Acting Business Editor for the NZ Herald

Pay out in Central Otago winery spat

Wentworth Peregrine Winery, Gibbston Valley, Queenstown. Photo / File
Wentworth Peregrine Winery, Gibbston Valley, Queenstown. Photo / File

The owner of a Central Otago winery can't put off paying out a fellow shareholder ahead of their Court of Appeal fight over the value of the stake.

Lindsay McLachlan and Greg Hay are both directors of Peregrine Wines, a South Island winery whose architecture has attracted international attention.

Peregrine Wines produced its first vintage in 1998 and says on its website that during "its short history it has been an impressive high achiever, with its wines winning numerous prestigious awards and trophies around the world".

Hay's family trust owns a 25.14 per cent stake of Peregrine Wines while another firm directed by McLachlan - Peregrine Estate - owns the rest.

In March 2013, according to a recent High Court decision, Hay approached McLachlan and advised that his family trust wished to sell its shares and invited Peregrine Estate to make an offer for them.

McLachlan, on behalf of Peregrine Estate, offered $1.57m.

This was not acceptable to Hay and his co-trustee so they decided to invoke a clause of Peregrine Wines' constitution that provided a procedure for the sale of shares by one shareholder to another.

McLachlan was not prepared to pay the trust's nominated selling price of $3.25m but confirmed that Peregrine Estate would buy the shares at "fair value", to be fixed in keeping with the winery's constitution.

A valuer, Julie Millar of BDO in Christchurch, was appointed and set this "fair value" at $2.62m.

Peregrine Estate did not buy the shares at this price and hired its own adviser to assess fair value.

That adviser came up with a value of $1.275m.

Hay and his fellow trustee then went to the Invercargill High Court, seeking summary judgment on Peregrine Estate's contractual obligation to buy the shares at the "fair value" that was fixed under the constitution.

Associate Judge John Matthews, in his decision last month, said that it was not arguable that Millar's $2.62m figure was "other than the fair value" required under Peregrine Wines' constitution.

The judge also found that the trustees had established that Millar's valuation binds both sides for the purposes of the company's constitution.

He entered judgment in favour of the trustees, entitling them to enforce the transfer of shares for the payment of $2.62m.

Peregrine Estate has filed an appeal and ahead of it being argued, the company sought a stay on the High Court decision.

It was concerned that if the appeal was successful, it may not be able to recover from the trustees the $1.4m difference between the payment and what it maintains is the fair value of shares.

Hay opposed the stay and said that while the trust owes about $800,000 to BNZ, he and it had substantial assets, including a property development, a valuable commercial property, a retail business and an interest in tourism businesses.

Hay said his co-trustee owned property investments, a cinema business, and a successful helicopter business.

Associate Judge Matthews said that even if a successful appeal required the trustees to refund Peregrine Estates the entire $2.7m pending a trial, the trustees would have substantial assets against which the company could take enforcement steps.

"They have in my opinion disclosed a financial position which shows that the risk of their not being in a position to honour their liability is minimal," the judge said.

He said the "balance of convenience" favoured the trustees getting back the full purchase price for their shares and dismissed the bid for the stay.

- NZ Herald

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