The appellants must pay the first and second respondents costs for a standard appeal on a band A basis and usual disbursements. We certify for second counsel.

REASONS OF THE COURT
(Given by Ellen France J)

[1] After hearing from counsel, we declined an application by the appellants to admit fresh evidence on the appeal. We said we would provide our reasons separately and these now follow.

Background

[2] In a judgment delivered on 22 April 2010, Asher J granted leave under s 165 of the Companies Act 1993 to Allen Peters and Paul Quinn, the first and second respondents, to bring a derivative action on behalf of Birnie Capital Property Partnership Ltd (BCPP) against the appellants.[1]
[3] The background to the application to bring a derivative action is set out in the judgment of Asher J.[2] For present purposes we need only record a brief outline.
[4] BCPP was set up as a vehicle through which investors could participate in a number of property projects for which William Birnie, the first appellant, had been developing plans.
[5] BCPP entered into an agreement to acquire the various property project assets in which Mr Birnie had an interest (the property project assets agreement). The particular transactions relevant in this case relate to the development of the Lion Rock golf course (the Lion Rock assets). That included a purchase of the interest of Mr Birnie under an agreement with a Mr Paterson to buy land on the Purerua Peninsula for $8 million (the Paterson agreement) and the purchase of another part of the Peninsula, also for $8 million (the Birnie agreement).
[6] The property project assets agreement included a clause providing for the Lion Rock assets to be transferred back from BCPP to the vendors if the conditions in the Paterson and Birnie agreements were not satisfied and BCPP was not able to acquire both Purerua Peninsula properties. In that event, the vendors would repay the $19 million purchase price. The parties called this the “put option”.
[7] On 30 September 2009 Mr Paterson validly cancelled the Paterson agreement for non-satisfaction of a vendor loan condition and failure to obtain a new title.
[8] On 16 October 2009 a valuation of the Purerua Peninsula land reported its value at $10 million to $13 million. That contrasted with the $16 million to be paid for it under the agreements for sale of the land, and the $19 million paid to the Lion Rock vendors, an unidentified portion of which was for the rights under the agreements.
[9] With the deterioration in the property market a dispute arose between BCPP’s two groups of directors, A and B, reflecting respectively the appellants and the investor shareholders, over whether the put option was to be exercised. The governance arrangements for BCPP meant that in order to pass a valid resolution to exercise the put option the vote of at least one group A director and one group B director was required.
[10] The group B directors, purportedly on behalf of BCPP, gave notice to the Lion Rock vendors of the exercise of the put option. At a subsequent Board meeting, Mr Norrie voted against a resolution to exercise the put option. Mr Birnie did not attend. Further attempts to pass the resolution were also unsuccessful because of the need for approval of a group A director. At that point Mr Peters and Mr Quinn applied for leave of the Court to bring the derivative action on behalf of BCPP. They advanced two causes of action, breach of directors’ duties and a damages claim.
[11] In considering the application, Asher J applied the test in Vrij v Boyle,[3] namely, whether a prudent business person in the conduct of his or her own affairs would bring the claim. He considered the test was satisfied and granted leave. We were advised that the trial is scheduled to begin on 14 March 2011.

Application to admit new evidence

[12] The new evidence is directed to an argument the appellants intended to make for the first time on appeal, namely, that the put option was never properly exercisable. The argument is that the conditions in the Paterson and Birnie agreements were not met because of BCPP’s own default and not because of a third party default or from other circumstances beyond the control of BCPP. Applying the principle that a party cannot rely on the failure of a condition where that failure was caused by the party’s own default, the appellants wanted to argue that the put option was therefore not exercisable.
[13] In submissions in support of the application, Mr O’Brien, who did not appear before Asher J, accepted that the evidence was not fresh because it was available at the time of the hearing in the High Court. The new evidence was primarily documentary and comprised Board papers and Board minutes of BCPP and some related correspondence. Mr O’Brien acknowledged that the appellants were seeking the indulgence of the Court but submitted that this was one of those cases where evidence should nonetheless be admitted on appeal because of its importance to the case. The submission was that it was in the interests of justice to admit the evidence because, if it was persuasive, the costs of the trial would be saved.
[14] The first and second respondents abided the decision of the Court on this aspect but submitted that the evidence was neither fresh nor cogent. As to its cogency, Mr Kennedy on behalf of the first and second respondents submitted that it did not establish that the conditions in the Paterson and Birnie agreements were not met because of BCPP’s own delay such that BCPP was not entitled to exercise the put option. Indeed, Mr Kennedy submitted that the evidence sought to be admitted actually supported his clients’ case.

Evaluation

[15] The application for leave to adduce further evidence is brought under r 45 of the Court of Appeal (Civil) Rules 2005. This Court in Erceg v Balenia Ltd expressed the requirements applying to a r 45 application as follows:[4]

[15] ... [The] requirements are that the evidence be fresh, credible and cogent. It will not be regarded as fresh if it could, with reasonable diligence, have been produced at the trial: Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1988] 3 NZLR 190 at 192 [(CA)]. Particular weight will be accorded in summary judgment proceedings to the need for finality: it is only in exceptional circumstances that the Court will permit further evidence to be filed on appeal: Lawrence v Bank of New Zealand [2001] NZCA 375; (2001) 16 PRNZ 207 (CA).

[16] The critical point here, where the evidence is not fresh, is that the appellants seek to advance it for the purposes of a new argument. The argument about the inability to exercise the put option was not, on a proper reading, heralded in the pleadings. Nor was it addressed in the submissions to the High Court. The result of admission of this evidence would be that this Court was in the position of addressing a new argument, on new evidence, without the benefit of the views of the High Court Judge. That outcome is undesirable and, ultimately, not helpful. This is not a case where the appellants are left without any remedy as this issue can be raised and dealt with properly at trial. Accordingly, as the evidence is not fresh and there is no persuasive reason for its admission, we declined the application to admit further evidence.

Other matters

[17] On being advised of this decision, Mr O’Brien abandoned the appeal which is therefore dismissed.
[18] The first and second respondents sought costs for a standard appeal on a band A basis and usual disbursements, with certification for second counsel. There is no objection to that course and costs are awarded accordingly.

Solicitors:
Bell Gully, Wellington for Appellants
Minter Ellison Rudd Watts, Auckland for First and Second Respondents

[1] Peters v Birnie [2010] NZHC 625; [2010] NZAR 494 (HC).
[2] At [2] – [20].
[3] Vrij v Boyle [1995] 3 NZLR 763 (HC).
[4] Erceg v Balenia Ltd [2008] NZCA 535.

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