A Companies Act compulsory buy-out for minority shareholders in Wellington property company Vey Group Ltd was ordered by the High Court following complaints about the commercial behaviour of Palmerston North director Leslie Fugle, alleged to be using the company for his own benefit. Interests associated with Mr Fugle gained control of Vey Group after a 2016 forced sale of a majority shareholding.
The High Court was told of disharmony between founding shareholders of Vey Group resulting in a Family Court order forcing Patricia Turvey to sell down a majority stake in Vey Group to repay funds lent the company by son Daryn. Leslie Fugle came to become sole director of Vey Group with shareholding split 51 per cent Fugle family interests: 49 per cent the Orana Trust holding shares for Turvey family interests.
Vey Group owns a three-level apartment building built in 2002. It is not code-compliant, needs remedial work and is uninsured.
Evidence was given of Mr Fugle ignoring Orana Trust interests. He refinanced a BNZ mortgage over the Vey property with a loan from privately-owned Aokautere Land Holdings Ltd, at a time when his son was Aokautere’s sole director. As a ‘major transaction,’ this refinancing required Orana approval. Mr Fugle went ahead over objections from Orana. He refused to provide financial information about Vey Group requested by Orana Trust unless the Trust first agreed to his fee at five hundred dollars per hour. He attempted to sell the Wellington property in a private sale to a buyer identified only as ‘R Pratt’ at what was said to be at an undervalue, with no marketing, no valuation undertaken and on unusual terms. Notice was given to Orana of a shareholders’ meeting to approve the ‘R. Pratt’ sale; advice of the meeting venue was incorrect causing Orana to initially attend at the wrong venue, then Mr Fugle refused to accept Orana’s vote against the sale saying its proxy vote was invalid. Orana trustees sued to block the sale.
After a defended High Court hearing, Justice Mallon ordered a compulsory buyout. Vey Group shares are to be valued by an independent accountant, with Fugle interests given 14 days to buy at that price. If they do not wish to purchase, the shares can be sold to a third party at no less than the independent valuation. Justice Mallon warned that if Mr Fugle does not co-operate, she can order the Wellington property sold ‘as is, where is’ and Vey Group liquidated.
re Vey Group Ltd – High Court (18.07.19)
19.130