Reeves v Abano Healthcare Group Limited [2014] NZHC 1316 (11 June 2014)

Last Updated: 1 August 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2014-404-1306 [2014] NZHC 1316

UNDER	Part 19 of the High Court Rules and section 123 of the Companies Act 1993
BETWEEN	JAMES LIVINGSTONE REEVES Applicant
AND	ABANO HEALTHCARE GROUP LIMITED Respondent

Hearing:	10 June 2014
Appearances:	Mr Stewart QC, Mr McKay and Mr Glennie for the applicant Mr Skelton QC and Ms Edwards for the respondent
Judgment:	11 June 2014

_{JUDGMENT OF THOMAS J}

This judgment was delivered by me on 11 June 2014 at 5.15 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date:...............................}

Solicitors:

R Stewart QC, J A Mackay and H Glennie, Chapman Tripp, Auckland

P Skelton QC, R A Edwards, Harmos Horton Lusk Limited, Auckland

REEVES v ABANO HEALTHCARE GROUP LIMITED [2014] NZHC 1316 [11 June 2014]

Introduction

[1] The applicant, James Reeves, is the registered owner of 10,109 shares in the defendant, Abano Healthcare Group Limited (Abano). He together with several other shareholders holds a class of over 3.8 million shares or 18.56 per cent of Abano. Mr Reeves is also the principal of Steamboat Capital Limited (Steamboat), a private investment company based in Auckland.

[2] Abano has 220,032 registered shareholders consisting of both institutional shareholders and retail investors.

[3] In this application Mr Reeves is supported by Mr Hutson. Mr Hutson is the director of Healthcare Industry Limited (HIL), which beneficially owns over 2.8 million shares in Abano (13.9 per cent). Mr Huston is also a director of Bay International Limited, which is owned by Abano (50 per cent), a trust associated with Mr Hutson (39 per cent) and another family trust.

[4] On 6 May 2014, Mr Reeves and HIL requisitioned a special meeting of Abano’s shareholders to be held pursuant to s 121 of the Companies Act 1993 to vote on the resolution that:

Trevor Janes be removed from office as a Director of Abano Healthcare

Group Limited with immediate effect.

[5] Trevor Janes has been a director of Abano since September 2005 and

Chairman of the Board since November 2011.

[6] The applicant seeks orders that the meeting not take place until three weeks after the scheduled meeting date, in order to give the shareholders time to make an informed decision on how to vote.

The claim

[7] The applicant claims:

(a) That pursuant to s123(1)(a) and (b) of the Act the Court orders the special meeting of shareholders to be held at 10.00 am on 13 June

2014 in Auckland be cancelled and that a fresh meeting be convened, to be held at a date that is not less than four weeks from

notice of meeting;

(b) That the agenda and location of the special meeting of shareholders shall be the same as at stipulated in the notice.

(c) Costs

[8] The applicant claims that it is impracticable to conduct the special meeting of shareholders on 13 June 2014 because:

Whether or not the shareholders should pass the resolution is a very important issue which involves numerous complex and controversial issues;

The notice is biased and/or misleading and therefore more time is required to reasonably inform shareholders about the issues and for them to consider them, and the notice does not comply with cl 2.3(a) of the constitution;

The notice was issued on Friday 23 May 2014 and set the date of the special meeting as Friday 13 June 2014. The notice period was therefore only 13 working days (excluding the date the notice was issued and the date of the special meeting). Although this technically complies with the constitution (cl

2.1 requires 10 working days’ notice), it is inadequate for shareholders to consider and vote on the resolution by proxy, having regards to such matters as the contents of the notice, other recent statements by the Board of Directors of Abano and/or its managing director Alan Clarke.

[9] Although Brown J made directions on 4 June 2014 for the filing of a statement of claim and an application for an interim injunction, the applicant has not filed a separate application for an interim injunction nor an undertaking as to damages.

[10] The substantive relief sought by the applicant is based on a single cause of action pursuant to s 123(1)(a) and (b) of the Companies Act 1993 (the Act). However it is clear that the relief sought is an order which will in reality be final relief in relation to the subject matter of these proceedings.

[11] Given the urgency of the application, I gave the result dismissing the application earlier today. I now set out my reasons.

Background

[12] It seems that Mr Hutson and Mr Reeves started to make general complaints about the governance of Abano in late November 2013 following Mr Janes’ re- election to the Board at the AGM and their failed takeover bid for Abano. The Abano Board believes that from December 2013 to March 2014 Hutson and Reeves approached all Abano’s institutional shareholders in an effort to gain support for their views which were critical of Abano’s operating performance and governance in general.

[13] On 10 April 2014 interests associated with Hutson and Reeves filed a Substantial Holding Notice with NZX with a number of annexures. One of those annexures called for the resignation of Mr Janes and referred to allegations of misleading information being supplied prior to and during the 2013 AGM. That included many of the allegations advanced in this proceeding. The letter referred to the establishment of a website www.rerunagm.co.nz. Posted on that website are details of the material relied on by Messrs Hutson and Reeves in support of their campaign to remove Mr Janes.

[14] On 10 April 2014 Mr Hutson and Mr Reeves wrote to Abano setting out their concerns about the approach of the company, the events of the November 2013

AGM, the performance of the company and the broker’s report obtained by the

company.

[15] It is clear that the purpose of the letter was to explain why the applicants were calling for Mr Janes’ resignation. The writers included their request for 32 working days’ notice of the special meeting to allow shareholders adequate time to consider the issues.

[16] On the same day they posted on their website a letter to shareholders entitled “performance speaks louder than words” and which contained much the same material.

[17] Messrs Hutson and Reeves released another statement on 10 April 2014 which received widespread media coverage. The Abano Board issued a short statement in support of Mr Janes. That also received some press attention.

[18] A number of communications followed from Mr Hutson and Mr Reeves to the Board. They were consistent in their request for a lengthy period of notice of the special meeting. Abano did not comment on that request.

Requisition

[19] The Board received a request from Messrs Hutson and Reeves to convene a Special Meeting on 23 April 2014. On two occasions the request did not comply with the formal requirements of a requisition but the Board nevertheless took steps to consider the issues around fixing a date.

[20] The requisition dated 23 April 2014 was released to the media and reported on. Abano announced receipt of the requisition on 24 April 2014. A copy of the announcement was posted on the NZX website.

[21] The Hutson and Reeves requisition on 30 April 2014 included an indication that they waived their right to have a 1,000 word statement included in the notice of meeting so as to ensure the meeting could be conducted in a timely and orderly manner. The letter indicated they would “reach out directly to fellow shareholders”. That letter was released to the media and reported on.

[22] A valid requisition notice was received on 6 May. On 7 May 2014 Abano released a statement noting receipt of the requisition notice and that a special meeting would be convened. Messrs Hutson and Reeves issued another media release that day.

[23] On 9 May 2014, Abano wrote to HIL and Mr Reeves, stating that it would convene a special shareholders meeting in accordance with the Act and Abano’s constitution.

[24] On 21 May 2014 Abano wrote to shareholders urging them to vote against the resolution. This was prior to notice of the special meeting being sent. It noted:

The notice of the meeting and proxy/voting form will be sent to shareholders in the next few weeks

[25] The letter referred to Mr Hutson and Reeves making personal attacks on members of the board. It also referred to them having dismissed out of hand or ignored opportunities for positive resolution of the issues. Furthermore it referred to Mrs Hutson and Reeves failed takeover attempt of Abano in 2013 including Mr Hutson’s attempt to acquire the Audiology Business for a “nominal sum”.

The Notice

[26] The notice of special meeting (the Notice) was sent to NZX for approval in accordance with the listing rules, requesting NZX to deal with it as a matter of urgency. Comment was received.

[27] NZX approved the notice of special meeting on 21 May 2014. On 23 May Abano sent the Notice to the shareholders stating that the special meeting would be held in Ellerslie, Auckland, on Friday 13 June 2014 at 10 am. It was sent by mail and emailed to those who had elected to receive communications electronically. It was posted on the Abano website.

[28] The Notice also stated that proxy forms (for those who could not attend the meeting) must be received by 10 am on Wednesday 11 June 2014.

[29] Mr Reeves did not receive the Notice and voting/proxy form until 28 May

2014.

Applicant’s communications

[30] The complaints made by Messrs Hutson and Reeves have been the subject of intense media coverage for a number of months. Annexed to Ms Paterson’s affidavit was a schedule outlining the extent of media coverage of the dispute from 3 March –

6 June 2014. The list runs to some eight pages with publications including NZX,

National Business Review, The New Zealand Herald, The Dominion Post, The Malborough Express, The Southland Times, The Manuwatu Standard, Radio New Zealand, ShareChat.co.nz, Scoop and Yahoo New Zealand.

[31] Messrs Hutson and Reeves have reached out directly to shareholders, including a circular around the same time the notice was posted and a letter sent on

30 May 2014 which included their own pre-filled proxy form and copies of news articles from the NBR.

Explanatory Notes

[32] The Explanatory Notes which accompanied the Notice at paragraph 19 say:

The Board believes that the Resolution is not just about whether Trevor Janes remains in office as a Director and Chairman but about the future control and direction of the Company. The Board urges you to VOTE AGAINST THE RESOLUTION if you want to show that:

You support the Board and its strategy.

You do not support Hutson and Reeves’ continued attempts to control the Company without making a formal Takeovers Code compliant takeover offer that is open for acceptance by all Shareholders on the same terms.

You urge Hutson and Reeves to stop the destructive campaign, which risks eroding the value of all shareholders’ investment in Company and is a waste of shareholder money

[33] Both parties say that the resolution is a very important one. Retail (small private) investors make up about 50 per cent of Abano’s shareholders. It is clear that they will play a key role in the vote. Mr Clarke, Abano Chief Executive, is reported as saying that institutional shareholders, who it seems support Abano, hold 22 – 23 per cent of the company and that the Hutson and Reeves interests can expect about

21 per cent. He is quoted as saying:¹

There are two blocs close to each other. Making the final decision will come down to the retail investors – the Mum and Dad shareholders.

[34] The crux of the applicant’s case is that in order to form a reasoned judgement

shareholders must also be given adequate time to form that judgement.

Section 123, Companies Act 1993

[35] Section 123 of the Act provides:

(1) If the court is satisfied that—

(a) it is impracticable to call or conduct a meeting of shareholders in the manner prescribed by this Act or the constitution; or

(b) it is in the interests of a company that a meeting of shareholders be held,—

the court may order a meeting of shareholders to be held or conducted in such manner as the court directs.

(2) Application to the court may be made by a director, or a shareholder, or a creditor of the company.

(3) The court may make the order on such terms as to the costs of conducting the meeting and as to security for those costs as the court thinks fit.

[36] The applicant’s argument is that it is impractical to conduct the meeting which has been called in terms of s 123(1)(a) if the information provided to shareholders does not comply with Abano’s constitution, in that it does not provide shareholders with sufficient detail to enable them to form a reasoned judgement in relation to it. The applicant essentially makes two points. First, that the amount of time given means that shareholders will not be able to form a reasoned judgement and secondly that the material provided by the Board is misleading and therefore will not enable a shareholder to form a reasoned judgement.

[37] Section 123 is clearly a procedural section² to be used where a meeting is required but cannot be convened because there are issues surrounding quorum, deadlock or where the rights of shareholders to hold a meeting are being thwarted by

_{procedural games.}

2. Union Music Limited v Watson [2003] EWCA Civil 180, [2003] 1 BCLC 453 at [33],considering the English equivalent of section 123.

[38] The cases under that section which have been referred to me support that interpretation. In the case of Re El Sombrero Limited,³ Wynn-parry J described the meaning of the word “impracticable” in the English equivalent provision as:

It is conceded that the word “impracticable” is not synonymous with the word “impossible”; and it appears to me that the question necessarily raised by the introduction of that word “impracticable” is merely this: examine the circumstances of the particular case and ask the question whether, as a practical matter, the desired meeting of the company can be conducted.

[39] As a practical matter it is clearly possible to call or conduct a meeting of shareholders in manner prescribed by the Act or the constitution. Such a meeting has been convened.

[40] Section 123(1)(b) provides that the court may order a meeting if it is in the interest of a company that a meeting of the shareholders be held.

[41] In this case there is no dispute that a meeting is in the interests of Abano and indeed it is the applicant who has requisitioned the meeting. The applicant however likes neither the timing of the meeting nor the information the Board has provided in support of the notice of the meeting, the Explanatory Notes. The applicant has used the procedure under the Act to requisition a meeting but, because he does not like its time or the way in which shareholders have been informed of the circumstances, he is seeking to use s 123. That, in my assessment, is an improper use of the section.

[42] I do not consider this is a case where relief can properly be given under s 123. “Impracticable” has a narrow meaning. It is clearly possible in this case to call and conduct a meeting. Section 123 is not appropriate for complaints in the nature of the applicant’s. However in case I am wrong about that and “impracticable” has the wider meaning advanced by the applicant, I will nevertheless consider the criticisms levelled at Abano and whether in the Court’s discretion relief is justified.

Is the notice period adequate?

[43] Section 121 of the Act provides:

A special meeting of shareholders entitled to vote on an issue—

(a) may be called at any time by—

(i) the board; or

(ii) a person who is authorised by the constitution to call the meeting:

(b) must be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.

[44] Pursuant to Schedule 2 of Abano’s constitution:

a) A director is removed from office at a meeting of shareholders by Ordinary Resolution and an Ordinary Resolution means a resolution passed by a simple majority (cls 1.1 and 11.9(b));

b) Written notice of the time, date and place of a meeting of shareholders must be sent to every shareholder entitled to receive notice of the meeting not less than 10 working days before the meeting (cl 2.1);

c) The notice must state the nature of the business to be transacted at the meeting “in sufficient detail to enable a shareholder to form a reasoned judgment in relation to it” (cl

2.3(a)).

[45] The 10 working day notice period is provided for in Abano’s constitution and the Act. I note this is the standard notice period which Abano has historically provided to shareholders, for example the special resolution required for the material transaction of the sale of Bay Audiology Limited in New Zealand. Ms Paterson, deputy chair of the Abano board, said in her affidavit evidence that the Board took those matters into account, including its assessment that the meeting should be held as soon as possible because the ongoing attacks on the board and Mr Janes in particular were costly, time consuming and required resolution.

[46] Abano’s notice provided 14 working days’ notice and 21 calendar days’

notice of the special meeting.

[47] Peter Hinton, partner at Simpson Grierson, has given expert evidence on market practice in relation to notice periods for special meetings of NZX listed companies. I am satisfied from his evidence and the analysis undertaken by him that

notice periods for special meetings (as opposed to annual meetings) tend to be relatively short and that the period of notice given by Abano is greater than the period of notice of any other NZX company since 1 January 2013 for any special meeting.

[48] I am also satisfied that the nature of the business considered at many of the special meetings analysed by Mr Hinton were more complicated than the removal of directors for example constitutional changes, major acquisitions and mergers and liquidations.

[49] The applicant claims to have been misled by omission about Abano’s true intentions as to when the meeting would be held. His continued reference to a longer time period was never corrected. He claims this was done in the context of the Board being aware that he intended to use that time to present his own case to shareholders including holding road shows throughout the country. He says that, clearly, this was not going to be able to be achieved within the time period which in fact was provided. He declined the opportunity to include a 1,000 word statement in the Explanatory Note by reference to his intention instead to communicate directly with shareholders.

[50] I am satisfied from the material that the issues in dispute have been in the public domain since at least 10 April 2014 and there have been numerous media articles covering the various issues and highlighting the competing contentions. While Albano’s obligation to provide shareholders with sufficient detail about the purpose of the meeting is not relieved by reports in the media, publicity regarding the issues and the meeting is relevant to the adequacy of notice of the meeting date.

[51] John Hawkins, National Chairman of the New Zealand Shareholders’ Association Inc (NZSA) provided affidavit evidence. NZSA is an independent body established to represent uphold the interest of retail investors and has approximately one thousand members.

[52] Mr Hawkins’ affidavit notes that the board of NZSA received and reviewed the notice of special meeting dated 23 May 2014. It was aware that a special

meeting was to be called prior to the notice being circulated as Mr Hutson and Mr

Reeves’ first requisition for a meeting was notified to NZX by Abano on 24 April

2014.

[53] Mr Hawkins’ affidavit records NZSA’s awareness that by at least 10 April

2014, Messrs Hutson and Reeves had been publicly advocating for the removal of Mr Janes from the Abano Board. NZSA has been researching and monitoring the position on behalf of its members and providing information and public comment as appropriate. These actions include:

(a) Publishing a media release 22 May 2014;

(b) Writing to all Abano shareholders on 29 and 30 May 2014.

(c) Posting a letter on NZSA’s website. The letter had been reviewed and approved by all members of NZSA’s board. It addressed the concerns raised by Hutson and Reeves regarding Abano, its governance and strategy and supported Mr Janes.

[54] In his capacity as National Chairman of NZSA Mr Hawkins was interviewed on Radio NZ about the issue.

[55] NZSA believes the issue to be considered at the special meeting is very straight forward, being a single issue that Trevor Janes be removed as director. NZSA believes Abano shareholders have had sufficient time to be fully and fairly informed and to reasonably consider and form a review on the resolution. NZSA refers to the extensive media attention and direct communications to shareholders by Abano and by Messrs Hutson and Reeves.

[56] NZSA has not received any complaint to the effect that shareholders have had insufficient time to consider the matter, noting that it is very rare for NZX listed companies to give materially more than the statutory 10 working days’ notice of a special meeting.

[57] NZSA believes that the meeting should proceed on 13 June and that postponing the meeting would cause confusion, resulting in additional costs and not be in the best interests of Abano’s retail shareholders.

[58] Subsequent to the notice there had been a number of reports to shareholders on the issue. Not only has NZSA reported but so too has the Institutional Shareholders Services Inc (ISS) on 29 May 2014. ISS is a global corporate governance organisation which advises and provides independent recommendations on how shareholders should exercise their votes. I have considered their report and note that ISS discussed the position with those seeking removal of Mr Janes and with the Board. The report sets out the competing contentions, the chronology of events and analysis of the various factors considered by it in reaching its recommendation to vote against the removal of Mr Janes.

[59] Forsyth Barr also issued a report dated 3 June 2014 to its retail shareholder clients making a recommendation on the resolution.

[60] That the notice period is more than adequate for reports and recommendations to be made to shareholders is evidenced by the approach of NZSA, the ISS report and the Forsyth Barr report.

[61] There is no doubt that the period of notice is adequate. It complies with the Act and the constitution. There is no ability for the Court to interfere with the board’s decision which I accept would set a dangerous precedent. In particular there has been no pleading to the effect that the timing was for an improper purpose. It is

not the task of the Courts to act as some sort of supervisor of board decisions.⁴

[62] I am satisfied from the affidavit evidence from Ms Paterson that appropriate considerations were taken into account in setting the meeting date. Again it must be remembered that it was the applicant who had requisitioned the meeting.

[63] Relevant considerations include the fact that shareholders have been on notice since 10 April 2014 that the applicant was calling for the resignation of Mr

Janes. The correspondence from Messrs Hutson and Reeves to the Board dated 10

April 2014, including the letter to shareholders which the applicant put on his website and the Korda Mentha Report, were all placed on the NZX website. Significant media attention ensued.

[64] It is pertinent to note that it was the applicant who elected to waive his statutory right for Abano to circulate a 1,000 word statement about the resolution. That was his choice. Whilst he did that with the intention of presenting road shows in the meantime, it was his choice to take the risk that the Board may not give the time he requested before the meeting.

[65] The applicant’s attitude was that he would reach out directly to shareholders and that is what he and his supporters have done. There was at least one direct mail out, they have provided proxy forms, established a website and engaged directly with the media. The applicant has made his concerns public, for example the entry on the Stuff website dated 29 April 2014 refers to the applicant’s opinion regarding the dental division, Mr Janes’ involvement in Capital and Merchant and a claim that Hutson and Reeves tried to buy Abano in 2014 for $7.14 to $7.80 a share.

[66] While not resiling from the requirement for the notice to comply with the constitution, it is relevant that the issues of concern to the applicant have been available on the NZX website since 10 April 2014, some two months before the meeting. Relevant too is the fact that the applicant does not seek any orders in connection with the Explanatory Notes, merely the timing of the meeting.

[67] In Cannon v Trask⁵ the Court granted an injunction restraining directors from fixing a particular date for the annual meeting as it was chosen deliberately, as the defendants accepted, to prevent shareholders from exercising their voting powers.

[68] I do not consider the circumstances of this case fall into the same or a similar category. It was the applicant who requisitioned the special meeting starting with the first attempt on 23 April 2014. He, by HIL and Steamboat Capital Limited, had issued a press release calling for Mr Janes’ resignation on 10 April. The meeting will

take place almost two months after that date. Clearly uncertainty as to Board membership and leadership should be set to rest at an early date. The applicant knew, or should have known, that Albano’s constitution required 10 days’ notice for a special meeting. Having set the ball rolling, he cannot complain when the Board complies with his request and convenes a meeting in accordance with the constitution.

[69] It is also pertinent to note that the applicant has other remedies should he remain dissatisfied after the meeting on 13 June 2014.

[70] I am satisfied that the notice period for the special meeting provides adequate time for shareholders to consider all relevant information.

Was the notice misleading? Are shareholders fully and fairly informed?

The law

[71] In the case of Floral Holdings Limited v Rothmans Industries Limited & Ors⁶ the Court granted an interim injunction restraining a listed Company from taking any step at an extraordinary general meeting convened to approve a sale of Rothman Industries Ltd’s tobacco interests. Chilwell J noted that central to the issues was “the right of shareholders in a company to be informed of matters material to a decision to vote for or against a resolution put to a general meeting.” The applicant had alleged that several communications by the Directors to the shareholders were either invalid or misleading, including by omission.

[72] The Court held (at 13):

...the test is whether shareholders have been fully and fairly informed to the point where they can properly determine whether they should vote in person or by proxy in favour of the resolutions to be put at the meeting. I am persuaded that the latter is the correct test for it recognises the situation that those who vote by proxy do on the information supplied.

[73] And secondly:

Corollary rules which flow from that test are that the information supplied should not be in any degree misleading, that a notice is not adequate if, whilst strictly true, it distorts or is, in other words, a “tricky notice” and that a collateral benefit to a director must be fully disclosed as a matter material to a decision on a resolution.

[74] In Garvie v Axmith,⁷ directors of a company gave notice of a meeting of shareholders to approve an agreement to purchase assets and undertakings of another company and to permit refinancing of the company. The Court held the resolutions passed at the meeting were invalid because the notice did not have sufficient information to permit a shareholder to come to an intelligent conclusion about whether he should vote in favour of the resolutions or not.

[75] The test in Floral Holdings was applied in Reeves v Pauanui Sports and Recreational Club Inc.⁸ The board of a private club gave notice to members of a special general meeting to consider a resolution approving the sale of a tennis court property. In that case the Court quoted the test in Floral Holdings but held that a “reasonably intelligent member” of the club would not have been misled and the statements represented the opinions of those responsible for the document. There

was also an opportunity to challenge that opinion at the meeting itself.

[76] The case of Malayan Breweries Ltd v Lion Corporation Ltd arose from the proposed merger of Lion and Nathan.⁹ The applicants sought to declare a resolution to approve a share purchase as part of a merger invalid on the basis that the notice and further information was deceptive, misleading and inadequate. The Judge concluded that notice did not contain the principal information necessary for an informed decision on the proposal being: terms of the agreement, the total cost of the merger, why the merger at such a cost was desirable, the effect on dividends and an associated “put option”. Supplementary material sent later was held to be sufficient

but was not sent within the requisite time. (The case was appealed to the Court of

_{Appeal (CA28/07/86) but the appeal was dismissed).}

⁷ _{Garvie x Axmith (1961) 31 DLR (2d) 65, [1962] OR 65 at 85-86.}

⁸ Reeves v Pauanui Sports and Recreational Club Inc HC Hamilton CIV-2010-419-1599, 16

_{December 2010.}

9. Malayan Breweries Ltd v Lion Corporation Ltd (1988) 4 NZCLC 64,344 (1988) 3 BCR 70 (HC).

[77] The following passage from the judgment is relevant:¹⁰

I do not regard press statements and the like as being a substitute for information which a company is bound, either by statute or its articles, or in equity to provide its shareholders.

Analysis

[78] The only issue of the potential concern is whether the information provided by the Board was in some way misleading. The parties do not seek a final determination of these issues but I approach it by an analysis as to whether issues raised are of concern to such an extent that the notice of meeting does not properly state the nature of the business to be transacted in sufficient detail to enable a shareholder to form a reasoned judgement in relation to it. I also consider whether there is on the face of it substance to the allegation that the Board has provided misleading information to shareholders.

[79] The Abano Board disputes that the notice of meeting is misleading or deceptive, noting that the notice was reviewed and approved by the Board and management and advisors as well as approved by NZX. In the Board’s view the statements are either factually accurate or genuine expressions of the Board’s opinion on the merits of the issues. As noted by Ms Paterson, shareholders are entitled to make up their own minds on the issues and vote accordingly.

[80] The applicant’s specific areas of complaints relate to the independence of Mr Janes and his past directorship of Capital and Merchants Finance Limited, whether the takeover proposal by Archer Capital with which Mr Reeves was involved was fairly reported to shareholders and action the FMA might take in this regard and other general issues.

[81] I consider the key areas relied on by the applicant:

(a) It is wrongly suggested that Trevor Janes was an independent Director at the time of the AGM and that the applicant was incorrect in saying he was not.

¹⁰ At 21

[82] This issue relates to Mr Janes’ being a Director of Accident Compensation Corporation since September 2012 and the ACC shareholding of approximately 6.75 per cent in Abano.

[83] The applicant says the Explanatory Notes suggest that Mr Janes was an independent director at all times leading up to and during the AGM on 26 November

2013. The waiver issued by NZX for directors of ACC which enable them to be considered “independent” if they were also directors of other NZX listed entities was not issued until 6 March 2014.

[84] The comment in the Notice as to Mr Janes’ independence is not to the effect as the applicant would have the Court believe. It is the current status of Mr Janes to which reference is made and in the context that the Board would rely on it for “future” director independence matters. This issue has also been addressed by the FMA which is not taking any action.

(b) The Notice was misleading and deceptive on how it was described Mr Janes’

past directorship of Capital and Merchant Finance Limited.

[85] Mr Janes was a director of Capital and Merchant Finance from 30 March

2005 until 30 October 2006. The FMA and the SFO undertook criminal prosecutions which led to the convictions of five past directors, three of them receiving terms of imprisonment. The applicant takes issue with the Explanatory Note which says Mr Janes “has not been the subject of any of the litigation that has subsequently involved that company”.

[86] Mr Janes signed a 2006 prospectus which appears to have been considered by the Judge sentencing his co-directors a misrepresentation of the monitoring of the company’s liquidity cash position. However there is some uncertainty in this regard. It is a fact, however, that Mr Janes has not been prosecuted.

[87] I note that the wording describing Mr Janes’ time with Capital and Merchant is the same wording as in the Mighty River Prospectus. While it might perhaps have been better to have specified that Mr Janes did not face any criminal prosecution, the

description of his involvement in Capital and Merchant is not sufficient to suggest that the notice is misleading to the extent that the meeting should not take place on Friday.

[88] Mr Janes has filed an affidavit wherein he refutes the allegation against him. I do not need to consider that any further. His position is a matter for shareholders.

(c) Archer Capital’s takeover proposal. The information provided by the Board of Abano consistently refers to the scheme of arrangement proposal by Archer Capital to acquire the shares in the company and in particular that it would involve Mr Hutson acquiring the Audiology business for a nominal sum.

[89] The applicant claims there has been misleading statements by the Abano Board in respect of the proposed takeover because it was not put in the context of a second offer having been made in November 2013 with an increased offer $7.80 per share.

[90] It is evident from the material that there was not a formal takeover offer in November 2013. There was no offer capable of acceptance. It was an enquiry from Macquarie acting for Archer Capital with a hypothetical question as to whether there would be any interest in an offer of $7.80. I accept the respondent’s submission that it would be wrong if that were described as a takeover offer. There has been a complaint to the FMA in this regard. The FMA has confirmed it does not intend to take any action.

(d) HIL has submitted a second complaint to NZX which is still outstanding.

[91] Some of the Board statements have been the subject of complaint to the FMA, the proper regulatory body to consider and determine complaints of misleading and deceptive conduct. In particular the FMA announced on 6 June 2014 that it did not propose to take any action in respect of complaints concerning comments about the dental diversion which have been at issue.

[92] I am not persuaded that the comments about complaints to the NXS and FMA are on the face of them misleading given the decisions that have been made by both those bodies.

(e) Misleading accusations against Mr Hutson and the applicant. The Explanatory Notes say that Mr Hutson and Reeves have engaged in a misleading a destructive campaign which is a waste of shareholder money.

[93] The Board is entitled to express its opinion about the action being taken by the applicant especially in the context of the resolution at issue. This is not a case of a board report on, for example, a takeover proposal. It is a resolution to remove a director and the chairman. The shareholders are entitled to and indeed would seek the Board’s honest opinion.

[94] The directors must also be mindful of their obligations as company directors to act in the best interests of the company. As such they are entitled to make recommendations to shareholders.

(f) Other issues.

[95] NZX rejected a complaint from the applicant or his associates in respect of a valuation report on Abano prepared by Grant Samuel deciding that there:

Is insufficient evidence that the Grant Samuel Report is false or misleading. The report was prepared by a third party and is simply one view of the valuation of Abano

[96] The material on the NZX website provides details of the applicant’s website, www.rerunagm.co.nz. Posted on the website dated 3 June 2014 and signed by Mr Hutson and Mr Reeves is a document raising the issue of their concerns about the so- called misleading financial information provided by the Abano Board. The valuation supported by the applicant is that of Korda Mentha which has been on the NZX website since 10 April 2014.

[97] Similar comments to the observations of the NZX could be made concerning the criticism by the applicant about the May 2014 Abano newsletter. It is alleged

that contains misleading statements regarding the forecast profit for Abano close in time before the notice of the meeting was sent out. Likewise, with respect to the applicant’s complaint that the Explanatory Notes do not distinguish between the returns to shareholders in dividends from returns of capital.

[98] The applicant also complains about the way in which he was criticised for sending his own proxy form and the allegedly misleading way in which that was dealt with by the Abano Board implying that NZX approval was required when in fact it was not. Abano did have to comply with NZX requirements for the proxy form. It was entitled to point that out and to caution shareholders not to be confused by the two proxy forms, the applicant’s version having been filled out in his and Mr Huston’s names.

Conclusion

[99] This decision is not intended to make detailed findings as to whether the Explanatory Notes were misleading. I accept that in order to do so full procedures including discovery and cross-examination would be required. I have however considered closely the affidavit evidence and submissions of counsel. I am satisfied that the Notice properly states the nature of the business to be transacted at the meeting in sufficient detail to enable a shareholder to form a reasoned judgment in relation to it. I have considered whether, should the matter be considered in ways analogous to injunctive relief, there would be on the face of it injustice were the

meeting to proceed because of concerns as to misleading or deceptive information.¹¹

_{I am not so satisfied.}

11. NWL Limited v Woods [1979] 1WLR 129 (HL), Cayne v Global Natural Resources plc [1984] 1 all ER 225 (CA).

[100] The application is dismissed. The respondent is entitled to costs. Leave is

_{given to refer any issue of costs to me within 28 days.}

Thomas J