Greymouth Petroleum battle continues
Oil and gas exploration company Greymouth Petroleum went from being a prosperous company to a dysfunctional one in less than 10 years, with the man blamed for the breakdown between directors forced to sell his stake, according to arguments heard in court.
But the Court of Appeal has labelled former chief operating officer John Sturgess' application to liquidate the company an attempt to "extort the highest amount" for his shareholding.
The High Court ruled last year that Sturgess must sell his 14 per cent stake in Greymouth Petroleum, one of Taranaki's most active oil and gas exploration businesses.
Sturgess had sought an order for the full sale of the company.
Chief executive Mark Dunphy held 52 per cent while Auckland investor Peter Masfen owned the remaining 34 per cent.
These two stood Sturgess down in February 2011, and he was accused of breaching his director's duties and leading Greymouth towards a potential crisis.
The High Court found Sturgess should take "primary responsibility" for destroying the trust essential to his working relationship with Dunphy and Masfen, ordering he sell his shares at fair market value.
But in an appeal today Sturgess sought a liquidation order for Greymouth, allowing for 30 days beforehand so the parties could negotiate on the exit price.
Sturgess was also broadly appealing findings made against him for breaches of reporting obligations and negligence.
His lawyer, Felix Geiringer, said today Sturgess' actions had been the "symptoms" rather than the "cause" of Greymouth's dysfunction.
Court of Appeal judges Justice Tony Randerson and Justice Forrest Miller, however, said the issue was now about remedy and liquidation would be "difficult" with "not a lot going for it".
Justice Miller said the essential argument was over what price would be paid for Sturgess' shares, with liquidation being a "nuclear option".
"He doesn't want the company wound up at all, what he wants is 30 days to extort the highest amount.
"But he is the wrongdoer.
"The reality is you're asking us to give them a very large club to beat them with."
Justice Randerson concurred, and said it was pretty obvious everyone would suffer from liquidation.
Sturgess had primary responsibility for what had happened between the shareholders, with each side undoubtedly wanting to end the relationship between them, he said.
"At the end of the day everyone agrees this company is disruptive.
"The real issue is how we're going to exit this company."
Justice Randerson said he could not imagine Sturgess would seriously want to liquidate the company, because it would ruin the value of the shares.
Furthermore, Dunphy and Masfen had more to lose, with a joint 86 per cent stake in the company.
The issue was whether Dunphy and Masfen decided they wanted Sturgess' shares, and if not, if he would then be free to sell them on the open market.
The value of Sturgess' shareholding was to be determined by arbitration next month.
Geiringer, however, said there was evidence a liquidation might increase the value of the company's shareholdings.
The case is expected to last about three days.
- Fairfax Media