Asking the High Court to liquidate a joint venture company was a legitimate tactic when shareholders had fallen out but were still in negotiation to settle their dispute, the High Court ruled.
Dennis Geerkins and John McAdam are 50/50 owners of Auckland telecommunications equipment supplier, Sietec Wholesale Networks Ltd. All is not well between the two. Mr Geerkins complains that he is being squeezed by Mr McAdam with profits diverted through excess charges imposed on Sietec Wholesale. Their joint venture company rents space from interests associated with Mr McAdam. Mr Geerkins alleges unreasonable costs, management fees and operating expenses are being wrongly charged their joint venture. Access to Sietec Wholesales’ database has been blocked, he says.
In September 2020, Mr Geerkins filed a High Court application to have Sietec Wholesale put into liquidation. This prompted a quick response. Both agreed the liquidation application would not be advertised, while Mr McAdam would not compete against Sietec Wholesale in bidding for work and that they would jointly work towards resolving their differences by having one buy out the other.
Some nine months on: Mr Geerkins alleges Mr McAdam has failed to honour his undertaking not to compete; Mr McAdam is in court asking for liquidation proceedings to be struck out. It is an abuse of process to seek liquidation of Sietec Wholesale when both sides are in negotiation, he says. A pending liquidation application is having an adverse effect on business, he says. The threat of liquidation is being used to force up the buy-out price, he complains.
Liquidation proceedings remain on hold. Associate judge Bell refused to strike out Mr Geerkins’ liquidation application.
Geerkins v. Sietec Wholesale Networks Ltd – High Court (21.06.21)
21.104