Christopher Swann’s sale of part interest in his Canterbury David Reid Homes franchise sees a dispute with new business partners over payment of his $50,000 working capital contribution.
The High Court was told Swann agreed in November 2020 to sell a two-thirds interest in his David Reid franchise to Aaron Hooper and Carl Fordyce. Canterbury Design and Development Ltd was set up to operate the restructured business with each to hold five hundred shares and with each to be represented on the board. Two years later there was an argument over whether Chris Swann had paid in a promised $50,000.
Evidence was given of a January 2022 email exchange after which a $50,000 invoice was paid relating to a Bishop Street build in St Albans, Christchurch. Bishop Street was not a Canterbury Design project. Mr Swann said the $50,000 he paid was his Canterbury Design working capital contribution; Mr Fordyce said it was payment of an unrelated debt and Mr Swann’s promised $50,000 working capital for Canterbury Design is still outstanding. Mr Swann took issue with the fact that he had yet to be allocated his promised one-third shareholding in Canterbury Design and that his chosen nominee as director had not been appointed to the board.
Associate judge Lester said the shareholding and directorship rights were acknowledged in a 2020 shareholders agreement. These rights were entirely separate from each promising to put in $50,000 working capital. The required $50,000 payment was not payment for an issue of shares.
Disputes between shareholders over Mr Swann’s allocation of shares and appointment of a director were governed by an arbitration clause in their shareholders agreement. First stop for the warring shareholders was arbitration, Judge Lester ruled. This arbitration will most likely also sort out the provenance of Mr Swann’s claimed payment of $50,000 working capital, he said. Failing that, back to court.
Swann v. Canterbury Design and Development Ltd – High Court (16.03.23)
23.031
Further Note: Prior to its sale in 2020 to Canterbury Design, the David Reid Homes Canterbury franchise was owned by Mr Swann through his company First Design & Build Ltd. A Companies Office search discloses that some ten months after this sale, First Design was in liquidation insolvent owing secured creditors $1.2 million.