Bequest: re Estate Helen Moeroa Snowball

 

A potential $20,000 bequest to a wayward son that disappeared out the front door following a court ruling, then re-appeared through the back door because of rules governing partial intestacies.

When Helen Snowball died in 2023 she left an unsigned will, the document incomplete as she was undecided about whether to leave any money to her son.

The High Court was told she had a difficult relationship with her only child, son Nootai.

At a time when she was running a taxi business, Nootai stole one of the taxis and sold it.  Her only regular contact had been Nootai’s arrival on her doorstep every two to three years demanding money.  Police were called on each occasion.

Her 2023 purchase of an Auckland home at Prangley Avenue in Mangere, ten months prior to her death, prompted advice from her lawyer about a will.

This purchase was registered jointly with her niece, Helen Tumu.  They took title as tenants-in-common in equal shares; meaning there was no right of survivorship, with the half share owned by each forming part of their estate.

The two had lived together since Ms Tumu was aged fourteen, with Ms Tumu later regularly providing household financial assistance.

Ms Tumu did not provide half the purchase cost for Prangley Avenue, but it was agreed that she would pay the mortgage and other outgoings.  This arrangement was recorded in a property sharing agreement.

Ms Snowball told her lawyer she wanted all her estate to go to her grand-niece, Ms Tumu’s daughter.  She is still a child.  Her name was suppressed by the court.

Ms Snowball’s lawyer cautioned about leaving nothing to son Nootai, indicating this might lead to her son later claiming against her estate.

A draft will was prepared leaving a $20,000 gift to Nootai; everything else going to her grand-niece, to be held in trust until she reached age 25.

When presented with this draft for signature, Ms Snowball prevaricated, saying she wanted more time to think about any gift at all to Nootai.

She died before any will was signed.

Using powers in the Wills Act, Justice La Hood approved as Ms Snowball’s final will the unsigned original draft, less the then proposed bequest of $20,000 to her son.

He withheld $20,000 from estate distribution, saying Ms Snowball had made a clear testamentary intention that her estate was to go to her grand-niece, but at time of her death remained undecided about destination of the $20,000.

Default rules in the Administration Act governing intestacies apply to distribution of this $20,000.

Ms Snowball had no husband or de facto partner.  Nootai is her only child.  He inherits the $20,000.

Evidence was given that the balance of Ms Snowball’s estate is valued at about $680,000.

re Estate Helen Moeroa Snowball – High Court (7.07.25)

24.153

Off-shore Trust: Maiolini v. Fideis (New Zealand)

 

There is over twenty million euros at stake with the Maiolini family, living in Italy and the Emirates, claiming professional advisers have duped them, with family losing access to music royalty payments.  The High Court put receivers in control of disputed assets until ownership is resolved, with a legal chase to follow through the intricacies of trust law and international tax arbitrage.

It is alleged professional advisers in the Netherlands, Canada and Australia have milked trust assets for their own benefit, refusing to return control to the Maiolini family.

Giacomo Maiolini is the founder of Time Records and driving force behind Best Records and Riga Music.  In the 1990s, he took advice on international asset structures from Dutch national, Erwin de Ruiter.

The High Court in New Zealand was told details of Maiolini family asset holdings being frequently restructured over the following two decades.

In 2005, an offshore trust was set up in Caribbean tax haven, Nevis: the Riga Settlement Trust.

Mr de Ruiter controlled this Trust.  Royalties were diverted to the Trust.  Mr Maiolini’s signature was needed to operate the Trust’s Luxembourg bank account.

For those versed in the intricacies of international tax law, it is not surprising that no mention was made in Riga Trust documentation of Maiolini family members as settlor, trustee or beneficiaries.

The only named beneficiary was a childrens hospital in Brescia, Italy.

The trust deed did allow for later addition of further beneficiaries.

Complications arose after tax authorities in various jurisdictions around the world cracked down on use of tax havens.

By 2010, Nevis was included on a blacklist of non-co-operative jurisdictions.  Mr de Ruiter recommended trust domicile be shifted to New Zealand.

Assets were then transferred to a new trust established in New Zealand: Riga Settlement (NZ).

The Riga Settlement (NZ) trust deed made no mention of a childrens hospital in Brescia; in fact, there is no named beneficiary in the trust deed.

Mr Maiolini continued to control payments out of the new Trust’s Luxembourg bank account.

Further complications arose with Mr de Ruiter’s 2018 conviction and three years’ imprisonment in the Netherlands for tax fraud.

To distance the New Zealand trust from Mr de Ruiter when he was under investigation in the Netherlands, trust assets were again re-settled in 2015, with creation of a further new trust: Quinoa Settlement.  Architect of this further re-settlement was an associate of Mr de Ruiter, Canadian businessman, Earl Campbell.

Trust assets came to be controlled variously by Mr Campbell and Australian chartered accountant, Kieran Brush, acting through a corporate trustee: Quinoa Trustees Ltd.

The Maiolini family claim that when the Luxembourg bank unilaterally closed the Quinoa Settlement’s bank account in 2019, trust money came to be dispersed into bank accounts in Canada, Dubai, Monaco and also into client accounts with Morgan Stanley and Bank Edmond de Rothschild.

Mr Maiolini claims in the New Zealand High Court that the trio of Mr de Ruiter, Mr Campbell and Mr Brush are diverting trust assets to their own benefit.

Using Trust Act powers, Justice Blanchard put the disputed assets under control of receivers based in New Zealand, until ownership is resolved.

The High Court was told Maiolini family want the 2015 Quinoa Settlement declared null and void.

If successful, this will see trust assets reverting to the prior trust: Riga Settlement (NZ).

This could result in assets then reverting to the Maiolini family.  They claim there is a written ‘statement of wishes’ on record identifying them as ‘hidden’ beneficiaries of the Riga Settlement (NZ) trust.

Maiolini v. Fidelis (New Zealand) Ltd – High Court (4.07.25)

25.152

Trust: Doig v. Kahia

 

With trustees failing to account for trust money received, making payouts in cash with no receipts, and some enjoying personal loans with no obligation to repay; Lisa Doig as beneficiary of a Taupo Maori trust called trustees to account.  The Maori Land Court ordered a meeting of all beneficiaries, with the Court indicating removal of trustees and orders for repayment is in the offing.

The Alice Kahia and Rawiri Kahia Hapeta Whanau Trust is unusual in having a narrower range of beneficiaries than is common for a Maori trust holding substantial assets.  Beneficiaries are direct descendants of Alice and Rawiri.

The full extent of trust assets is not a matter of public record, but the Trust holds shares in Contact Energy and has interests in land situated near both Turangi and Rotorua.  Annual income exceeds $99,000.

The Trust was established in 1995.  There are currently eight trustees.

In 2021, beneficiary Lisa Doig asked the Maori Land Court for a full review of Trust operations.  Her questions have gone unanswered by trustees since 2003. 

A court-ordered investigation found little or no supporting documentation for payments made by trustees, plus evidence of some trust revenue being paid directly into trustees’ personal bank accounts.

There was evidence of some trust transactions being agreed by sub-sets of trustees, without the knowledge and approval of other trustees.

Also of concern was evidence of at least three current trustees having previously borrowed trust funds with no apparent obligation to repay.  In addition, some trustees have received grants with no record of the amounts given, why the grants were made, or who approved payment.

All current trustees, in some way, have breached their trustee duties, Judge Warren said.  These failings went beyond technical breaches of the law, he said.

If whanau choose a trust structure to manage their assets, then they must comply with trust law rules, he said.

Lack of accounting records meant an audit could not be completed.

Judge Warren was critical of trustees not responding to Ms Doig’s requests for information.

A court-ordered meeting of Trust beneficiaries was ordered.

Judge Warren asked beneficiaries to advise whether current trustees should be removed, who might be suitable replacements and whether current loans to trustees should be written off, or repayment terms imposed.

While he will be guided by beneficiary views, Judge Warren made it clear he is not bound by their decisions.

He ordered all trust funds be frozen pending a final decision.

Doig v. Kahia and others – Maori Land Court (3.07.25)

25.151

Liquidation: Khov v. Waitotara Farms

 

With relationship property claims stalled in the Family Court, Linda Smiley joined court-appointed receivers having the High Court wind up an Ohinewai farming company.  She alleges former partner Keith Stark is colluding with others to drive down the value of relationship property.

Calculation of her relationship property entitlements depends, in part, on final distribution of Keith Stark’s late father’s estate.

There have been complaints about Keith’s management of a seventy hectare Waikato farm, still part owned by his late father’s estate.  Loans Keith owes the estate are also in dispute.

Last year, the farm was valued at between $2.6 million and three million dollars.

Estate assets have been under control of court-appointed receivers since 2023.  They told the High Court a recent attempt to sell the farm failed, with Keith trespassing real estate agents from the property.

What followed was an allegedly bogus offer to buy, from an individual suspected to be allied with the ‘sovereign citizen’ movement. 

So-called sovereign citizens deny the state has any control over their lives, putting up pseudo-legal arguments which purport to separate their state-registered name from their personal sovereign existence.  A tenet of their beliefs is that they are not bound by government rules.

Ms Smiley told the High Court she suspects Keith Stark is colluding to drive down the farm sale price, affecting her relationship property claim.

Evidence was given that occupiers of a residential property on the farm are suspected to have links to the sovereign citizen movement.

The High Court was told receivers handling Keith Stark’s late father’s assets had found it impossible to reach agreement on winding up the estate.

Central to the dispute is Waitotara Farms Ltd.  The estate is a minority shareholder in Waitotara Farms.

Keith Stark and Linda Smiley are the two directors.  Any Waitotara decision requires their joint approval.

Receivers’ previous attempt to force sale of farming assets by putting Waitotara Farms into liquidation was put on hold with Keith and Linda jointly agreeing to support plans for sale of the farm.

This agreement led to an October 2024 mediation agreement, signed by all parties, setting out a process for sale.

The High Court was told Keith then deliberately obstructed access.  A scheduled auction was cancelled.

With receivers’ liquidation application then renewed, Keith alleged the receivers ‘continued to exceed their authority,’ were running up excessive bills, were making false and misleading statements and were blocking payment of his wages.

He asked liquidation be delayed, enabling him to get legal advice, and to belatedly file a statement of defence.

Associate Judge Sussock ordered Waitotara Farms Ltd into liquidation immediately.  It was ‘just and equitable’ that liquidation take place, enabling sale of farm assets and distribution of Keith’s father’s estate.

She dismissed claims by Keith that liquidation was not necessary.  He had found a buyer for the farm, he claimed.

There were doubts about the substance of this offer.

There was no deposit payable.  There was a one month ‘due diligence’ clause, with no obligation to buy.  The buyer’s financial circumstances were unknown.

Receivers said the offer was no better than a free option, leaving open the opportunity to come back later and negotiate down the offer price.

Evidence was given that the offer to buy was in the name of an individual who is part-owner of a Huntly property used as the contact address for a non-existent court, oft-named in sovereign citizen pseudo-legal demands: the Royal Crown Court of Equity in Exchequer.

If it was intended to make a bona fide offer for the farm, such an offer can be made now to the liquidator, Judge Sussock said.

Khov v. Waitotara Farms Ltd – High Court (1.07.25)

25.150

Joint Venture: Brown v. TF5 Ltd

 

With their proposed joint venture Auckland property development in negative equity, Julian Brown had no further legal claim over the land after fellow investor Troy Flavell paid off the mortgage debt and claimed full ownership.

Plans to turn a profit on subdivision of an Auckland residential property were not realised after buying in for $1.4 million at what was near the top of the market in 2022.

The High Court was told each put in $200,000 cash, with the balance borrowed from a second-tier lender who took additional security with a mortgage over Mr Flavell’s Kumeu home.

Having to bail out two years later, they put the property up for auction.

No bids were received.  A post-auction offer at $1.2 million was declined.

By time of notice threatening a mortgagee sale, their mortgage debt had climbed to $1.4 million.

Evidence was given of Mr Flavell then repaying the mortgage personally, transferring title to the land across to a company he controlled: TF5 Ltd.

Mr Brown then lodged a caveat on the title, claiming their joint venture agreement still entitled him to a half interest in the land.

Associate Judge Lester ruled Mr Flavell was entitled to assume full ownership of the land after paying off the joint venture debt; he could claim an indemnity from joint venture assets for the amount paid.  The amount of the joint mortgage debt exceeded the market value of the joint venture asset.

The amount paid to clear the mortgage exceeded the price any third party buyer was willing to pay for the property at the time.  There was no suggestion of Mr Flavell buying in at an undervalue.

Mr Brown’s shared interest in the property had vanished.

Brown v. TF5 Ltd – High Court (30.06.25)

25.149

Negligence: Routhan v. PGC Wrightson

 

Businesses might expect that by time a disputed negligence case reaches New Zealand’s highest court there would be some finality, with a measure of unanimity between five judges sitting on the Supreme Court bench setting out legal principles to guide future conduct.  Not so.  A dispute over financial losses suffered after a real estate agent misstated past milk production figures on sale of a West Coast dairy unit saw two judges supporting continued use of a much-criticised rule for assessing damages, two wanting to amend the rule, and one wanting to ditch it.

As Justice Kos wryly commented in the Supreme Court, negligence principles need to be coherent, not only for the benefit of lawyers and law students, but also for the very people facing liability for negligence.  He wants to ditch the contentious rule.

Courts in both Australia and Canada have refused to use it.

Legal argument centred on New Zealand’s application of a 1997 ruling from England’s highest court.

The case: South Australia Asset Management Corp v. York Montague Ltd, was about valuers’ liability for overvaluation of properties on which lenders subsequently lost money.

The case has come to represent a formulaic rule that damages for negligent advice are calculated on ‘the consequence of information being inaccurate.’  One complaint is that compensation might be awarded for losses which are unrelated to any negligence.

In the South Australia Asset Case, lenders’ losses were accentuated by a fall in property values.

Equally, this formula can, in some instances, force a limit on damages.

The formula leaves unstated an earlier question: what was the deal?  Or in legal terminology: what was the scope of the duty undertaken by the person now liable for negligence?

This issue was front and centre in a dispute by Phil Routhan’s family trust following its 2010 purchase of a 105 hectare dairy unit near Hokitika, where Mr Routhan was misled as to the farm’s carrying capacity.

The Court of Appeal ruled he was entitled to no more than the excessive price paid, this amount itself being disputed.  His claim for damages was capped.

Wrightson real estate agent Greg Daly helped broker the purchase and complete paper work, assisting in Mr Routhan’s Rabobank financing.

In both marketing material promoting the sale and the Rabobank application, the farm’s carrying capacity and past milk production levels were overstated.

Mr Routhan sued, claiming he overpaid for his purchase and then wasted expenditure on farm improvements in a forlorn and hopeless attempt to match the supposedly possible milk production levels he had been told were achievable.

Of the five judges sitting in the Supreme Court, three ruled the ‘scope of duty’ accepted by Wrightson’s agent was verification of past milk production figures.

Wrightson was not liable because it passed on incorrect information, they said.  Wrightson was liable because it carelessly led Mr Routhan to believe the vendor had verified milk production figures, when it knew he had declined to do so, saying they needed checking.  

Breach of this scope of duty left Wrightson liable for both Mr Routhan’s $480,500 overpayment when buying the dairy unit in 2010, plus $300,000 spent subsequently on additional fertiliser and re-pasturing in his failed attempt to replicate supposedly potential milk production.

The court was told the vendor is an uncle of Mrs Routhan.  Rabobank forced a sale of the dairy unit in 2020, under threats of a possible mortgagee sale.

Routhan v. PCG Wrightson Real Estate Ltd – Supreme Court (26.06.25)

25.148

Director's Duties: Classic Flights v. Li

 

Part of a carefully camouflaged plot, a Cessna 172 aircraft registration was changed from ZK-DXP to ZK-LIT.  Junjie Li was ordered to pay $126,000 damages for his part in a deceptive scheme having his company take on lease of a light aircraft on terms favouring a second company he secretly controlled, then trying to cover his tracks with misleading and evasive answers denying any personal benefit from the deal.

Wanaka-based Classic Flights Ltd is in liquidation, owing creditors some $189,000.

Liquidators were perplexed by a so-called licensing deal which saw a Cessna aircraft leased on uncommercial terms from a business called Apex Aviation.  Classic Flights was bearing the costs whilst Apex appeared to be enjoying the benefits.

Ownership and management of Apex was proving opaque.

Liquidators had little more than Companies Office records to work with.  They showed Junjie Li as director of Classic Flights for some two years before resignation in 2019.

Mr Li is also known as Fox Li.

A Wanaka address was given as a residential address for two replacement directors.  This address was Classic Flights’ hanger at Wanaka airport.  These new directors in fact live in China, leaving Classic Flights in breach of Companies Act rules requiring at least one director live in New Zealand.  

A contract set up earlier by Mr Li saw Cessna registered ZK-DXP leased by Classic Flights from Apex on unusual terms.  Classic was liable for all maintenance costs.  The aircraft was only twenty hours short of a major mandatory commercial overhaul, due after 1800 hours operation.

Classic Flights paid $126,000 for a full engine overhaul, upgraded avionics and an engine upgrade from 150 hp to 180 hp.

Classic saw limited benefit from its lease; Apex had first claim on the aircraft’s use.

Unable to get clear answers from Mr Li about circumstances of the lease, he was summoned for examination on oath by Classic Flights’ liquidators.  His answers on oath proved equally evasive.

He could not identify who were the accountants supposedly holding Classic Flights accounting records.

He would not identify his relationship with one Lin Shi who was apparently in control of a company called U-Fly New Zealand Ltd which by then had possession of ZK-DXP, re-registered since late 2019 as ZK-LIT.

Mr Li implied Lin Shi is male.  Later enquiries identified she is Mr Li’s spouse.  Their relationship was disguised in Companies Office registrations by having the two recorded as living at separate addresses.

The High Court was told Mr Li is senior flying instructor at U-Fly. Through family nominees, he controls the company.  

In the High Court, Mr Li was held liable for breach of directors’ duties as director of Classic Flights for not acting in good faith and for abusing his power as director by arranging a ridiculously uncommercial deal for lease of the Cessna aircraft by Classic on terms benefitting his family through its ownership of rival business U-Fly.

He was ordered to pay $126,600 damages to Classic Flights, being Classic’s maintenance costs overhauling the aircraft.

At a later court hearing, Mr Li was ordered to pay, in addition, liquidators’ full costs of nearly $100,000 incurred taking legal against him.  Mr Li’s evasive behaviour had frustrated liquidation enquiries and subsequent litigation, Justice Churchman ruled.

Classic Flights Ltd v. Li – High Court (6.05.25 & 26.06.25))

25.147

CBL: FMA v. Mulholland

 

Chief financial officer of failed insurer CBL Corporation, Carden Mulholland, was hit with a double whammy: ordered to pay $641,000 as penalty for failure to prod CBL’s board into making earlier disclosure of insolvency, while also being lumbered with FMA costs of another $606,000 with the High Court noting no costs claim was made against CBL directors similarly held liable.

When approving the order against Mr Mulholland for payment of some $1.2 million, Justice Gault commented some of the costs order imposed on Mr Mulholland could have been shared amongst directors.

In 2023, independent CBL directors Sir John Wells, Paul Donaldson and Ian Marsh were held liable to pay one million dollars each for breaches of the Financial Markets Conduct Act.  Anthony Hannon, chair of CBL’s audit and financial risk committee, was ordered to pay $1.1 million.   

Their liability followed failure to keep the market fully informed of off-shore risks ultimately leaving CBL insolvent.  The insurer collapsed in 2018.

In a court approved deal with the Financial Markets Authority, Mr Mulholland agreed to pay a $641,250 penalty.  He faced a maximum penalty of three million dollars.

He had been with CBL for ten years prior to its collapse.

In his role as chief financial officer he had intimate knowledge of CBL’s worsening financial position.  Liability followed from what was described as his failure to keep CBL’s board fully informed.

Within CBL, he was designated ‘Regulatory Public Disclosure Officer.’

First claim on this $641,250 penalty is Financial Market Authority itself.

Securities market regulation is partly self-funded; sinners pay.  Financial Markets Conduct Act requires penalties be applied in payment of Financial Markets Authority investigation and prosecution costs.

This may lead to the Authority being over-compensated, with the amount of a penalty resulting from any particular investigation exceeding costs, Justice Gault commented.

The High Court was told the Authority has a memorandum of understanding with the Crown covering the interplay between central government funding and receipt of penalty payments.  Details of this memorandum were not disclosed.

Agreeing to accept the Authority’s demand for recovery of $606,200 costs, Mr Mulholland said he acknowledged the all-up figure of $1.2 million he has to pay is less than actual costs incurred by the Authority in its CBL investigations and litigation.

Financial Markets Authority v. Mulholland – High Court (25.06.25)

25.145

Asset Forfeiture: Commssioner of Police v. Le

 

It was guilt by association, with police alleging Ut Don Le and Hai Thi Thu Le had profited from cannabis dealing by reason of the volume of cash washing through their bank accounts and their close association with convicted dealers.  Assets valued at a few hundred thousand dollars were surrendered as part of a court-approved deal, in full satisfaction of police claims some $1.2 million was generated by cannabis dealing.

The two were never charged with cannabis offences.

Action was taken under the Criminal Proceeds (Recovery) Act after a forensic examination of their bank accounts identified over $1.1 million in unexplained deposits passed through their accounts over a seven year period ending September 2022.  Over that period, Mr Le declared taxable income of just over $77,000; Ms Le just under $170,000.

Police interest was piqued by the fact that two businesses each had worked for (Mr Le a flooring company and Ms Le a nail salon) were run by individuals later convicted of cultivating cannabis.

Mr Le’s fingerprints were found on items at one of the cultivation plots.  Their home was listed as bail address for a work colleague bailed on criminal charges for cannabis cultivation.

In a criminal proceeds settlement approved by the High Court, they each agreed to surrender assets in full settlement of the police proceeds of crime claim.

They handed over a property on Titchmarsh Crescent at Flat Bush in South Auckland, plus a late model Mercedes Benz, a jet ski and a trailer.

The court was told there is limited equity available from a sale of Titchmarsh Crescent.  It carries a Westpac mortgage, securing a loan of approximately $745,000.

Commissioner of Police v. Le – High Court (16.06.25)

25.143

Radio Spectrum: Cayman Spectrum v. Spark NZ

 

Market dynamics a decade ago set the scene for a High Court order that Cayman Spectrum pay Spark around $2.3 million for temporary transmission tower access.  In late 2015, Cayman was days away from losing its spectrum allocation because of delays in setting up network coverage; Spark could see the strategic benefit of potentially getting its hands on more spectrum coverage than then allowed, by temporarily sharing towers with Cayman.

Auction of radio spectrum was carefully managed by Business, Innovation and Employment, accelerating internet coverage within New Zealand.  Bidding rules prevented winners from sitting on their spectrum rights in the hope of simply selling later to another buyer.

By end of November 2015, successful bidders had to be operating a commercial wireless broadband service covering at least fifteen of New Zealand’s seventy-five territorial local authorities.

Six days short of this deadline, Canada-controlled Cayman Spectrum was at risk of losing its 2.5 spectrum licence.  It did not have sufficient transmission coverage.

Vodafone could not help.  It did not have enough compatible equipment.

Spark had its network in place.  It could accommodate Cayman’s need for temporary use of some thirteen specific transmission sites.

Haggling commenced, with Spark angling for an option to later buy Cayman’s spectrum rights.

Failing that, Spark was open to deferred payment; fifty per cent of sale proceeds, if Cayman sold to a third party.  Cayman countered with an offer of fifteen per cent.  They settled at twenty per cent.

Cayman later sold its spectrum rights for USD 10 million.  Spark claimed it was owed USD two million.

Last year, the High Court ruled that then Cayman director, Boyd Craig, had no authority to unilaterally commit Cayman to the Spark deal.

With no contractual right to twenty per cent of the USD 10 million sale, the High Court ruled Spark was entitled to payment as quantum meruit: legal jargon for payment at reasonable value for services provided, where remuneration has not been agreed.  

The two sides could not agree on a figure.

There was no market price to use as a benchmark.

As Justice Lang commented, this was case of one buyer and one seller and a service agreement arising in unusual circumstances which are unlikely to ever happen again.

The agreement to pay twenty per cent of sale price from any subsequent Cayman sale served as proxy for the value provided, Justice Lang ruled. 

Justice Lang ruled Cayman owed as a quantum meruit payment the sum of USD two million, less NZD 600,000.

This deduction is the amount Cayman, now under control of entrepreneur Malcolm Dick, was willing to pay in 2016, being an unsuccessful bid to have Spark’s transmission hosting agreement run for its final five months.  Spark had exercised its right to cancel when guarantor Woosh Wireless collapsed.

In New Zealand dollars, the court order against Cayman equates to $2.3 million, using the exchange rate applying at time of Cayman’s sale.

That may not be the final figure.  Either side can still argue over what date should count when calculating the USD two million exchange rate.

Cayman Spectrum (NZ) Ltd v. Spark New Zealand Trading Ltd – High Court (16.06.25)

25.141

Leaky Home: Vanifatova v. Wang

 

With her father living in China, daughter Crystal Wang and husband Wilson disguised weathertightness issues for her father’s Auckland property, resulting in them both liable to pay damages for deceit following a 2021 sale for $773,000.

Angelina Vanifatova sued after spending nearly half a million dollars on remediation to her newly purchased Onehunga, Selwyn Street, property.  It is one of sixteen similar townhouses, constructed in 2001 with monolithic cladding.

The High Court was told Mr Wang senior purchased in 2014.  He never lived there. The property was tenanted.

A catalogue of tenant complaints followed, with water ingress to downstairs bedrooms below an upstairs balcony.

Evidence was given of successive patchwork repairs carried out, primarily new sealant applied to exterior joints, but also one instance of rotting structural framing replaced.

Photographs taken by the then tenant greatly assisted Ms Vanifatova’s case.  This tenant had used a rent-strike to force remedial work.

The contract signed by Ms Vanifatova explicitly stated the vendor had no knowledge of any weathertightness issues.  A further clause in the contract stated the vendor disclaimed any expertise in assessing weathertightness issues.

Justice Andrew ruled Mr Wang senior, in China, was liable for misrepresentation.  He was liable for comments made on his behalf by his daughter and her husband which misrepresented the building’s weathertightness.

This included ‘half-truths’ which misrepresented the true position.

In response to a request for information about remedial work carried out, Ms Vanifatova was shown a copy of a contractor’s invoice which excluded the extent of the work done.  Whether this non-disclosure was accidental, or deliberate, it amounted to misrepresentation by omission, Justice Andrew ruled.

Crystal Wang and her husband were not signatories to the contract.  They were personally liable in the tort of deceit; making false representations about weathertightness, knowing these statements to be untrue, with the intent Ms Vanifatova would act on them.

Evidence was given of them failing to give a full and accurate picture of the remedial work done, describing the work as routine maintenance when they were aware there was an ongoing problem.

They were also aware of an adverse building report which caused an earlier purchaser to withdraw.

Damages awarded totalling about $550,000 were reduced by $64,000, being damages paid earlier to Ms Vanifatova by the contractor who carried out a pre-purchase inspection on her behalf.

Vanifatova v. Wang – High Court (16.06.25)

25.144

Family Trust: White v. White

 

It took a court order to remove Gregory White as trustee of a Hawkes Bay family trust after he refused to implement plans to distribute assets, winding up the trust.  He was ordered to pay legal costs incurred.

The High Court was told he and his brother are the trustees and final beneficiaries of a family trust set up in 2015, owning a farm and adjacent lifestyle block on Pirau Road, near Hastings.

The two agreed to wind up the trust, splitting the proceeds equally.

A proposed auction in late 2022 did not go ahead after Gregory refused to sign a listing agreement.  After Cyclone Gabrielle swept through the region three months later, Gregory refused to liaise with his brother over necessary repairs.

He did not agree to a $1.35 million offer for the land made over a year later by their neighbour.  Gregory held out for at least $1.5 million. No sale eventuated.

With Gregory living in Australia, his brother became increasingly frustrated with his sibling’s lack of co-operation; queries from bankers, the trust’s lawyers, and himself were left unanswered.  

Justice Churchman removed Gregory as trustee on grounds he had failed to act in good faith, had failed to deal with trust property and had failed to act for the benefit of beneficiaries.

Gregory did not file a statement of defence.  He did not appear in court.

White v. White – High Court (16.06.25)

25.142

Loan: Jia v. Yang

 

With fourteen million dollars already committed to an Auckland North Shore property development, Yuling Yang and Sen Gao were approached by fellow investor Victor Jia for a further $1.5 million to bail him out of a problematic personal debt.  Repayment of what eventually became a three million dollar personal loan was in dispute after China Construction Bank called up its loan over the six-storey residential development.

Mr Jia, also known as Xinhong Jia, said this personal loan was in fact a limited-recourse loan tied to their joint project, with his benefactors only entitled to payment out of what might remain from the wash-up on liquidation.

The Court of Appeal was told Mr Jia’s plea for a personal loan followed difficulties in repaying a debt owed another member of the Chinese community.  Non-payment would be a severe loss of face.

Ms Yang and Mr Goa came to the rescue with an agreement recording what became an unsecured non-interest bearing three million dollar personal loan with repayment deferred until the North Shore project at Browns Bay was complete and ‘shareholder dividends payable and paid [to them as] shareholders.’

This agreement was concluded at a time when prospects of their property development being profitable looked good.

Three years later, Ms Yang and Mr Goa were demanding repayment of their three million dollars.  Twelve months on, China Construction Bank forced a sale of Browns Bay, recovering $21 million dollars owed.

Mr Jia alleges China Construction sold at an undervalue.  Action against the bank is threatened.

Fending off claims by Ms Yang and Mr Goa for return of their three million dollars, Mr Jia said they had to wait for the outcome of litigation against China Construction.  Any surplus would be paid as a ‘shareholder dividend,’ amounting to final repayment in terms of their loan agreement, he said.

The Court of Appeal ruled ‘dividends’ as envisaged by their agreement applied to payments made by a solvent company to its equity investors.  It cannot be likened to a payment made on liquidation, the Court said.  Use of the word dividend was not to be confused with payments to creditors in a liquidation, which also get labelled as dividends, the court said.

Their contract made no provision for what might happen if the project failed; this prospect was never considered when the loan was set up.

The Court ruled it was an implied term in their loan contract that if the project failed, Mr Jia’s obligation to repay his personal loan fell due immediately.

Jia v. Yang – Court of Appeal (13.06.25)

25.140

Property Management: Millar v. First NZ Properties

 

When a commercial contract ‘runs on’ beyond its scheduled end, all contract terms continue to apply, ruled the Court of Appeal, critical of a trial judge’s selective choice as to which terms still applied when holding directors Michael Millar and son-in-law Paul Mephan liable for benefits extracted from First NZ Properties. 

Result: Mr Millar’s liability to pay some $2.4 million damages was reduced; Mr Mephan’s liability to pay $450,000 overturned.

The earlier 2024 High Court ruling covered over two decades of property management by Mr Millar, primarily through his Nelson-based company Investment Services Ltd, and his role as director of commercial properties held under the umbrella of First NZ Properties Ltd.

In the High Court, he was found liable for failing to properly disclose excess management fees charged and of taking a share of capital gain on property sales without authority.

One critical issue was: what were the terms of Investment Services ongoing management contract?

The original management contract was signed in 1995, covering three Foodtown supermarkets in Auckland.  Over time, First NZ sold these investments, purchasing replacement properties.

New management contracts were not drawn up to specifically cover these replacements.

Mr Millar, and Investment Services, said the original management contracts simply ran-on, carrying over to the replacement properties.

The High Court ruled terms covering calculation of management fees did carry over (with both Mr Millar and Investment Services liable for padding these fees) but a term entitling a share in any capital gain on sale did not carry over (ordering repayment).

The Court of Appeal ruled the original 1995 contract envisaged further properties might be purchased.  This meant all terms of the 1995 contract applied to subsequent purchases; not only the formula for calculating management fees, but also the right to five per cent of capital gain on sale.

On appeal, Mr Millar’s and Investment Services’ liability for padding fees remained.  Investment Services had developed a policy of subcontracting to others management of specific properties, charging this cost to First NZ investors, and then continuing to pocket for itself a full management fee.

Court of Appeal ruled payment of $450,000 being a share of capital gain on the 2018 sale of a First NZ property in Symonds Street, Auckland, was permitted by terms of the run-on management contract.

Millar v. First NZ Properties Ltd – Court of Appeal (11.06.25)

25.139