Brian
Wagstaff and Richard Young face a $282 million damages claim from jilted
Chinese investors saying the two had no legal grounds to dump them from a
proposed infant milk project.
Their dispute is headed
for a full court hearing after Associate judge Doogue ruled detailed evidence is
required to sort out the effect of a home-made 2014 Heads of Agreement. The court was told Auckland-based Messrs
Wagstaff and Young set up Danpac (NZ) Ltd with plans to build and operate a
dairy factory producing canned infant formula for the Chinese market. Heads of Agreement were signed between Danpac
and Pure Elite Holdings Ltd which has a substantial distribution network in
China together with required regulatory approvals for selling infant formula. This agreement envisaged Pure Elite’s backers
putting up $5.3 million in cash initially while Danpac would put in its milk
factory assets plus cash. All-up, a
total of $10.4 million was needed. A 51
per cent shareholding in Danpac was transferred to Chinese interests as part of
the deal and they appointed new directors.
Months later, Mr Wagstaff had Companies Office records changed to cancel
the 51 per cent holding and remove the new directors. Danpac was then removed from the register
with assets transferred to a new company, Bodco Ltd. New investor China Animal Husbandry Group now
holds a majority shareholding.
Pure Elite investors
protested. Bodco says the promised cash
injection was not put up, so the shares were taken back. Judge Doogue decided it is not that
simple. The initial Heads of Agreement
is silent on when cash contributions were to be made and what should happen if
payment was not made. Bodco argues there
was an implied term allowing the share transfer to be reversed. A full court hearing is required to determine
when cash contributions were to be made and if there was a common understanding
that failure to pay would result in the deal being unwound.
Pure Elite investors
claim $55 million for their share in the agreed project and $227 million for
business opportunities in China lost.
Pure
Elite Holdings Ltd v. Bodco Ltd – High Court (25.09.17)
17.121