Alleging Andrew Guest and Stephen Donovan diverted potential benefits from a multi-million dollar Auckland land development into their own pockets, joint venture partner Tim Chen is in the High Court seeking to work around legal roadblocks Guest and Donovan are exploiting to prevent legal action.
The three are directors of a company called Viranda Partners Ltd. Investors represented by Chen allege Viranda Partners was robbed of a business opportunity near Warkworth just north of Auckland valued variously between $25 million and $54 million. The land in question sold in 2021 for $200 million.
Guest and Donovan deny any wrongdoing. Legal rules require court action over the dispute to be taken in the name of their joint venture company: Viranda Partners Ltd. It is Viranda which has been allegedly harmed. Viranda has no money; it cannot pony up cash to pay lawyers. An investors agreement requires unanimous consent from all Viranda directors before any calls are made to raise further cash from shareholders. The High Court was told Guest and Donovan have made it clear; they will veto any call for cash from shareholders to fund legal action by Viranda against them.
Associate judge Lester granted Chen’s company Veritas Capital Company Ltd status to bring legal action in Viranda’s name against Viranda directors Guest and Donovan. Veritas Capital is a Viranda shareholder. While Veritas will fund the litigation, it has a right to claim reimbursement from Viranda should Guest and Donovan be found liable for breach of directors’ duties and ordered to pay damages to Viranda.
The effect of the High Court ruling is to shift control of current legal action against Guest and Donovan from their joint venture company Viranda where they can veto any progress to shareholder Veritas Capital and Veritas’ investors where Guest and Donovan have no say.
Viranda Partners Ltd v. Guest – High Court (14.11.22)
23.004