STARTUP AND STARTUP v THE VILLAGE PRESS LIMITED AND ORS [2016] NZHC 2690

STARTUP AND STARTUP v THE VILLAGE PRESS LIMITED AND ORS [2016] NZHC 2690 [9 November2016]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2016-441-134[2016] NZHC 2690UNDER the Companies Act 1993IN THE MATTER of The Village Press LimitedBETWEEN WAYNE KEITH STARTUPFirst PlaintiffAND MAUREEN FRANCIS STARTUPSecond PlaintiffAND THE VILLAGE PRESS LIMITEDFirst DefendantAND MARK RHYS WELDONSecond DefendantAND ANTHONY JOSEPH CASEYThird DefendantAND STUART JOHN WEBSTERFourth DefendantAND ROBERT THOMAS ARMSTRONGFifth DefendantOn the papers: 9 November 2016Counsel: J R Billington QCJudgment: 9 November 2016JUDGMENT OF CLARK J[1] An ex parte application for an interim injunction and related orders camebefore me on the afternoon of 9 November 2016.[2] The plaintiffs, Wayne and Maureen Startup, seek urgent orders to restrain thefirst defendant, The Village Press Ltd, from taking actions that Mr and Mrs Startupsay would prejudice their interests as shareholders in the first respondent.[3] The substantive proceeding is an application under s 174 of the Companies Act1993 seeking orders to prevent prejudice to the plaintiffs' interests and the interests ofother minority shareholders arising from proposed actions in breach of the CompaniesAct 1993 and the constitution of The Village Press Ltd.[4] Mr and Mrs Startup seek also the appointment of a receiver pending resolutionof the s 174 application or, in the alternative, orders variously assisting inspection ofthe affairs of The Village Press Ltd so far as is relevant to the s 174 application. Theseorders are not sought on an ex parte basis.[5] Mr and Mrs Startup have given an undertaking as to damages.[6] I have considered a memorandum in support of the application byMr Billington QC and had regard to four affidavits including from the proposedreceiver.[7] Mr Billington submits that there is a serious case to be tried with respect to thes 174 application. Broadly, the plaintiffs allege that the board of The Village Press Ltdhas taken or proposes to take a series of steps prejudicial to their interests: removingMr Startup as a director and issuing shares with the effect of diluting the interests ofMr and Mrs Startup, both actions being in contravention of the constitution of TheVillage Press Ltd.[8] Mr Startup deposed that the conduct challenged by the substantive applicationincludes:(a) That The Village Press Ltd and its directors have acted in a way whichbreaches its constitution by:(i) Issuing new shares without proper resolutions and notice beinggiven to shareholders.(ii) Removing him as director without a proper vote.(b) Failing to provide him or other minority shareholders with companyrecords, despite requests.(c) As a result of the issuing of new shares, diluting his share value, andtherefore his voting rights in the company.(d) Failing to enter into good faith discussions about value for the purposesof Mr Startup exiting the company.[9] On the basis of these allegations I accept there is a serious case to be tried inrespect of the s 174 application.[10] I accept also that the balance of convenience and justice lies in favour of theapplicants:(a) Damages are not an adequate remedy because the potential loss to theplaintiffs may be irreparable;(b) Orders will preserve the status quo and avoid the need to unwind anytransactions if the underlying application prevails.[11] I propose to make only those orders that are necessary to prevent the adverseconsequences of a meeting scheduled for 10 November 2016 at which resolutions areproposed which ought to be, at the least, forestalled pending determination of Mr andMrs Startup's claim.[12] Orders are granted in the following terms:(a) The first respondent, The Village Press Ltd is restrained from:(i) passing resolutions to have approved or give effect to:(A) a proposed share issuance under a Rights Offer.(B) a resolution to approve future issuing of shares.(C) a resolution approving historic issuing of shares to thecurrent registered directors of The Village Press andJohn Fernandes.(ii) issuing further shares in The Village Press pendingdetermination of the substantive proceeding.(b) These orders remain in effect pending further order of the Court._____________________________Karen Clark JSolicitors:Anthony Harper, Auckland for Plaintiffs