IN THE COURT OF APPEAL OF NEW ZEALAND CA834/2011 [2013] NZCA 130. WORLDWIDE NZ LLC Respondent

Transcription

1 IN THE COURT OF APPEAL OF NEW ZEALAND CA834/2011 [2013] NZCA 130 BETWEEN AND NEW ZEALAND VENUE AND EVENT MANAGEMENT LIMITED Appellant WORLDWIDE NZ LLC Respondent Hearing: 9 April 2013 Court: Counsel: Judgment: Harrison, Wild and French JJ A C Sorrell and S R Robertson for Appellant M J Fisher and H L Hui for Respondent 2 May 2013 at am JUDGMENT OF THE COURT A The appeal is allowed. B The declaration made by the High Court that New Zealand Venue and Event Management Limited pay Worldwide NZ LLC interest on the fair market value of the B shares from 26 April 2006 to the date of payment, pursuant to s 87 of the Judicature Act 1908, is set aside. C D The cross-appeal is dismissed. The respondent is to pay the appellant costs for a standard appeal on a band A basis with usual disbursements. REASONS OF THE COURT (Given by Wild J) NEW ZEALAND VENUE AND EVENT MANAGEMENT LIMITED V WORLDWIDE NZ LLC COA CA834/2011 [2 May 2013]

2 Introduction Table of Contents Para No. [1] Background The judgment under appeal [18] Issue (1) interest: did Potter J err in awarding WWNZ interest on the value of the B shares she determined? [4] [20] Issue (2) value of the derivative proceeding: did Potter J err in placing a nil value on the derivative proceeding, for the purposes of determining the fair market value of the B shares? Result [52] [65] Introduction [1] This is an appeal and cross-appeal from a judgment delivered by Potter J on 24 November In that judgment Potter J determined the fair market value of B units and shares acquired by the appellant, New Zealand Venue and Event Management Limited (NZVEM, previously named Jacobsen Venue Management New Zealand Ltd), from the respondent, Worldwide NZ LLC (WWNZ). The Judge also fixed the time for payment and, pursuant to s 87 of the Judicature Act 1908, awarded interest on the value she had determined from 26 April 2006 to the date of payment. [2] In determining the fair market value of the B units and shares, Potter J put a nil value on a derivative proceeding which WWNZ was seeking to bring against NZVEM. 2 [3] By the time the hearing of this appeal and cross-appeal ended, the issues we need to determine had reduced to two: 1 2 Worldwide NZ LLC v QPAM Ltd HC Auckland CIV , 24 November The precise parties to the derivative proceeding are set out below at [9].

3 (1) Interest: Did Potter J err in awarding WWNZ interest on the value of the B units and shares she determined? (2) Value of derivative proceeding: Did Potter J err in placing a nil value on the derivative proceeding, for the purposes of determining the fair market value of the B units and shares? This second issue encompasses the two questions we refer to below at [63]. Background [4] Quay Park Arena Management Ltd (QPAM) is the corporate trustee of the Quay Park Arena Management Trust (the QPAM Trust). QPAM was incorporated on 10 January The QPAM Trust was established by a Unit Trust Deed dated 9 March 2004 (the Deed). [5] The Deed records that the unit holders and their interests were as follows: 3 Unit Holder Number and Class of Units Percentage Interest Jacobsen Venue 33 A Units 55 per cent Management New Zealand Ltd Jacobsen FT Pty Ltd 12 A Units 20 per cent Worldwide NZ 15 B Units 25 per cent LLC [6] In terms of the constitution of QPAM, its A class shares correspond to and are stapled to the A units in the QPAM Trust; similarly the B class shares are stapled to the B units. Consequently the provisions of the Deed governing transfer of the units applied also to transfer of the shares and to the shareholders rights. Because the units and shares are stapled, we will use the term B shares to describe both. [7] The Deed provides for rights of pre-emption triggered, amongst other things, by a change in control of WWNZ. 3 These holdings are set out in the Schedule to a Unit Subscription Agreement also dated 9 March 2004.

4 [8] WWNZ is a subsidiary of the Worldwide Entertainment group, a corporation based in Florida in the United States. Mr John Utsick was the WWNZ appointee on the Board of QPAM; between them, the two Jacobsen companies had three directors. [9] On 12 September 2005 WWNZ and Mr Utsick issued a proceeding under s 165 of the Companies Act 1993 against QPAM and its three Jacobsen-appointed directors, alleging that those Jacobsen directors had preferred their own interests in concluding a ticket sales agreement for the Vector Arena. This is the derivative proceeding the subject of issue (2) set out above at [3]. [10] On 18 January 2006 the United States District Court for the Southern District of Florida put the Worldwide Entertainment group into receivership. Mr Michael Goldberg of Florida was appointed receiver. We need not detail the ensuing disputes between Mr Goldberg and the Jacobsen interests, since they have no relevance to the two issues we must decide. [11] On 26 April 2006 NZVEM, through its solicitor, wrote to Mr Goldberg advising him that the receivership of WWNZ constituted a change in control in terms of the Deed, giving rise to NZVEM s right of pre-emption under the Deed. The letter advised that NZVEM was prepared to pay WWNZ fair value for the B shares owned by WWNZ. The letter also asserted that WWNZ no longer has any rights in respect of the [QPAM] Trust or QPAM. It put Mr Goldberg on notice that [NZVEM] accepts [WWNZ s B shares] in the Trust as of 18 January 2006, being the date of the receivership. [12] NZVEM subsequently excluded WWNZ and Mr Goldberg from participating in the affairs of QPAM and the QPAM Trust. This led WWNZ and Mr Gosney (whom Mr Goldberg, as receiver of WWNZ, had purported to appoint to the Board of QPAM) to issue a further proceeding on 4 April 2006, challenging NZVEM s entitlement to exclude them from participation in QPAM and the QPAM Trust, and challenging also QPAM s entitlement to fix the purchase price for the B shares WWNZ had held.

5 [13] An interim injunction preventing NZVEM excluding WWNZ from participation was granted by Baragwanath J on 11 May 2006, but discharged by Hugh Williams J in a judgment he delivered on 26 May This Court dismissed an appeal in a judgment delivered on 10 November It held that the Deed treated the change in control of WWNZ as a disposal of the B shares. Consequently, with the appointment of Mr Goldberg as receiver, WWNZ was deemed to have disposed of the B shares (to Mr Goldberg) in breach of the Deed, because WWNZ had not first offered those shares to NZVEM, in accordance with the latter s right of pre-emption. [14] NZVEM gave this Court an undertaking that it would not dispose of the B shares until it had paid for them, in an amount fixed by QPAM or by the Court. It also undertook that it had paid $4.125 million into a trust account to be held as security for its obligation to pay for the B shares. 6 [15] The parties dispute came before this Court again in April At the beginning of the hearing, the issues requiring decision were narrowed to two: (a) How is the consideration to be paid by the Jacobsen interests to WWNZ to be fixed? (b) What is to happen to the derivative proceeding? In a judgment delivered orally on 16 April 2008, this Court answered issue (a) by declaring: 7 that the consideration to be paid for WWNZ s units and shares is to be their fair market value to be assessed if necessary by the court. [16] As mentioned above at [12], WWNZ commenced the proceeding which led to this appeal and cross-appeal on 4 April Not until WWNZ filed its second amended statement of claim on 22 March 2007 did it seek from the High Court a declaratory order determining the fair market value of the B shares as at the Worldwide NZ Ltd LLC v QPAM Ltd HC Auckland CIV , 26 May Worldwide NZ LLC v QPAM Ltd CA122/06, 10 November At [36]. Jacobsen Venue Management New Zealand Ltd v Worldwide NZ LLC [2008] NZCA 105 at [57].

6 valuation date of 26 April That declaratory order was then consistently sought through to the fourth (and final) amended statement of claim filed on 15 July [17] In that fourth amended statement of claim, for the first time, WWNZ claimed interest. It did so in these terms: 9 Interest on the sum payable from 26 April 2006 at the rate of 7.5% per annum under section 87 Judicature Act 1908 ( the total sum payable ). The judgment under appeal [18] The operative parts of Potter J s judgment relevant to this appeal are: 10 I determine that the fair market value of the 25 per cent interest of WWNZ in the B units in the QPAM trust and the B shares in QPAM as at 26 April 2006 is $2.69m (see [244] above and appendix E3). I make declarations that [NZVEM] shall: (a) pay interest on the amount determined as the fair market value of the B units and shares ($2.69m): (i) (ii) at the rate of 7.5 per cent from the valuation date 26 April 2006 to 30 June 2011; and at the rate of 5 per cent from 1 July 2011 to the date of payment; (The fair market value of the B units and shares as determined ($2.69m) together with interest thereon being the total sum payable ); and (b) (c) [p]ay the total sum payable by tendering payment of the total sum payable in cleared funds at the address for service of WWNZ in this proceeding; and [m]ake payment within 28 days of the date of this judgment. [19] We will refer to the Judge s reasoning when dealing with the two issues, to which we now turn Second amended statement of claim, 22 March 2007 at 11 (prayer for relief A(g)). Fourth amended statement of claim, 15 July 2009 at 9 (prayer for relief B). At [324] [325].

7 Issue (1) interest: did Potter J err in awarding WWNZ interest on the value of the B shares she determined? [20] Potter J dealt with interest at [258] [279] of her judgment. She began by noting the claim for interest in the fourth amended statement of claim, and by observing that the Deed is silent as to the payment of interest. She then set out s 87 of the Judicature Act which, relevant to this appeal, provides: 87 Power of Courts to award interest on debts and damages (1) In any proceedings in the High Court, the Court of Appeal, or the Supreme Court for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate, not exceeding the prescribed rate, as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment: provided that nothing in this subsection shall (a) (b) authorise the giving of interest upon interest; or apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement, enactment, or rule of law, or otherwise [21] Potter J then summarised the parties opposing arguments. NZVEM had relied on this Court s judgment in Body Corporate No v Auckland Regional Council 11 to support its submission that its liability to pay the fair value of the B shares as fixed by the Court was an inchoate liability, and not a debt. While accepting that WWNZ could seek a declaration determining the value, NZVEM submitted that was not a cause of action covered by s 87. Potter J distinguished Body Corporate No on its facts. We revert to that below at [36] [40]. [22] The following two passages contain the essence of Potter J s reasoning in awarding WWNZ interest: [273] The contractual obligation to pay the consideration for the units and shares arose in terms of the unit trust deed at the point the pre-emptive rights were exercised. While actual payment must be deferred until the fair market 11 Body Corporate No v Auckland Regional Council (1993) 6 PRNZ 559 (CA).

8 value is known (either by agreement or determination of the court), the legal obligation to pay the consideration for the units and shares was not dependent on determination of the amount of the consideration to be paid. Accordingly in terms of s 87 the plaintiffs cause of action arose at the point the pre-emptive rights were exercised. [275] Section 87 does not require that the amount of the debt be known. For s 87 to apply there must be a cause of action giving rise to a debt that a party seeks to recover. Since WWNZ has established a cause of action and is pursuing payment of the debt which JVMNZ is contractually bound to pay, s 87 can properly be applied, notwithstanding that the amount of the debt was not known at the time the cause of action arose. [23] We consider Potter J s reasoning on interest is erroneous. First, she appears to accept WWNZ s submission that the fair market value of the B shares is an ascertainable debt in terms of s In our view there is either a debt or there is no debt. A debt is a sum of money due from one person to another. To be due, it must be payable. To be payable it must be a sum certain a sum ascertained. [24] There are cases holding that a sum due, not ascertained but immediately and readily ascertainable, is a debt. We agree with those decisions, but that is not the position here. [25] We regard as correct the following definition of a debt which Hammond J gave in Colonial Mutual Life Assurance Society Ltd v Commissioner of Inland Revenue: 13 A debt is something owed by one person to another. In legal (and common) usage, it refers to what arises between the parties by reason of a prior obligation, whether contractual, or statutory. The debtor has an obligation to pay the debt, and can be sued on it. [26] Although the point made is somewhat obvious, we refer also to this Court s observation in Body Corporate No referring to payment of the increased rent in issue in that case: Although [the increased rent] is backdated it obviously cannot be paid until the amount is known At [262]. Colonial Mutual Life Assurance Society Ltd v Commissioner of Inland Revenue (1999) 19 NZTC 15,375 (HC) at [109]. At 563.

9 [27] To similar effect is this statement by Heath J in Glaister v Amalgamated Dairies Ltd, in the context of specific performance: A purchaser cannot be able to pay the purchase price if the purchase price remains to be ascertained. 15 [28] The sum payable by NZVEM to WWNZ for the B shares was neither a sum ascertained (and thus a sum certain), nor a sum immediately and readily ascertainable. Thus, our view is that Potter J erred in terming it an ascertainable debt. [29] This point is of some general importance. We therefore set out, in the following summary, a range of judgments supporting our view that NZVEM was not indebted to WWNZ from the valuation date 26 April 2006 to 22 December 2011 (the date by which Potter J declared NZVEM was to pay for the B shares). Counsel did not refer us to these cases; they are the fruits of our own research. Cases supporting our view Case OPC Managed Rehab Ltd v Accident Compensation Corporation [2006] 1 NZLR 778 (CA). Holdgate v Holdgate CA166/02, 24 July Summary ACC had overpaid OPC $334,000. This Court held that ACC was entitled to make a statutory demand under s 289 of the Companies Act 1993 for that sum. ACC s cause of action for money had and received had such similarity to an action for recovery of a debt that OPC s obligation to repay could be treated as a debt that is due for the purposes of s 289. So, in this case the sum treated as a debt was a sum certain $334,000. For decision was whether one partner to a dissolved partnership had to pay the other interest on monies owed. At [2] the Court held that would be the case only if the monies in question amount to moneys owing or any other indebtedness. In the course of his judgment for the Court, Tipping J stated: 16 It is of the essence of a cause of action for a debt that the amount owing be a liquidated sum. There must be no basis for any argument about quantum as opposed to liability. That is one of the principal reasons why there cannot be indebtedness between partners on a dissolution until accounts Glaister v Amalgamated Dairies Ltd [2003] 1 NZLR 829 (HC) at [133]. At [9].

10 have been taken and the precise amount owing by the partner in debit is thereby ascertained. The no useful purpose exception must be read against that starting point. Westpac Banking Corp v Nangeela Properties Ltd [1986] 2 NZLR 1 (CA). Re F P & C H Matthews Ltd (in liq) [1982] Ch 257 (CA). K v K (Divorce Costs: Interest) [1977] Fam 39 (CA) This is a firm statement that there can only be a cause of action for a debt if the amount owing is a sum certain (which is what is meant by liquidated ), and not in dispute. The issue was whether a payment of $25, made by a company to its bank (Westpac) was a voidable preference under s 309 of the Companies Act Three separate judgments were delivered. The Court unanimously held that the payment was recoverable by the liquidator as a voidable preference. McMullin and Somers JJ both held that the Court could also make an award of interest under s 87, as the liquidator s action for monies had and received was analogous to a debt 17 or had the characteristics of a debt; it would be a sum payable in respect of a liquidated money demand and would be recoverable by action. 18 Again, the sum treated as a debt was a sum certain. Interest under s 87 could therefore be awarded on it. Similar to Westpac v Nangeela. The English Court of Appeal held that the liquidator s claim for 10, was a claim for a debt. That debt arose, not on the making of the order avoiding the transaction, but upon the liquidation. Thus, another case where the sum treated as a debt was a sum certain. Involved a claim by a wife for interest on costs and disbursements ordered in her favour on 17 May Those costs and disbursements were fixed by the taxing master and, on 18 August 1975, the husband was ordered to pay within 28 days the sum of 16, He paid well within the 28 days. The Court was unanimous in dismissing the wife s claim. In the course of his judgment Lord Denning MR said: 19 In the further alternative, we are entitled to apply a little common sense. Interest should be payable whenever money is wrongly withheld from the one who is entitled to it: see Jefford v Gee [1970] 2 QB 130, When the sum is unascertained, the debtor cannot be expected to pay it until it is At 9 per McMullin J. At 11 per Somers J. At

11 McMiken v Clark (No 3) HC Auckland CIV , 23 April 2007 at [15] [21]. quantified. He cannot make a tender until he knows how much it is. He cannot be said to be wrongfully withholding the money until it is fixed. So in all fairness interest should only run from the date of quantification: see the instances given in Jefford v Gee at p 145. If he is given time to pay, it should only run from the time when payment falls due. Cooper J allowed interest under r 538 of the then High Court Rules only from the date when the High Court gave judgment, because it was only then that a judgment debt arose. At [21] Cooper J held that a debt must be for an ascertained amount or an amount immediately calculable, that is where all the issues necessary to enable calculation of the amount owing have been determined in a judgment. The Judge supported this by referring to Parsons v Mather & Platt Ltd [1977] 1 WLR 855 (QB) at 859 where Ackner J stated: [S]tatutory interest (under s 17 of the Judgments Act 1838 of the United Kingdom) runs from the date on which the judgment is pronounced, so long, of course, as that judgment quantifies the amount. Holdgate v Official Assignee HC Auckland B1545/96, 25 July Jordan v Vorwerk HC Napier CIV , 23 April Ackner J then cited the passage from Lord Denning s judgment in K v K, which we have set out above. The issue was whether a debt owing by one partner to another was in existence at the date when the debtor partner was adjudicated bankrupt. Priestley J at [62] held that a debt was not created until, amongst other things, the amount owing had been determined, by agreement, at $127,300. This case held that no debt was created until the amount owed was fixed. Dealing with an application to enforce a foreign judgment, Master Gendall held it is enforceable if it is, amongst other things, an order to pay a debt or certain sum of money. 20 Master Gendall held that such a sum would be sufficiently certain if it can be ascertained by a simple arithmetical calculation. This case held that there was a debt because the sum due was immediately, readily ascertainable. 20 At [20].

12 [30] The cases we have summarised support our view that a court may award interest on a debt only from the date on which the debt is ascertained, or becomes immediately ascertainable. The reason for that is perhaps best articulated by Lord Denning in the passage we have cited from his judgment in K v K (Divorce Costs: Interest). In short, it is unfair to order a party to pay interest on a debt before it is or can be quantified. [31] We have found three cases which, at first blush, may appear to express a view contrary to our view that a debt must either be ascertained or readily ascertainable and/or that interest should not be awarded in respect of any period before that point is reached. Two of these cases are decisions of the House of Lords, the third a decision of the English Court of Appeal. Most recently, in BP Exploration Co (Libya) Ltd v Hunt (No 2) Lord Brandon, in a judgment concurred in by the other four Law Lords, stated: 21 [T]here cannot be any general rule that, whenever the amount of any debt or damages payable by one party to an action to the other cannot be ascertained until judgment is given, the court should never, in the exercise of its discretion, award interest from a date earlier than the date of such judgment. The issue in BP Exploration was whether the trial Judge was correct in awarding interest under the English equivalent of s 87 on two substantial awards he had made pursuant to the Law Reform (Frustrated Contracts) Act Although those awards were analogous to damages, they were not in respect of debts. Further, at all material times those two sums were sums certain, so the issue that concerns us was not before the House of Lords. Nor did their Lordships need to decide whether interest could pre-date the accrual of a cause of action, because the trial Judge had awarded interest only from a date about two and a half years after BP s cause of action arose. Insofar as Lord Brandon extended his general statement to any debt it is, strictly, obiter, and we respectfully disagree with it. [32] Next is the House of Lords decision in Marren (Inspector of Taxes) v Ingles. 22 This involved the rather different statutory context of capital gains tax, and in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1983] 2 AC 352 (HL) at 374. Marren (Inspector of Taxes) v Ingles [1980] 1 WLR 983 (HL).

13 particular whether there was a debt in terms of an exemption provision in the legislation. In his judgment Lord Fraser stated: 23 The meaning of the word debt depends very much on its context. It is capable of including a contingent debt which may never become payable: see Mortimore v Inland Revenue Comrs. 24 It is also capable of including a sum of which the amount is not ascertained: see O Driscoll v Manchester Insurance Committee. 25 But I agree with Slade J and with Templeman LJ, both of whom held that the word debt in para 11 does not apply to the obligation of the purchaser under this agreement, which was described by Templeman LJ as a possible liability to pay an unidentifiable sum at an unascertainable date The latter part of that passage summarises the ratio of Marren: the word debt in the relevant legislation did not include a possible liability to pay an unidentifiable sum at an unascertainable date. That ratio is not at variance with our view. [33] The third case is O Driscoll v Manchester Insurance Committee, 26 referred to by Lord Fraser in the passage just cited. The issue was whether the respondent Committee was indebted to a Dr Sweeny, against whom the appellant s executors had issued a garnishee order attaching all debts owing or accruing to Dr Sweeny from the Committee. Dr Sweeny had rendered bills to the Committee which had made payments to him on account. The Committee undoubtedly owed Dr Sweeny more money, but the exact amount depended on final adjustments to be made as between the Committee and the members of a panel of doctors (including Dr Sweeny), each of whom had provided medical services to the Committee. The Court was unanimous in holding that there was a debt to which the garnishee order could attach. Swinfen Eady LJ stated: 27 Here there is a debt, uncertain in amount, which will become certain when the accounts are finally dealt with by the Insurance Committee. Therefore there was a debt at the material date, though it was not presently payable and the amount was not ascertained.... [34] The unusual fact situation in O Driscoll perhaps exemplifies Lord Fraser s observation in Marren that the meaning of the word debt depends very much on its At 990. Mortimore v Commissioners of Inland Revenue (1864) 2 H & C 838, 159 ER 347 (Exch). O Driscoll v Manchester Insurance Committee [1915] 3 KB 499 (CA). Ibid. At

14 context. The further amount payable by the Committee to Dr Sweeny was circumscribed by the bills he had rendered to the Committee, less the payments it had made on account. The balance that would become payable to Dr Sweeny was subject only to what Swinfen Eady LJ described as payment on the figures being finally adjusted. 28 That position can be contrasted to the position in this appeal, where the amount to be paid by NZVEM to WWNZ for the B shares was entirely unknown until Potter J determined their fair value. As a statement of general principle, we respectfully disagree with Swinfen Eady LJ that there can be a debt, uncertain in amount. [35] In summary, we regard the precedent value of these three English cases as limited. For the reasons we have explained, they do not dissuade us from our view that a debt must be a sum either ascertained or readily ascertainable before interest can be awarded on it under s 87. [36] The second error we consider Potter J made was in distinguishing this Court s decision in Body Corporate No on the bases that: 29 (a) (b) [N]o cause of action arose until the arbitrator s award [fixing rental under a lease] was published as it was only at that point that the existence of a debt was established, irrespective of its amount. As the Court of Appeal observed, it was only when there was an award that established a new rent in excess of the old that any liability or debt was established. [T]he obligations of the lessor and lessee to each other were fully provided by the terms of the lease and the relevant statutes, in particular the Public Bodies Leases Act [1969]. There was specific provision for the rent review and the process by which it would be carried out. The lessee was not contractually bound to pay a rent increase until the review was complete and the determination resulted in an increase in rent. [37] We do not consider those are distinguishing points. The issue in Body Corporate No was whether the High Court was correct to award interest on an arbitrator s award of 28 November 1991 fixing an increased rental back to the rent At 511. At [271].

15 review date of 27 November Referring to the position before the arbitrator, this Court observed: 30 It is apparent from the award that after the arbitrator had drawn counsel s attention to an earlier award he had made the lessors did not pursue the claim for interest and so no order was made. In this earlier award, the arbitrator had concluded that what he was called upon to do under the submission was to make a declaration of the rent payable under the lease; not to award a sum of money. Therefore the power to award interest conferred by s 87 Judicature Act 1908 and which may be exercised by arbitrators but which is limited to proceedings for the recovery of any debt or damages, was not available. [38] That was precisely the position before Potter J in the High Court: the fourth amended statement of claim asked the Judge to make a declaration as to the amount payable for the B shares; not to award a sum of money. [39] Further, after referring to Halsbury s Laws of England s definition of the expression cause of action, this Court stated: 31 the cause of action here did not arise until the award was published. The lessors could not establish their claim to arrears of rent unless and until the review process had resulted in the fixing of a new rent in excess of the old. To make out their claim, they had to establish a valid binding award. This they could not do until 28 November It is true that their liability to pay any increase existed from the commencement of the lease, but that was an inchoate liability until the amount of the increase was fixed. The lessors may have been able to come to the Court for a declaration as to that liability, and may to that extent have had a cause of action. But s 87 does not cover a claim of that kind. It covers proceedings for the recovery of debt or damages; and an essential aspect of the right to recover debt here was not just an award but an award in excess of the old rental, which the Court is not entitled to assume would follow as of course. [40] Again, that was exactly the position before Potter J. WWNZ s cause of action for recovery of the value of the B shares as a debt did not arise unless and until NZVEM failed to pay the value of the shares determined by Potter J within the 28 days of the date of judgment which the Judge allowed for payment. Prior to that, any liability NZVEM had was inchoate. [41] Third, we consider Potter J erred in her reasoning in [273], which we have set out above at [22] above. At the end of [273] Potter J held that WWNZ s cause of At 563. At 564.

16 action arose at the point the pre-emptive rights were exercised. Had the Judge gone on to identify what that cause of action was, she would have appreciated that no cause of action (except, perhaps, for a declaration) arose at that point. All that arose was a contractual obligation on the part of NZVEM to pay WWNZ for the B shares when their value was agreed or determined by the Court. No cause of action for breach of that contractual obligation, nor any other cause of action (bar one for a declaration as to value), arose unless and until NZVEM failed to pay for the shares once their value had been agreed or determined. [42] The position is quite simply that WWNZ s proceeding is not one for the recovery of any debt or damages, in terms of s 87(1). That is so for two reasons. [43] First, in terms of the way it is pleaded, WWNZ s claim was not one for the recovery of any debt or damages. The key parts of WWNZ s final (fourth amended) statement of claim are: It is an implied term of the Deed that NZVEM would be required to pay for the B [shares] within a reasonable period of time [(14 days was advanced)] after the fixing or determination of their fair market value. 32 The Deed does not specify a mode for determining the fair market value. The Court of Appeal has declared it to be assessed if necessary by the High Court. 33 In the result there is an executory contract under which NZVEM is obliged to make payment for the fair market value of the B shares within a reasonable time after the fixing or determination of their fair market value. 34 Prayers for relief seeking: Fourth amended statement of claim, above n 10, at [20A]. At [21]. At [22](a). At 9.

17 o A determination by the Court of the fair market value of the B shares (prayer A). o Interest on the sum payable from 26 April 2006 under s 87 (prayer B). o A declaration that NZVEM is obliged to pay the sum within 14 days of the date of judgment (prayer C). Thus, WWNZ s claim is most accurately described as a proceeding seeking a declaratory judgment as to the amount payable under an executory contract. [44] Second, s 87(1) gives the Court a discretion to: order that there shall be included in the sum for which judgment is given interest Potter J was not asked to and did not give judgment in any sum. All the Judge did was determine the fair market value of the B shares, and make a series of declarations. [45] For each of those two separate reasons, s 87 did not apply to the proceeding. [46] For WWNZ, Mr Fisher sought to support Potter J s award of interest under s 87 by relying on this Court s decision in Hieber v Hieber. 36 Hieber involved a claim for equitable interest, pursuant to the promise to pay interest which courts imply where a purchaser of a property is in possession receiving the rents, but without having paid the purchase monies. Further, there was agreement in Hieber both that the purchaser should pay interest and as to the period for which interest should be paid. The only issue for this Court was the appropriate rate of interest. By contrast, WWNZ claimed interest only under s 87, and Potter J awarded interest under that section. There was no agreement that interest should be paid, let alone as to the appropriate period. 36 Hieber v Hieber [1991] 1 NZLR 315 (CA).

18 [47] For all those reasons, Hieber is of no assistance to WWNZ. In saying that, we have not overlooked that this Court in Hieber allowed interest under s 87 from the settlement date of 4 May 1990 to the date of its judgment, 5 November A balance of $2,288,970 had become payable to the respondent vendor on 4 May While the Court could have awarded interest in its equitable jurisdiction, it held that the implied promise to pay the fixed balance due also came within the expression debt or damages in s 87. That does not assist WWNZ in defending an award of interest up to the time Potter J fixed the amount payable, and the date for its payment. [48] Doubtless because WWNZ claimed interest only pursuant to s 87, never on equitable principles, there was no evidence before Potter J that NZVEM had received the benefits flowing from the ownership of the B shares from 26 April onwards, nor any evidence as to what those benefits were. Potter J could not, and did not, make any relevant findings of fact. The Judge s focus was on s 87 because the claim for interest that she had allowed had invoked that provision. [49] Quite apart from the lack of any pleaded claim for equitable interest, or any evidential foundation, there is a further difficulty in the way of Mr Fisher s attempt to support the award of interest on the basis that NZVEM enjoyed the benefits of the B shares over the relevant period. That difficulty is that WWNZ, in each of its successive statements of claim, denied NZVEM s legal title to and equitable interest in the B shares. When we confronted Mr Fisher with this difficulty, he contended that WWNZ did not by its conduct do anything to deny NZVEM s rights [to the B shares]. Mr Fisher maintained that WWNZ s denial of NZVEM s legal and beneficial interest in the B shares was in order to protect its own rights. We reject that submission. WWNZ s pleading was undoubtedly conduct deny[ing] NZVEM s rights [to the B shares]. 37 QPAM treated NZVEM as the owner of the B shares from 27 April 2006, when it received NZVEM s notice that NZVEM had exercised its pre-emptive rights. The transfer of the B shares from WWNZ to NZVEM was entered in QPAM s share register on or about 5 May These details are recorded in an affidavit sworn by the finance manager of QPAM, Mr Brendan Hines, in the appeal CA122/06 referred to in [13] above.

19 [50] For completeness we record Mr Fisher s acceptance of Potter J s holding that, contrary to WWNZ s pleaded denial, the legal and beneficial ownership of the B shares passed to NZVEM on 26 April 2006, and that WWNZ did not have an unpaid vendor s lien in respect of the shares. [51] For all those reasons we hold that Potter J erred in awarding WWNZ interest, pursuant to s 87, on the fair market value of the B shares as she determined it. Issue (2) value of the derivative proceeding: did Potter J err in placing a nil value on the derivative proceeding, for the purposes of determining the fair market value of the B shares? [52] Potter J dealt with the value of the derivative proceeding at [148] [189] in her judgment. She outlined the allegations of breach of fiduciary duty made in the derivative proceeding. To summarise: 38 Without the knowledge of WWNZ and Mr Utsick the Jacobsen directors procured the entry of QPAM into a ticketing services agreement with Ticketmaster. The monetary benefits accruing to QPAM under that agreement were in the range $2.7 million to $4.4 million below market value, based on an offer subsequently received from Ticketek. The reason for the agreement was that Ticketmaster advanced monies to QPAM which reduced the need for NZVEM to provide debt funding of $5 million for the Arena to meet the requirements of the Auckland City Council. [53] Potter J noted that an amended statement of claim filed on 12 December 2005 sought an order under s 165 of the Companies Act 1993 granting WWNZ and Mr Utsick leave to bring proceedings on behalf of QPAM. It was alleged that QPAM had a strong claim against the Jacobsen directors with good prospects of success but 38 At [149].

20 that the proceeding should not be left to the Jacobsen directors or the shareholders of QPAM, because the Jacobsen directors effectively controlled QPAM. [54] The Judge then considered the progress of the proceeding, in particular discovery, concluding [A]s at valuation date, 26 April 2006, neither the plaintiffs nor QPAM had inspected the Jacobsen directors documents. 39 [55] Next, Potter J dealt with a submission by Mr Fisher that, in fixing the value of the B shares, she should consider documents relevant to the value of the derivative proceeding, discovered in the proceeding before her. Potter J did not accept this submission. She held that the discovery obtained in the proceeding before her could have been pursued in the derivative proceeding, but was not. She said: 40 And: 41 As at the valuation date it was not available to, and not obtainable by, a willing purchaser of the B shares, to add to the information such a purchaser may have had about the derivative proceeding. As the Court of Appeal said, the right of action in the derivative proceeding is simply a valuation issue. To attempt in the course of this proceeding to inject into the valuation process, documentary evidence which was not available at the valuation date and had not been pursued in the proceeding in which it could have been obtained is a blatant attempt to introduce hindsight information. [56] Although she declined to consider the additional documentation, Potter J made some observations about that documentation concluding: 42 In summary, my assessment is that the additional documentation, even if admissible, would not have enabled the Court to draw firm conclusions about QPAM s arrangements with Ticketmaster to inform an assessment of the value of the derivative proceeding. [57] The Judge then considered the opposing valuations of the derivative proceeding. Mr Lucas, the valuer for WWNZ, had valued it at $1.2 million which he At [154]. At [164]. At [166]. At [169].

21 had incorporated in reaching the value of the 100 per cent equity of QPAM. 43 By contrast, NZVEM s valuer, Mr Hussey, had assessed the value of the derivative proceeding as nil. 44 Indeed, as Potter J noted, Mr Hussey went further expressing the view: 45 the possibility of such a claim was likely to create an overall negative view of the risk attaching to the potential investment and was likely therefore not to be disclosed to potential purchasers of the 25 per cent interest, who would have to work with the very parties who were the defendants in the derivative proceeding. [58] The Judge noted that Mr Hussey, under persistent questioning by Mr Fisher, had queried what value a rational purchaser would put on the derivative proceeding and had concluded: [T]he purchaser, I believe, just wouldn t pay for it. I suggest even the mention of that asset would devalue the whole asset that you re talking about. 46 [59] Potter J then set out her views on the value of the derivative proceeding in these terms: [185] I am persuaded by Mr Hussey s evidence on this aspect. The reality is that as a matter of fair market value, the right of action in the derivative proceeding has no value unless a notional purchaser could be persuaded to pay something for the chance of the benefit. The only chance of deriving a benefit would depend on the derivative action proceeding with the support of the purchaser of the 25 per cent interest against parties representing the holders of the 75 per cent majority interest, the very persons on whom the purchaser of the 25 per cent interest would be dependent for co-operation in preserving and enhancing the value of the purchaser s investment. [187] In my view that reality has to be appropriately reflected in the valuation and I consider the consequence of recognising that reality is, as Mr Hussey insisted, that no rational buyer would pay anything for the right of action represented by the derivative proceeding. A willing, but not anxious, seller would have to acknowledge that reality, notwithstanding the item technically forms part of the seller s asset base At [176]. At [179]. At [180]. At [183].

22 [189] Accordingly I conclude that the derivative proceeding has a nil value in assessing the fair market value of QPAM and the B shares and units. [60] Mr Fisher has come nowhere near persuading us that Potter J s conclusion is in error. Indeed we share the Judge s view that the derivative proceeding was worth nothing, and for the reasons the Judge gave. We consider the Judge s assessment of a nil value was commercially realistic and sound. [61] In advancing his argument on this issue Mr Fisher appeared to argue that the value should be struck as between the parties to the derivative proceeding. He argued that the blatant breach of fiduciary duties by the defendant Jacobsen directors gave the derivative proceeding a value. But Mr Fisher has simply got the wrong parties for the required valuation exercise. Potter J asked the correct question: what if any value would a notional rational willing but not anxious purchaser of WWNZ s 25 per cent B shareholding in QPAM be prepared to pay for the value of the proposed derivative proceeding against the Jacobsen directors? 47 [62] Mr Fisher also protested that the Jacobsen directors should not be permitted to get away with what he submitted was a blatant breach of fiduciary duty. That is nothing more than a cri de coeur, or perhaps a call to arms. It is irrelevant to the required valuation exercise. [63] Because we agree with Potter J s assessment that the reality was that the derivative proceeding had a nil value for the purposes of valuing WWNZ s B shares, we find it unnecessary to deal with the two subsidiary issues raised by Mr Fisher in respect of Issue (2). Those issues were: (a) Are the documents Potter J ruled inadmissible as hindsight documents admissible? (b) Did the Judge err in deciding that she could not draw any firm conclusions about the merit of the derivative proceeding as at valuation date? 47 Particularly at [185] [187].

23 [64] To summarise, we find no error in Potter J s assessment that the derivative proceeding had a nil value for the purposes of valuing WWNZ s B shareholding. Indeed, we are in firm agreement with the Judge s assessment. Result [65] The appeal is allowed. The declaration made by the High Court that NZVEM pay WWNZ interest on the fair market value of the B shares from 26 April 2006 to the date of payment, pursuant to s 87 of the Judicature Act, is set aside. [66] The cross-appeal is dismissed. [67] The respondent is to pay the appellant costs for a standard appeal on a band A basis with usual disbursements. Solicitors: Stewart Germann Law Office, Auckland for Appellant Brookfields, Auckland for Respondent