Water
is becoming more valuable than gold in parched central Otago. The Court of Appeal ruled a sale of Gibbston
Valley’s water supply company for a nominal price of one dollar was
invalid. Company assets have a
replacement value of some $158,000. The
deal was signed by Katrina Buxton, de facto wife of property developer David
Henderson.
Gibbston Water Holdings Ltd is the
corporate vehicle owning and operating a water reticulation system for the
Valley with water rights, a pumping facility, a storage tank and 7.6 kilometres
of pipes supplying about 30 properties.
It is a not-for-profit company with deed holders expected to meet
operating costs. Interest was piqued in
August 2011 when control of the Gibbston Valley scheme passed to Castlereagh Properties
Ltd, a company in David Henderson’s property group, at a cost of one
dollar. The paper work was signed by Ms
Buxton. The court was told this deal had
the effect of taking Gibbston Water, and its water supply assets, out from
under a mortgage otherwise secured over the water supply business. Gibbston Water was promptly put into
liquidation and liquidator Mr Robert Walker charged with the job of getting the
water supply assets back from Castlereagh Properties.
The Court of Appeal ruled the liquidator
had power to reverse the sale transaction since it was at an undervalue. Ms Buxton argued her signature to the sale
amounted to consent by the company to selling at an undervalue. The Companies Act does allow “entitled
persons” in a closely-held company to short-cut company procedures by their
unanimous written consent. The court
ruled signing a contract of sale, by itself, cannot be read as written consent
to bypass company law rules governing sales at an undervalue.
Castlereagh
Properties v. Walker – Court of Appeal (9.10.15)
15.112