Share Sale: Maunier v. Rouast

 

Hamilton-based Maxime Rouast was ordered to pay an extra $44,700 on his purchase of minority shareholder Christophe Maunier’s forty per cent stake in their company: New Zealand Guidance Plus Ltd.  As director, Mr Rouast failed to comply with Companies Act rules to pay a fair price.

Strict rules in the Companies Act require any purchase of shares by a director to be at ‘fair value’ when buying out fellow shareholders.

The two set up business in 2016, providing services to Francophones looking to invest in New Zealand.  They first met at school, sharing a common interest in computers.  Mr Maunier is based in New Caledonia.

The High Court was told their business relationship broke down progressively through 2021.  Mr Maunier said health issues were affecting his ability to work.  Mr Rouast was doubted this.

After several Skype discussions, it was agreed Mr Rouast would buy out his associate’s minority interest in New Zealand Guidance.  This led to a dispute over their company’s value.

Mr Maunier told the High Court he was presented with a ‘take it or leave it’ price.  Mr Rouast indicated he would extract funds from the company as payment of management fees, leaving their company a worthless shell, if Mr Maunier did not accept the offered price.

Mr Maunier signed.

He later sued, claiming the purchase price was too low.

There is no need to prove commercial pressure forced a sale at undervalue, Justice O’Gorman ruled.  The Companies Act simply requires a director pay ‘fair value.’

NZ Guidance was described as a small company, dependent on skills of its management, operating in a niche market.

Justice O’Gorman valued the company at $128,000 on a ‘notional liquidation’ basis.

Its major assets in 2021 were money in the bank and a website.  Mr Maunier was entitled to forty per cent of this value: $51,200.

Justice O’Gorman ordered Mr Rouast pay an additional $44,700 on top of the price previously paid.

In 2021, Mr Rouast paid $20,000.  This payment was based, in part, on what Justice O’Gorman ruled was an incorrect calculation of shareholder current accounts.

Payment of a salary to Mr Rouast’s spouse was written back as drawings by Mr Rouast.  The court was told this salary was calculated to split Mr Rouast’s taxable income between the two.  There was no evidence of work done by his spouse to justify the salary supposedly paid.

Increasing this assessment of Mr Rouast’s drawings from the company as at 2021 meant not all of the 2021 payment of $20,000 could be considered payment for the shares purchased.   

Maunier v. Rouast – High Court (15.08.24)

24.197

Repair Costs: Mikro Hldgs v. Digga NZ

 

After continual downtime and ongoing repair costs dealing with faulty construction machinery, it was not enough for Rotorua-based Richardson Drilling to describe the equipment as being ‘dud or a ‘lemon’ as justification for compensation.  The High Court required detailed evidence as to how and why the machinery broke down before forcing compensation from the Australian supplier.

Australian-owned Digga (NZ) Ltd sold a screw pile drive plus accessories in 2017 to companies associated with Mike Romanes for a total cost of some $177,000 dollars.

Of importance, the equipment was rated as providing torque at 300,000Nm, a critical requirement for heavy duty piling work.

Over the next two years, the equipment was used on a number of jobs in both Wellington and Auckland.  It broke down twice, requiring extensive off-site repairs.

Digga supplied replacement equipment from Australia.

Richardson Drilling refused to pay a $57,300 repair bill charged by Digga (NZ) for repairs to the original screw pile.

Richardson said the equipment never achieved promised performance standards.  It demanded repayment of the original purchase price.

In the High Court, Justice Blanchard dismissed allegations by Richardson Drilling that it was common knowledge in the industry that Digga’s product ‘did not provide longevity.’  In what was a week-long court hearing, Richardson provided no evidence to support this allegation.

Further, Justice Blanchard said Richardson Drilling did not provide sufficient evidence as to what caused its purchased equipment to fail.

As supplier, Digga said plausible reasons were a failure to properly maintain the equipment and rough handling on the job.

Richardson Drilling was ordered to pay the repair bill and was not awarded a refund on its original 2017 purchase.

Mikro Holdings Ltd v. Digga NZ Ltd – High Court (14.08.24)

24.196

Mortgage: Lay v. BNZ

 

After learning annual income declared in support of a housing loan was nearly four times that reported to Inland Revenue, BNZ called up the loan despite mortgage payments being kept current.  The High Court refused an injunction blocking the Bank’s mortgagee sale.

In 2023, Cambodian nationals Kimteav Lay and Bau Hoang purchased a family home at Flat Bush in South Auckland with Bank of New Zealand finance.

Soon after, an unidentified whistleblower told BNZ that financial information in support of their loan was false.

The family operates a bakery business in East Tamaki.

The High Court was told financial information provided to the Bank stated revenue for the 2021 financial year was $465,000 with a surplus of $318,000; 2022 $470,000, with a $337,000 surplus.

In comparison, tax filings with Inland Revenue reported markedly lower sales revenue for the two years; nearly one quarter that advised to the Bank.

BNZ demanded repayment, saying their loan application fraudulently represented their financial position.

In turn, Kimteav Lay and Bau Hoang said they were innocent victims of a fraud perpetrated by the person hired to prepare their financial reports.

They made a voluntary disclosure to Inland Revenue, updating their past tax returns disclosing greater income than previously returned.

They claim the Bank has not dealt with them ‘reasonably and fairly’ in seeking to sell their family home.  They allege the Bank is in breach of the Fair Trading Act, acting unconscionably in its investigation and enforcement.

The Bank says its customers’ income position is, at best, opaque.  Their credit risk is unknown. 

Justice Jagose refused an interim injunction, intended to stop the mortgagee sale.

If the borrowers prove later in court they are entitled to damages, the Bank is able pay, he said.

Lay v. Bank of New Zealand – High Court (14.08.24)

24.195

Negligence: Royal Caribbean Cruises v. Tourism NZ

 

Having already contributed millions of taxpayer dollars by way of accident compensation for overseas tourists as victims of the 2019 Whakaari/White Island volcanic eruption, US lawyers’ attempt to have taxpayer-funded Tourism New Zealand together with Geological and Nuclear Sciences dragged into US litigation against cruise operator Royal Caribbean Cruises was blocked in the High Court on grounds of sovereign immunity.

Tourists and guides on Whakaari Island suffered serious injuries during an unexpected eruption in December 2019.  Most were visiting on a tour package booked through Caribbean Cruises, from ‘Ovation of the Seas,’ then docked at Mount Maunganui.  Twenty-two died.  

New Zealand law prohibits legal action seeking compensation for personal injury by accident.  A statutory insurance scheme covers hospital care and rehabilitation plus compensation for lost income.

This disaster saw Accident Compensation immediately release millions of dollars to support increased health sector costs, in particular offshore purchases of skin needed for multiple grafts treating badly scalded victims.

Accident Compensation is funded directly and indirectly by taxpayers; through levies and government grants.  

New Zealand’s accident compensation legislation is no bar to separate legal action being taken offshore by citizens of other countries for compensation following injury in New Zealand.

Legal action is underway in Florida.  A number of tourists injured, and descendants of those killed, are suing Royal Caribbean Cruises alleging it is liable for failing to warn of the risks.

As part of pre-trial procedures, the New Zealand High Court was requested by the Florida court to take evidence on oath from both Tourism New Zealand and Geological and Nuclear Sciences.

A list of questions was provided.

It looks innocent enough; litigants seeking information about operational procedures and information held by each organisation.

Lurking behind these questions is the possibility both organisations might be dragged into the US litigation, with Royal Caribbean Cruises wanting to argue these taxpayer-owned organisations are the ones responsible for issuing any warnings.   

In the High Court, Justice Wilkinson-Smith ruled both organisations were excused from having to answer any questions.

Evidence Act rules govern ‘letters of request’ from overseas courts.

In general, the High Court will enforce these requests, having the named individual or organisation give evidence on oath which is then sent back to the requesting court.

All countries reserve the right to say no.

The Evidence Act states letters of request cannot be enforced against ‘the crown’ or its employees; recognising what in legal jargon is called the doctrine of sovereignty.  No independent country takes willingly to being bossed around by another.

‘Crown’ is not defined.

Neither Tourism New Zealand nor Geological and Nuclear Sciences are government ministries or government departments.  They are ‘crown entities.’

They are funded by taxpayers.  Directors are appointed by government.  Directors do have operational freedom, but are required to comply with government policy directives.

There is sufficient crown control of each organisation for them to be defined as ‘crown,’ Justice Wilkinson-Smith ruled.

She refused to order compliance with the Florida court’s letter of request.

Royal Caribbean Cruises Ltd v. Tourism New Zealand – High Court (13.08.24)

24.194

Access: Alderton v. Sixty-Six Auckland

 

Frustrated by Peter Mawhinney’s lack of co-operation in finalising proposals hatched nearly thirty years ago, Peter and Linda Alderton had the High Court force transfer of his ten per cent interest in their Waitakere lifestyle block in West Auckland.

Decades ago, Mr Mawhinney had grand plans for residential subdivision of what is primarily a forestry block on Anzac Valley Road.  His long-running legal battles with first Waitakere City Council and later Auckland City eventually led to a 2016 High Court order blocking any further litigation for a five year period.

The Aldertons unwittingly became bit players in this legal morass following their 1997 purchase of a four hectare lot, part of Mr Mawhinney’s initial subdivision.  They built a substantial home on site.

As part of purchase negotiations, it was agreed Mr Mawhinney could retain access rights over a sliver of the land, to enable further proposed subdivision.

This came to be recorded as interests associated with Mr Mawhinney holding a ten per cent undivided ownership share in the Aldertons’ four hectare block, with access rights spelt out in a separate document.

No progress was made on future subdivision after Mr Mawhinney’s neighbouring land was sold in a mortgagee sale.

This left Mr Mawhinney’s interests remaining as part owner of the Aldertons’ property, sharing in the improvements made, but not obliged to meet any costs.

Frustrated by Mr Mawhinney’s refusal to return the ten per cent holding, they asked the High Court for a Property Law Act order forcing a sale.  Where appropriate, one co-owner can be forced to sell out to another co-owner at a fair and reasonable price. 

Mr Mawhinney appears to be holding on to his access and ownership rights as some sort of leverage against new owners of his neighbouring land sold in the mortgagee sale, Justice Gault said.

His arrangement with the Aldertons was not intended to be a long-term arrangement, Justice Gault said.  It was a short-term arrangement to accommodate further subdivision.  Being no longer in control of neighbouring land, it was time 27 years on to bring the arrangement to an end, Justice Gault said.

Mr Mawhinney’s ten per cent interest in the Aldertons’ land is of no commercial value, according to valuers.

Justice Gault discounted claims by Mr Mawhinney that he still had a residual right in the neighbouring land and that any access right has considerable market value.

Rather than order a sale at no cost, Justice Gault ordered transfer of the ten per cent interest on payment of $10,000.  Payment of more than a nominal sum recognised a benefit for the Aldertons; future complications they would otherwise face when trying to sell, should Mr Mawhinney’s interests as co-owner remain registered on the title.

Alderton v. Sixty-Six Auckland Ltd – High Court (13.08.24)

24.193

Cartel: IRS International v. Containerco

 

Providing repairs and spare parts for refrigerated containers, IRS International alleges Containerco (NZL) and Qube Logistics breached the Commerce Act, acting as a cartel jointly increasing charges for access to their depots.

IRS International claims their anti-competitive behaviour is a ploy to drive up its costs, forcing it out of the local market.  IRS operates in New Zealand as a branch of Japanese-based Daikin Industries.

The High Court was told IRS holds contracts with international shipping lines for the inspection and maintenance of refrigerated containers, known in the industry as reefers.

In the past, IRS was allowed free access to Containerco’s  and Qube’s portside depots to service reefers.

Containerco and Qube also service containers, in competition with IRS International.

This pattern of free access changed in 2018 with access fees charged IRS per container serviced.  This fee was justified as recovery of increased health and safety costs in supervising contractors on site.

IRS reluctantly agreed to pay; increased work-related deaths and injuries at New Zealand ports had seen greater awareness of safety issues.  

IRS now objects to new substantial increases in access fees.

Evidence was given that Containerco’s fees doubled in early 2024; Qube following months later with a four-fold increase, matching Containerco’s new price.

IRS sued after threats to deny access if these increased charges are not paid.

It alleges the two were party to an arrangement or understanding in breach of the Commerce Act, intended to price it out of the market.

At a preliminary High Court hearing, Containerco and Qube asked that IRS be required to front up with security for unpaid increased fees, pending a full court hearing.

IRS said it is willing to continue paying the previous rates for access.

Justice Moore ruled security is not required.

IRS has the financial resources to later pay accumulated arrears of increased charges should its legal claim fail, he said.

Evidence was given that IRS’ revenue from New Zealand operations topped eighteen million dollars for the 2023/2024 financial year, generating a net profit of some $860,000.

Whether Containerco and Qube jointly acted in breach of the Commerce Act has yet to be decided.  Meanwhile, both have agreed to allow IRS ongoing access to their depots.

Separately, IRS claims the new fees amount to unconscionable conduct in breach of the Fair Trading Act.

IRS International Pty Ltd v. Containerco (NZL) Ltd & Qube Logistics Ltd – High Court (13.08.24)

24.192

Will: re Estate Kho

 

One year before his death in 2022, Chiaw Peng Kho purchased blank standard form wills from a retail store and proceeded to sign two copies dated the same date but in each case failing to state who is to inherit his assets.

The only difference between each document was that he named different executors: in one case, former boarder Alex Chan who previously lived with him for two years as a student; the other, a now deceased sister living in Malaysia.

Perpetual Trustee was appointed temporary administrator of Mr Kho’s estate over top of argument over who should be in control and how his assets are to be divided.

The High Court was told estate assets have been identified as a house in Auckland suburb Westmere and some $907,200 in bank accounts.

The Westmere property is tenanted.  Mr Chan has been managing the property since Mr Kho’s death.

Several of Mr Kho’s siblings have questioned Mr Chan’s motives, making unspecified allegations that the will naming him as executor was ‘doctored.’

There is evidence suggesting Mr Kho intended Mr Chan to inherit should his named sister not survive him.  The High Court was told she did die before Mr Kho.

Perpetual Trust was appointed as an independent temporary administrator of Mr Kho’s estate pending a full investigation into circumstances surrounding signature of the wills and full evidence of Mr Kho’s intentions.

In the absence of any evidence as to Mr Kho’s intentions over who should inherit, his assets will be divided between his ten Malaysian siblings using default rules in the Administration Act.  Where a sibling has died, that person’s share passes to any children they may have.

re Estate Chiaw Peng Kho – High Court (12.08.24)

24.191

Negligence: Hook v. Callaghan Innovation

 

What started as a business dispute over development of low-carbon cropping, progressed to litigation over a $310,000 Callaghan Innovation grant.  The High Court dismissed Chris Hook’s complaint that Callaghan was negligent in disbursing a 2020 grant to a business called Cross Slot with subsequent losses for Mr Hook when his side deal with Cross Slot collapsed.

Mr Hook is a fervent campaigner for low carbon agriculture, promoting technologies designed to sow seed directly into untilled soil without a need to first plough and prepare land.  He lives variously in New Zealand and the Ukraine.

The High Court was told he joined New Zealand-based Cross Slot with plans to promote its agricultural machinery across Europe and with it the practice of sowing into untilled soil.

Their relationship soured.  Cross Slot cancelled the European licence it had granted Mr Hook’s company.  He sued.

Callaghan provides funding to commercialise scientific and technology-based innovations.

Mr Hook alleged Callaghan was negligent in approving a $310,000 grant to Cross Slot in August 2020.  If the grant had not been made, his joint European project with Cross Slot would not have taken place and he would not have suffered the losses incurred, he said.

Justice La Hood ruled there was no duty of care owed by Callaghan to business people in Mr Hook’s position.  Callaghan dealt with Cross Slot.  It had no knowledge or interest in any downstream commercial arrangements Cross Slot might enter into.

Even if it were negligent in making a grant to Cross Slot, Callaghan was not liable for any of Cross Slot’s downstream losses, Justice La Hood said.

Mr Hook appeared to have misunderstood how ‘negligence’ is interpreted in a legal sense, Justice La Hood said.

Mr Hook was complaining that Callaghan was ‘negligent’ in the sense that it was ‘incompetent’ in making a grant to Cross Slot, he suggested.

Liability for negligence in a legal sense requires a chain of evidence: proof that a loss suffered was reasonably forseeable and that there is legal closeness, or ‘proximity,’ between the wrongdoer and the person claiming.

There was no proof of any ‘proximity’ between Callaghan and Mr Hook.  His negligence claim was struck out.

Hook v. Callaghan Innovation – High Court (9.08.24)

24.189

Exchange Rates: Rosemount Front Ltd v. Clarke

 

It is a mark of how major retail banks no longer provide general banking services; the High Court accepted a screenshot of online currency exchange rates as evidence when translating a UK court judgment into NZD.  Previously judges required a bank certificate as authorative evidence; now not available as retail banks no longer buy and sell foreign currency.  

Saxon’s Estate Agency is chasing Paul Clarke around the world for fees claimed on the June 2021 sale of his family home at Weston-super-Mare in England.  The High Court was told he now lives in New Zealand, at Geraldine.

Mr Clarke did not defend Saxon’s claim in the UK courts for agency fees of GPB 5760.

The real estate commission charged Mr Clarke is 1.5 per cent of the sale price.

With legal fees and interest added, Saxon’s is pursuing Mr Clarke for GBP 7378.

To recover this amount in New Zealand, Saxon’s applied under the Reciprocal Enforcement of Judgments Act to have the UK court order registered as a judgment of the New Zealand High Court, then becoming enforceable through New Zealand courts. 

Part of this process requires evidence of the NZD equivalent of the overseas court judgment as at date of registration in New Zealand.

Learning that no bank certificate was available, Justice Preston accepted the conversion rate displayed from an online enquiry at www.poundsterlinglive.com/history.

This calculation holds Mr Clarke liable to pay $15,347.

Rosemount Front Ltd v. Clarke – High Court (9.08.24)

24.188

Trade mark: Globeride v. Morris

 

Unused trade marks should not be retained on the register, they are abandoned vessels in the shipping lanes of trade; judicial comment on why Trade Marks Act encourages revocation of abandoned trade marks which would otherwise trip up later traders using the same or similar branding.  Multinational Globeride had Leanne Morris’ New Zealand ‘Feel Alive’ trademark revoked for non-use.

In 2013, Auckland-based Ms Morris registered the mark ‘Feel Alive’ for clothing.

This prior registration stymied plans by Globeride Inc to later register the same mark for its fishing gear and marine products.

In 2022, it challenged Ms Morris’ continued registration.

If not used commercially, a trademark can be revoked after three years continuous non-use.

When deciding Globeride’s revocation application, the Assistant Commissioner of Trademarks noted there was scant evidence of any commercial use by Ms Morris for the period 2019-22, but there was sufficient to sustain her trademark rights.

This decision was overturned by the High Court.

There was no evidence of Ms Morris selling or advertising any ‘Feel Alive’ branded products from early 2019, Justice Gordon said.

Evidence of online traffic was ambivalent; failing to identify any concluded sale of ‘Feel Alive’ product.  Sales appeared to be product labelled as ‘Terra” essential oils or ‘Wellness’ boxes.

Ms Morris’ right to use the trademark ‘Feel Alive’ was revoked.

For trademarks, it is a case of use it or lose it.

She had not provided any evidence of brand management for ‘Feel Alive’ either through website advertising or online sales for the three years 2019-22.

Globeride Inc v. Morris – High Court (9.08.24)

24.190

Lien: Nigel Carruthers Aviation v. Skyline Aviation

 

Winton Land’s Chris Meehan sued to recover possession of his personal Beechjet 400, grounded after Skyline Aviation claimed a lien over the aircraft for unpaid bills.  Mr Meehan disputes the amount owed.

The High Court ruled a common law possessory lien otherwise entitling Skyline to keep possession of the aircraft until paid was overridden by terms of its agreement with Mr Meehan’s company: Nigel Carruthers Aviation Ltd.

In 2023, Winton’s CEO and board chair purchased a 25 year old personal jet.  The aircraft had been upgraded in 2012 with new engines and upgraded avionics.

Mr Meehan told the High Court he intended to use the aircraft for travel within New Zealand and to Australia, both for business and personal trips.  He used the aircraft on only two occasions before Skyline impounded it mid-2024 in a dispute over unpaid invoices.

A total of $622,000 is claimed; some for maintenance charges, the balance being monthly management fees.  Skyline had agreed to co-ordinate short-term private charters at times when the aircraft was not required by Mr Meehan.

Any person who has done work on a chattel, such as a motor vehicle or aircraft, is entitled to retain possession until paid.  This common law possessory lien is described as a ‘self-help’ remedy; there is no need for prior agreement or court order.

This right to retain possession is used by contractors to get payment for work done or improvements made to a chattel.  It cannot be used to force payment of arrears in management fees.

Skyline claimed it held a possessory lien for some $288,000 invoiced for repairs and maintenance of the Beechjet.  It was not claiming a lien for the balance, being unpaid management fees.

Mr Meehan disputed the amount due, criticising Skyline’s timeliness and standard of work.

Justice Radich ordered Skyline release the aircraft.

The contract with Mr Meehan’s company states Skyline has ‘no interest in or right to the aircraft other than rights expressly set out in this agreement.’

To state that the contract sets out in full their relationship implies that Skyline’s right to a common law possessory lien is lost, Justice Radich ruled.

Nigel Carruthers Aviation Ltd v. Skyline Aviation Ltd – High Court (8.08.24)

24.187

Koha: Official Assignee v. Honey

 

Within Maoridom, giving of koha invites reciprocal obligations.  But for insolvency law, koha can amount to a gift, automatically repayable like all gifts if made within two years of bankruptcy.  Maria Honey’s purchase of land at Coromandel from a relative, at below market price just over a month before his bankruptcy, saw her liable to front up with the balance, over top of legal argument this reduced price amounted to koha and was not recoverable as a gift.

Richard Anderson was bankrupted in 2014.  Before bankruptcy, he struck a deal with niece Maria Honey intended to ensure he remained in occupation of his family home at Matatoki, near Thames.

He told the High Court that the intent was to have Ms Honey buy the property, allowing him and his family to remain, while removing the home from assets likely to be seized on bankruptcy.

Agreed price was the then rateable value: $308,000.  Ms Honey was having to borrow money for the purchase.  The best deal she could get was a $175,000 bank loan.

It was agreed Ms Honey would pay $175,000 with her uncle leaving $133,000 in as vendor finance.  On settlement date in October 2014, legal documents were signed with the debt due on the vendor loan immediately forgiven, turning the loan into a gift.

Then everything unravelled.

The High Court was told Ms Honey subsequently trespassed Mr Anderson and family from the Matatoki property, giving possession to members of her wider whanau.

Learning of the $133,000 gift, Insolvency Service gave notice under the Insolvency Act cancelling the deed of gift as being the gifting of an asset within two years of bankruptcy; the asset being Mr Anderson’s right to collect $133,000.

Ms Honey challenged notice of cancellation.

A gift carries connotations of getting something, while giving nothing in return.

Forgiveness of the $133,000 balance owed on the purchase price was koha, she said.  In terms of tikanga Maori, koha carries with it reciprocal obligations.  She was providing something in return, she said.

The Matatoki property is Maori freehold land.  It has been in the same family for over a century.

Ms Honey said a $133,000 reduction in price triggered a personal obligation to maintain family ownership.  This was unstated, but it is understood within Maoridom that Maori land is not to be sold outside family connections, she said.

Ms Honey said she has honoured these obligations by having extended family assume occupation of Matatoki.

Context is everything when applying tikanga Maori to legal issues, Associate Judge Skelton said.

The transaction related to Maori land, but the narrow legal issue was forgiveness of a promise to pay $133,000 of the purchase price.  Forgiving this debt was a ‘gift,’ he ruled.

He cancelled the 2014 deed.

Cancellation has the effect of now requiring Ms Honey to pay the balance due, with $133,000 then becoming available to pay Mr Anderson’s bankruptcy creditors.

Official Assignee v. Honey – High Court (8.08.24)

24.186

Family Trust: re Dagmar Girardet Family Trust

 

The largely hidden but ever-increasing levels of inter-generational wealth is seeing family trusts being re-written to protect capital from perceived predations by those marrying-in and later making relationship property claims.

Old-style family trust deeds commonly included spouses of family members as beneficiaries.  Not so common now.  Tales of bitter divorces and payouts demanded by departing spouses has seen a hardening of attitudes and a tightening of eligibility to share in family trust assets.

High Court approval is generally required for major re-writes of family trust deeds.  The court has a Trusts Act supervisory role, designed to protect under-age beneficiaries and beneficiaries yet-to-be born from adverse changes to existing rules.   

The Girardet family, owners of the Candida stationery business, obtained High Court approval for wholesale changes to their family trust.

As a private trust, the market value is not public.

The Trust was established in 1988.  Patriarch Klaus Girardet died in 2022.  His widow obtained court approval re-writing Trust rules.

In particular; the life of the Trust was extended to 125 years, her three children and their children were specified as beneficiaries (removing any reference to spouses), and wording of the Trust was simplified into modern usage.

The changes were explained as necessary for future estate planning and improved creditor and relationship property protections for future generations.

re Dagmar Girardet Family Trust – High Court (7.08.24)

24.185

Estate: Blake v. Estate Kathleen Baddeley

 

As executor of his mother’s insolvent estate, Quinton Baddeley was ordered to pay legal costs for a relative who had to sue for $363,000 owed.  Mr Baddeley wrongly took the view that he could refuse to pay the estate debt, giving priority to other relatives he assumed to be beneficiaries.

Kathleen Baddeley died in 2023.  Her estate is divided between her two children, including son Quinton.

During her life, Kathleen received an interest free loan from granddaughter Lisa Blake, enabling her to buy an occupation right in a retirement village.  An acknowledgement of debt was signed.

A clause in her will specifically referred to this debt, noting that the retirement village had been directed to pay the licence’s termination balance, due on death, direct to Ms Blake.

Kathleen made partial repayment before her death.  After later receiving the contracted termination fee, Ms Blake was still owed $363,000.

The High Court was told Kathleen died insolvent, with an expected shortfall in her estate of about $20,000.  There was insufficient to pay her debts in full; primarily the $363,000 still owed her granddaughter.

As executor, son Quinton said priority should be given to his mother’s expressed wishes that each of her seven grandchildren receive $10,000; a total of $70,000.  He wanted to make these payments before repaying Ms Blake.

There is no mention in Kathleen’s will of any bequest to grandchildren.

Associate Judge Gardiner said Quinton as executor could not ignore payment of estate debts.

Even if the grandchildren were named as beneficiaries, payment of estate debts came first, she said.

The court was told Quinton claimed his mother’s will allowed him to divert payments with a clause stating: trustees have power to ‘retain any assets … without being liable for any loss caused by their retention.’

This common provision is not an excuse to leave estate creditors in the cold; it serves to protect executors from personal liability for any fall in the market value of estate assets during what can be an extended period of estate administration and winding up.

Blake v. Estate Kathleen Baddeley – High Court (7.08.24)

24.184

Procceds of Crime: Commissioner of Police v. Akavi

 

We might assume that NZ Police has no direct involvement in the illicit drug trade, but its speculative assessment of cash generated by dealers must be accepted by judges when making Criminal Proceeds (Recovery) Act profit forfeiture orders.

The Act presumes the level of profits generated by convicted or suspected dealers as assessed by police is correct, unless offenders prove to the contrary.

Legislative use of the term ‘profit forfeiture’ is misleading.

The Criminal Proceeds (Recovery) Act seeks to recover revenue generated by dealing, with no allowance for expenses incurred; cultivating, manufacturing, or buying finished product prior to sale.  This confiscation of revenue is described in the Act as ‘profit forfeiture.’

One High Court judge got a rap over the knuckles for questioning police calculations.

King Cobra gang member Tereva David Akavi pleaded guilty in 2021 to dealing in methamphetamine; caught in Wellington as part of Police investigation Operation Bonito.

At a subsequent criminal-proceeds hearing, Police sought a profit forfeiture order of $468,000.  This figure was calculated on the assumption Akavi was involved in selling at least one ounce of meth per week for one year at a price of $9000 per ounce.

This unit sale price per ounce was derived from street purchases by undercover police.

The trial judge questioned why an arbitrary assumption had been made that Akavi was dealing regularly in these volumes and for exactly one year.  He slashed the profit forfeiture order to $98,850; the value of meth purchased by undercover police from King Cobra associates over a ten day period in 1991.

The Court of Appeal increased the profit forfeiture order to $468,000 as calculated by Police.  In the absence of evidence to the contrary from Akavi, Police assessment of revenue generated had to be accepted. 

The Criminal Proceeds (Recovery) Act has its parallels in tax law.

Taxpayers failing to file tax returns have a default assessment calculated by Inland Revenue.  This assessment stands, unless the defaulting taxpayer provides evidence to the contrary.

Inland Revenue has decades of data across every trade and occupation as a basis for estimating what should be likely taxable income for a particular taxpayer.

Police has no such historical record to support its proceeds-of-crime profit forfeiture assessments.

Commissioner of Police v. Akavi – Court of Appeal (5.08.24)

24.183

Relationship Property: Ku v.Lang

 

An ongoing dispute between Lam Lo’s former spouse and his de facto partner of over twenty years standing has seen his de facto partner register a relationship property claim against title to his former spouse’s Auckland Half Moon Bay property valued at some $2.66 million.

Mr Lo and his de facto partner Yuanhong Lang lived for the last two decades at the Sutherlands Road property in Auckland’s eastern bays; a property registered in the name of his former spouse, Janice Ku.

Mr Lo now lives in a care facility at a retirement village.  Ms Ku wants Ms Lang out of her property.  She refuses to budge, claiming Sutherlands Road is relationship property and she is entitled to half of Mr Lo’s interest in the property.

Their dispute is clouded by multiple relationship property agreements signed between Mr Lo and his then spouse Ms Ku, and a ‘contracting out’ agreement signed between Mr Lo and Ms Lang when they were living together in which she supposedly agreed to give up all Property (Relationship) Act rights she might have against Mr Lo’s assets.     

The High Court was told Ms Ku and Mr Lo divorced in 2006.  He had commenced living with Ms Lang three years previously.

Associate Judge Taylor ruled that should Ms Lang succeed in overturning her earlier ‘contracting out’ agreement, she was entitled to no more than a potential share of whatever might amount to Mr Lo’s share of relationship assets flowing from his earlier marriage to Ms Ku.

Online valuations estimate the Sutherlands Road property is currently worth $2.66 million.

The status of Mr Lo’s relationship property rights against Ms Ku’s assets is confused.  The two signed successive relationship property agreements intended to set out their agreed entitlements.

Their final agreement required Mr Lo to take over responsibility for all outgoings and mortgage payments for Sutherlands Road.  The High Court was told this agreement was not honoured.

Ms Ku says she remains the absolute owner of Sutherlands Road.  Their relationship property agreement was repudiated and cancelled, she says.

Judge Taylor said evidence is required from Mr Lo.

He is not a party to the current court dispute between the two women.

In the interim, Ms Lang can continue living at Sutherlands Road and her notice of claim remains on the title, Judge Taylor ruled.

Relationship property notices of claim registered against title to land operate much like caveats, having the effect of freezing any further dealings with the property until a dispute is resolved.

Ku v. Lang – High Court (1.08.24)

24.182