Under S174 Companies Act 1993 Derivative Proceedings Compromise/settlement of Derivative Action S168 +3 more

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Parties

Donald Aspinall McCulloch; Nola Evans; Peter Glyne Evans as Trustees of Totara Trust

Plaintiffs

Bernard Paul Quinn

First Defendant

Ngati Awa Asset Holdings Limited

Second Defendant

Alan Patrick Peters

Third Defendant

Peters Capital Limited

Fourth Defendant

William Norman Birnie

Fifth Defendant

Stephen Robert Norrie

Sixth Defendant

Birnie Capital Property Partnership Limited

Seventh Defendant

Picasso Nominees Limited

Eighth Defendant

William Norman Birnie; Stephen Robert Norrie; Richard James O'Bryen Hoare as Trustees of the Paoneone Settlement Trust No. 5

Ninth Defendant

BJF Properties Limited

Tenth Defendant

Procedural Posture

Oppression/derivative Claims Under S 174 Companies Act 1993 / Interlocutory Strike‑out Application Dismissed; Leave to Amend; Remitted to Commercial List for Further Directions

Legal Issues

  1. 1 Whether shareholders can bring a s174 claim where derivative proceedings in the company's name have been effectively compromised
  2. 2 Whether sale of shares and related compromise of derivative litigation amounts to conduct of the company's affairs for s174
  3. 3 Whether directors or shareholders who obtained leave to pursue derivative proceedings can owe fiduciary duties to other shareholders in the circumstances

Ratio Decidendi

The strike‑out application was dismissed because the plaintiffs have an arguable cause of action under s174: the sale of shares and the effective compromise of derivative proceedings that the defendants controlled can amount to conduct of the company's affairs that is oppressive or unfairly prejudicial; in the circumstances it is at least arguable that the parties who obtained leave to pursue derivative proceedings (and related shareholder recipients) owed duties and that relief including compensation under s174 is available; the claim should be amended and proceeded with rather than struck out.

Court Disposition

Strike out application dismissed; plaintiffs granted leave to amend statement of claim; matter remitted to Commercial List for further directions; costs awarded to plaintiffs

Orders

  • Strike out application by first to fourth defendants dismissed
  • Plaintiffs to file and serve amended statement of claim by 3 February 2012