Sea Management Singapore Pte Ltd v Professional Service Brokers Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeJudge Bell
Judgment Date25 Jan 2012
Neutral Citation[2012] NZHC 13
Docket NumberCIV-2011-404-5315

[2012] NZHC 13




Sea Management Singapore Pte Limited
Professional Service Brokers Limited
First Defendant


National Equity Limited
Second Defendant


Nigel Geoffrey Ledgard Burton, Michael Murray Benjamin and Michael Walter Daniel
Third Defendants


Allan Brooke Mitchell and Fleur Nina Mitchell as Trustees of the Remuera Trust
Fourth Defendants


John Noble Cozens, Suellen Ruth Wilkins and John Phillips Wilkins as Trustees of the Pandanus Trust
Fifth Defendants

D J Cooper and T B Fitzgerald for Plaintiff

M A Gilbert SC and M C Harris for Second to Fifth Defendants



This is an application under s 241(4)(d) of the Companies Act 1993 that Professional Service Brokers Ltd (PSB) be put into liquidation on the just and equitable ground. The plaintiff, SEA Management Singapore Pte Ltd (SEA), is a 50 per cent shareholder of PSB. The second to fifth defendants are the other shareholders. They form one bloc – the NEO shareholders. SEA's ground for seeking a liquidation order is that there is an irreconcilable deadlock at board and shareholder levels, so that strategies favoured by either bloc cannot be executed, potential business opportunities will be missed and there will be a loss of value. The NEO shareholders oppose, saying that SEA can have no justifiable lack of trust and confidence in the NEO directors. SEA has created the deadlock so as to bring about a forced sale of a subsidiary, and there are adequate alternatives to liquidation, which is a remedy of last resort.

Legal principles

Under s 241(4)(d) the court may appoint a liquidator if it is satisfied that it is just and equitable that the company be put into liquidation. In Re Bleriot Manufacturing Aircraft Company Ltd Neville J said: 1

The words “just and equitable” are words of the widest significance and do not limit the jurisdiction of the Court to any case. It is a question of fact and each case must depend on its circumstances.

Many cases since have confirmed that approach including Loch v John Blackwood Ltd, 2Ebrahimi v Westbourne Gallery Ltd3 and Jenkins v Superscaf Ltd.4


Because there is no limit to the kinds of cases where it may be just and equitable to order a liquidation, categorisation has been deprecated. 5 However, where common patterns recur, the courts have developed consistent approaches. One

recurring kind is deadlock by decision-makers, at board or shareholder level, that paralyses the business of the company. Deadlock may arise when there is equality of voting power between competing factions, although deadlock cases are not confined to companies where control is shared equally. 6 The deadlock must be so serious as to impede the continued operation of the company. The essential basis for the court to give relief is frustration by internal discord. The court may order liquidation in its discretion if it is satisfied that there is no other way out of the impasse. New Zealand examples include Re Upper Hutt Town Hall Ltd, 7Re Mataia Ltd, 8Vujnovich v Vujnovich, 9Re Rongo-ma-tane Farms Ltd10 and Strachan v Denbigh Property Ltd.11

The task of the court is to find out whether there is a deadlock, its causes and its effects. In Re F Hall and Sons Ltd the Court of Appeal said: 12

As to whether there was a deadlock is a question of fact and, if there was, the question as to whether it was sufficient to justify a winding-up order depends upon the manner in which it arose and its effect upon the various parties interested. It is necessary therefore to examine the circumstances leading up to the alleged deadlock and the petition for winding-up.

It is not for the court to adjudicate on the merits of differences between the parties on business issues, as Lord Cairns explained in Re Suburban Hotel Co: 13

But what I am prepared to hold is this, that this Court, and the winding-up process of the Court, cannot be used and ought not to be used, as the means of evoking a judicial decision as to the probable success or non-success of a company as a commercial speculation.

But if the court finds that the plaintiff is solely responsible for the deadlock, it may dismiss the application in its discretion, 14 as the Court of Appeal did in Re F Hall and Sons Ltd. On a finding of a sufficiently serious deadlock to stymie the operation of the company, a liquidation order is not made automatically. As the court needs to

be satisfied that there is no other way out of the impasse, alternatives are always relevant. Charles Forte Investments Ltd v Amanda, 15 not a deadlock case, shows that the availability of alternative remedies is a relevant consideration in all applications under the just and equitable ground, in part to ensure that the remedy is not misused. As a decision to order liquidation under s 241(4)(d) involves the exercise of an equitable discretion, other factors going to justice and equity may influence the decision.

One of the NEO shareholders? defences is that SEA cannot have a justifiable lack of confidence in the NEO directors. They rely on this passage from the advice of the Privy Council in Loch v John Blackwood Ltd: 16

It is undoubtedly true that at the foundation of applications for winding up, on the ‘just and equitable’ rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. But this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business. Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of a company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up.


On its face that suggests that any application for a liquidation order on the just and equitable ground must show a justifiable lack of confidence in the conduct and management of a company's affairs. But that is to read this passage out of context. That case did involve a claim of justifiable lack of confidence, but the Privy Council was not intending to exclude cases which did not raise that claim. That is apparent from its rejection of the ejusdem generis interpretation, so as to leave the grounds unconfined, and its recital of passages from the Scottish case, Symington v Symington's Quarries Ltd, 17 a deadlock case. In Ebrahimi v Westbourne Galleries Ltd Lord Cross said: 18

But it is not a condition precedent to the making of an order under the subsection that the conduct of those who oppose its making should have been unjust and inequitable.


If SEA had based its application on a claim of lack of justifiable confidence in the NEO directors, the defence would be relevant. But SEA claims on the basis of deadlock. It is conceivable that in a deadlock case the probity of those opposing might be part of a defence to show that the plaintiff is solely responsible for the impasse, but it is not a defence by itself. It is necessary to keep in mind that deadlock may arise without fault on either side.


SEA cited decisions of New York 19 and Delaware 20 courts to show how deadlock is addressed in those jurisdictions. The New York decisions show that in that state there is no inquiry as to fault but only whether a deadlock exists, precluding successful conduct of the corporation's affairs. The just and equitable ground allows a more nuanced approach. The Delaware decisions are under that state's limited liability company 21 (LLC) statute, which provides for judicial dissolution when it is not reasonably practicable to carry on the business in accordance with the limited liability company agreement. In both cases the Court of Chancery declined to require plaintiffs to use remedies available under the LLC agreement in the particular circumstances of those cases. In Haley v Talcott Vice Chancellor Strine said: 22

The Delaware LLC Act is grounded on principles of freedom of contract. For that reason, the presence of a reasonable exit mechanism bears on the propriety of ordering dissolution under 6 Del. C. §18–802. When the agreement itself provides a fair opportunity for the dissenting member who disfavours the inertial status quo to exit and receive the fair market value of her interest, it is at least arguable that the limited liability company may still proceed to operate practicably under its contractual charter because the charter itself provides an equitable way to break the impasse.

That is not very far away from the approach under the just and equitable ground under our Companies Act.


PSB is a holding company. The important subsidiaries 23 are GSB Supplycorp Ltd (GSB) and Conexa Ltd. There is no significant external debt. Combined there are about sixty staff. They have offices in Auckland and Wellington.


GSB, a wholly owned subsidiary, is a procurement services provider. Before it was privatised in 1991 it was the state-owned enterprise that took over the Government Stores Board. Its business is focussed on New Zealand and Australia. It has throughout traded profitably. It is said to be New Zealand's largest commodities brokerage with members transacting business worth $700 million per annum.


Conexa is a start-up e-commerce and procurement software developer and supplier. It provides collaborative trading networks for businesses of all sizes, delivering online selling, billing and procurement technology products and...

To continue reading

Request your trial
1 cases
  • Menzies v Vaycay Trading Ltd
    • New Zealand
    • High Court
    • 24 March 2020
    ...and that it substantially exceeds its assets. Whilst 3 4 5 6 7 Sea Management Singapore Pte Ltd v Professional Service Brokers Ltd [2012] NZHC 13 at [3]. Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (HL); and Hawkes v Cuddy, Re Neath Rugby Ltd [2007] EWHC 2999 (Ch) at [222]–[228]. See ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT