School Rules: Battison v. Melloy

Adolescence is a time for asserting independence and for testing boundaries. In a High Court challenge to rules governing hair length at St John’s College, Hastings, Justice Collins said the law requires school rules be clear and certain, be applied reasonably and if breached the penalty must match the offending.

St John’s College was told its suspension of sixteen year old student Lucan Battison for refusing to cut his hair shorter was unlawful because the School’s rules on hair were uncertain and the manner of his suspension was unreasonable.

The court was told Lucan has naturally curly hair.  School rules require hair to be off the collar and out of eyes.  Twice in March 2014, teachers demanded Lucan cut his hair shorter, against his wishes.  This issue became more contentious several months later, two weeks after the appointment of Mr Paul Melloy as the School’s new principal.  Evidence was given that Lucan’s hair had been much the same length for all the time he had been at the School.

Lucan was suspended by the headmaster for refusing to shorten his hair.  This suspension was confirmed by the School Board’s disciplinary committee.

Justice Collins said the Education Act allows schools to suspend students if the student’s  gross misconduct or continual disobedience is a harmful or dangerous example to other students.  A decision to suspend must be based on reasonable grounds.  This creates a high threshold for suspension, he said.

There was no evidence that Lucan’s hair length amounted to a harmful or dangerous example to other students.  The mere fact that a teacher demanded he cut his hair was not grounds alone for suspension.  The Board’s disciplinary committee did not comply with the Education Act, Justice Collins ruled.  It did not exercise independent judgment as to whether Lucan’s offer to wear his hair in a bun constituted compliance with the School’s hair rule.  The disciplinary committee simply endorsed the headmaster’s decision to suspend.  There was evidence that other schools in the Hawkes Bay region allowed pupils of both gender to wear their hair long, provided it was in a ponytail.

In any event, the punishment must fit the crime.  There must be a correlation between the offending and the punishment.  The degree of Lucan’s continued disobedience was not great enough to warrant suspension, Justice Collins said.

In conclusion, Justice Collins said St John’s hair rule was invalid on the grounds of uncertainty.  He contrasted the general wording in the School’s hair rule with the carefully prescribed rules governing dress standards and wearing of the School uniform.  All students and parents knew in advance of the School’s uniform requirements.  The hair rule was capable of different interpretations by students, parents, teachers, the principal and the Board.

Battison v. Melloy – High Court (27.06.14)

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Greymouth Petroleum: Sturgess v. Dunphy

The Court of Appeal has set parameters for warring parties within dysfunctional Greymouth Petroleum to negotiate the sale of a 13.8 per cent stake held by former chief operating officer John Sturgess after the court ruled Sturgess failed to do his job properly.

Greymouth is a closely held company with extensive oil and gas interests in New Zealand and Chile.  Joint venture investors fell out with Mr Sturgess after complaints he was incurring expenditure without authority, was failing to properly report to the board and was proving misleading and evasive when asked to account for company performance.

Mr Sturgess was initially willing to sell his stake to the remaining joint venture participants but later changed his mind, fearing the value placed on his shares would not price in expectations of future profitability for Greymouth’s Chilean prospects.

Founded in 2002, Greymouth Petroleum is owned 13.8% by interests associated with Mr Sturgess; 52.1% by interests associated with Mark Dunphy (who is executive chairman); and 34% by Peter Masfen.  By 2011, Mr Sturgess was estranged from his joint venture partners.  The court was told Mr Sturgess was aggrieved that he had not been given an enhanced shareholding in a Chilean venture.  Messrs Dunphy and Masfen said they fell out because Mr Sturgess began to act unilaterally and irresponsibly.

Mr Sturgess had taken to secretly recording meetings with fellow directors.  At a tense board meeting in February 2011, directors attempted without success to have Mr Sturgess take a three month “holiday” from his position as chief operating officer.

After a seven week High Court trial, Justice Gilbert ruled Mr Sturgess was primarily to blame for the dysfunctional relationship: he had failed to report properly to the board and to Mr Dunphy; he had conducted drilling and exploration operations without approval and sometimes negligently; and he had committed the company to unauthorised capital expenditure. 

Several instances stood out.  In 2009, Mr Sturgess approved a fracking operation at a Taranaki drill site without board approval and contrary to professional advice.  The well was not suited to fracking.  The operation wasted one million dollars.  In respect of a 2010 seismic survey in Taranaki,  Mr Sturgess  unilaterally committed the company to costs of a survey which later proved to be wasted and then in turn threw good money after bad by trying to rework the data.  In relation to operations in Chile, there was evidence of Mr Sturgess failing to keep the board informed of operational problems which had arisen at various sites.

In the High Court, Mr Sturgess said he would step down as director and was willing to sell his 13.8% stake in the company, provided he got fair market value.  Six months later in the Court of Appeal, he wanted to hold on to his shares as a passive investor.  The court was told there were already differences of opinion over Greymouth’s dividend policy.

The Court of Appeal ruled that the only way forward was to have Mr Sturgess exit from the company and sell his shares.  It applied the terms of the shareholder agreement signed by each of the three investors when the company was formed: the fair value of the shares was to be fixed by an arbitrator; Messrs Dunphy and Masfen could purchase Mr Sturgess’ shares at this price; if they did not purchase, Mr Sturgess was free to offer the shares to anyone else at the same price.  If Mr Sturgess seeks to offer the shares to a third party at a lower price than the arbitrated fair value, Messrs Dunphy and Masfen have the right to buy at this more favourable price.

Sturgess v. Dunphy – Court of Appeal (24.6.14)

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Partnership: Kidd v. Worldwide Leisure

A legal spat between two overseas millionaires over ownership of Huka Lodge has returned to the New Zealand courts.

Once they were friends and business associates.  Mr Michael Kidd and Mr Alexander Pieter van Heeren made their fortunes as steel traders in South Africa during the 1970s.  Apartheid South Africa was then an international pariah facing economic sanctions.  They both looked to transfer funds away from South Africa.  In 1984 the luxury tourist lodge at Huka Falls was purchased for $1.3 million.  Title was taken through a nominee to hide the South African connection given the then sensitivity of trading with South Africa.  Mr Kidd alleges Huka Lodge was purchased out of joint business funds and he is part-owner of the property.  He says interests associated with Mr van Heeren hold his share of the property as trustee.   This question has never been resolved.  To force the issue, Mr Kidd registered a caveat over the land title for Huka Lodge.  This has the effect of preventing any sale of Huka Lodge or registration of any mortgage against the title without Mr Kidd first agreeing.

Their dispute got an airing in the High Court for the second time in two decades when Mr van Heeren applied to have the caveat removed.  This reopened round one of their business dispute heard in the New Zealand courts back in 1996.  The 1996 hearings were adjourned when Mr van Heeren argued Mr Kidd had earlier signed what was called “an indemnity” which purported to settle all their business disputes worldwide.  The New Zealand courts decided any question about the validity of this indemnity had to be decided by South African courts.  The New Zealand High Court was told it took 13 years to get a final decision from South Africa with a judge there ruling that Mr Kidd was induced to sign the indemnity following misrepresentations made by Mr van Heeren – the indemnity was void.

Back in New Zealand for round two, Mr van Heeren said Mr Kidd’s breach of trust claim was woefully out of time.  Huka Lodge was purchased in 1984 and Mr Kidd is alleging that purchase to be a misuse of business funds held in trust on his behalf.  Any claims for breach of trust must be brought within six years.

Judge Bell said the caveat will remain.   The argument is not that there was a breach of trust itself, but that jointly owned business funds were used to purchase Huka Lodge and the Lodge is held in trust for both Mr Kidd and Mr van Heeren.  Any evidence to support this claim has yet to be heard in the New Zealand courts.

Kidd v. Worldwide Leisure Ltd – High Court (16.06.14)

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Leaky Homes: Osborne v. Auckland City

Despite a last-ditch offer of an out of court settlement by Auckland City nervous that the Supreme Court would rule against it in a leaky home case, the Supreme Court issued its ruling regardless, saying it was in the public interest to have a final judicial ruling on time limits for leaky home claims.  This court ruling has increased the number of homeowners who can potentially claim taxpayer-funded compensation for leaky homes.

John Anthony Osborne and Helen Osborne fought long and hard to get a definitive ruling on whether they were entitled to seek compensation for their leaky home.  They purchased a newly constructed home in 1997, finding shortly afterwards that it leaked.  The court was told they decided to seek compensation under the Weathertight Homes Resolution Services Act.  If eligible, they could recover part of their repair costs from government and Auckland City – having to pay 25 per cent of the repair costs themselves.  To be eligible, they had to bring their claim within ten years of the house being built.  Auckland City said they were out of time: construction was sufficiently advanced that the house was habitable by August 1996.  They didn’t bring their claim within ten years of that date.  The Supreme Court ruled that a house is not “built” merely when it is habitable; it is “built” when Council issues a code compliance certificate.  In the Osbornes’ case, the final certificate was issued in April 1997 and they had claimed within ten years of that date.

After the Supreme Court heard legal argument in November 2013 and before issuing its ruling in June 2014, Auckland City attempted to suppress the case.  The court was told Auckland City offered to settle with the Osbornes on the condition that the Supreme Court did not release its judgment.  Litigants sensing that a court may rule against them might seek suppression to avoid an adverse result becoming public knowledge.  The Supreme Court said that even if litigants decide to discontinue an appeal, the court has a discretion to still issue its ruling.  The Supreme Court said it would have released its judgment in this case even if there had been an agreed out of court settlement and a formal abandonment by the Osbornes of their appeal.  The legal point at issue affected homeowners other than the Osbornes and it was in the public interest for the court ruling to be made public.

Osborne v. Auckland City – Supreme Court (10.06.14)

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