Directors Loukas Petrou and Stephen Jones were ordered to pay $513,400 damages to Mark’s and Julie’s Miedema Family Trust for wrongly extracting cash from a Canam Construction Tauranga subsidiary part owned by the Trust at a time when the two directors were up to their neck in an unconnected Canam commercial arbitration over costs on the then troubled Auckland apartment build for Auckland Trotting Club at Greenlane’s Alexandra Park.
In 2022, the arbitrator held a Canam Construction subsidiary liable to pay Auckland Trotting some $85 million.
While preparing for this arbitration, Canam’s Bay of Plenty operations were of peripheral concern to Messrs Petrou and Jones. But Bay of Plenty was a major concern for Canam Construction (BOP) Ltd’s minority shareholder, Mark Miedema and his family trust’s 33 per cent shareholding.
The High Court was told Mr Miedema had been lobbying for some time to have a substantial dividend paid by Canam (BOP); cash needed to purchase a family home. No dividend was forthcoming.
Eventually, Mr Miedema took his trade skills elsewhere; taking employment with a rival construction company. Many of his staff followed, leaving Canam (BOP) without staff and no ongoing work.
The legal dispute that followed saw Miedema Family Trust suing both Mr Petrou and Mr Jones, alleging they were party to a scheme stripping cash out of the company.
After a two week High Court hearing in late 2023, Justice Anderson ruled the two personally liable for charging overhead costs of some $2.3 million to Canam (BOP), depriving the company of resources otherwise available to pay a dividend.
Evidence was given of the Canam group operating a centralised accounting system with revenue and expenses for all subsidiaries, including Canam (BOP), passing through one bank account: the ‘treasury account.’
Each financial year, ‘head office’ costs were pro-rated across the various subsidiary companies in preparation of annual financial statements.
Mr Miedema complained a large $2.3 million ‘head office’ charge levied against Canam (BOP) on his departure from the company was in breach of the Companies Act as ‘oppressive behaviour’ by a majority shareholder. This sum was well in excess of previous annual overhead charges.
Messrs Petrou and Jones argued that while there was a prior agreement that Canam (BOP) would not be levied its fair share of overhead expenses during its start-up period, it was agreed that reduced charges would be recovered over time.
No overhead charge was levied Canam (BOP) for its first three years. Charges for the next three years were well below costs of head office support, they said.
The $2.3 million taken was part of the agreed catch-up, they argued.
Justice Anderson ruled there was no evidence of any catch-up agreement.
It was ‘oppressive behaviour’ affecting Miedema Family Trust as minority shareholder to later impose these increased charges, she ruled.
The two directors were ordered to pay $513,400 damages: the tax free equivalent to Trust beneficiaries of the Trust’s 33 per cent share of a notional $2.3 million dividend paid to Canam (BOP) shareholders; with this share then notionally taxed again in hands of the Trust.
To avoid ongoing clashes, Justice Anderson ordered the Trust’s shareholding in the now worthless Canam (BOP) Ltd be transferred to Mr Petrou and Mr Jones for a token one dollar payment.
But that was not the end.
Both sides were subsequently back in court claiming each side should pay the other’s legal costs and expenses. Calculation was made difficult by the fact Miedema Family Trust abandoned some of its initial claims and lost others, while still being awarded $513,400 damages for its successful claim.
The net result: Messrs Petrou and Jones were ordered to pay the Trust a further $94,300; a contribution towards its legal costs.
The Trust claimed $507,500 in litigation fees and expenses.
Miedema Family Trust v. Petrou – High Court (31.10.24 & 1.05.25)
25.112