25 September 2017

Dairy: Pure Elite v. Bodco

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)

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