A nearly five year campaign by Palmerston North director Leslie Fugle unsuccessfully challenging minority shareholder rights in a Wellington property company saw the High Court commenting that he would have saved himself hundreds of thousands of dollars if he had just bought out the minority at fair price from the outset.
Minority shareholder claims that Vey Group owes them over one million dollars has been the major issue. Vey owns an investment property in Wellington’s Webb Street. Interests associated with Mr Fugle hold a majority interest. The Orana Trust, representing Turvey family interests, was reduced to a minority stake after dissension within the Turvey family saw a partial sell-down of their holding in a forced sale. At that time, Patricia Turvey was allied with Mr Fugle. A series of court cases followed after Mr Fugle attempted to freeze out Orana Trust. A court-ordered receivership was followed by a court-ordered liquidation.
The High Court was told Mr Fugle disputed the level of unsecured loans put into Vey Group by Orana Trust. Arguments about the extent of this liability meant no price could be agreed in setting a figure for Mr Fugle to buy out Orana’s minority holding. Meanwhile, redevelopment of Webb Street remained on hold.
Acting on court instructions, accountants analysed Vey Group transactions determining that Orana was owed $1.04 million. This debt was accepted by Vey Group liquidators as a claim in the liquidation. Mr Fugle was back in court, challenging the debt. He variously alleged most of this money related to Turvey family tax arrangements unrelated to Vey Group but run through Vey Group’s books and that much of the money Orana put into the company was capital, not loans enjoying prior payment on liquidation. Justice Mallon dismissed Mr Fugle’s attempt to overturn the liquidator’s decision. He put up no evidence to support his claims, she said. In contrast, the accountants had used source documents to verify as best possible the debt claimed by Orana Trust. Receivers marked down Orana’s initial claim of a $1.3 million debt to a final figure of $1.04 million.
Justice Mallon also dismissed Mr Fugle’s claim that even if the $1.04 million was loaned to Vey Group the loans were ‘stale,’ payment being outside the Limitation Act six year period and were no longer recoverable. Funds provided were either expressly repayable on demand or impliedly repayable on demand and the six year rule did not start running until demand was made, Justice Mallon ruled. Orana Group made demand for payment in June 2018.
The court was told Mr Fugle has now taken one hundred per cent control of Vey Group by paying $200,000 to buy out Orana Trust’s 49 per cent holding. The court-ordered liquidation has not been terminated. Mr Fugle told the court he has funds in hand to pay out Vey Group creditors. Orana Trust remains a Vey Group creditor for the sum of $1.04 million.
re Vey Group Ltd – High Court (2.02.22)
22.033