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

Charity: Estate Arthur Whatman v. Masterton District

 

Arthur Whatman was very generous bequeathing his Masterton property for use as a convalescent home, but like many charitable gifts, lack of funding to cover ongoing costs has caused financial headaches.   Application for High Court approval to sell the land met with strong local opposition.

Beneficiaries do sometimes decline non-cash bequests.  Immediate repair costs and ongoing maintenance coupled with onerous terms of a bequest means a bequeathed asset can have a negative economic value.

On his 1938 death, Arthur Whatman bequeathed to the local hospital board land he owned on Ngaumutawa Road in Masterton.  He specified the land and homestead on it were to be used as a ‘convalescent or rest home’ for the ‘sick, aged or needy.’  His will specified that no part of the land was to be ‘sold, let or leased.’

The homestead came to be used primarily as a rest home for permanent residents, rather than providing short-term stay for convalescents.  By 1965, the hospital board was finding increasing costs made use of the homestead uneconomic.  Financial losses were incurred for each of the previous five years.

High Court application under the Charitable Trusts Act saw control pass to the local council.  It built pensioner units on part of the land, leaving the rest vacant.

Nearly sixty years later, Masterton Council was again back before the High Court seeking to vary terms of Mr Whatman’s bequest.

Council said there is a desperate shortage of social housing in the Wairarapa.

It was seeking to build further housing, but did not have sufficient cash to subdivide the remaining Whatman land without first raising rates; a further burden on ratepayers, it said.

Adding a further 25 units to the site would cost in excess of ten million dollars, Council said.

It sought approval to sell the remaining land, subject to a covenant that it be used solely for ‘public housing.’  Proceeds of sale would be used to build roading and utilities needed to support any proposed devlopment.

Community support for the proposal was divided.

Close neighbours objected.

A wording change from provision of housing for the ‘sick, aged and needy’ to provision of ‘public housing’ was an extravagant departure from the intent of Mr Whatman’s bequest they said.  The new wording did not properly reflect his wishes to help solely the aged and indigent, they claimed.

Justice Radich ruled the phrase ‘public housing’ as proposed by Council merely modernised wording in Mr Whatman’s bequest and was synonymous with the word ‘needy.’

Objectors said Council could instead lease the land, rather than sell outright.  Council said leasing alone would raise insufficient cash to cover infrastructure costs for development of any housing project.

Charitable Trusts Act approval was given to changed wording allowing Masterton Council to sell the bequeathed land, subject to covenants being registered to have the land used only for ‘public housing.’

Estate of Arthur Whatman v. Masterton District Council – High Court (1.08.24)

24.181

Lake View Mangawhai: Mangawhai Developments v. Lake View Estate

 

Owners of Mangawhai Lake View Estate control their private subdivision the Court of Appeal ruled, putting to an end to claims by rival developers that they had a right of veto over subdivision plans.

Development of a two hundred hectare private subdivision off Devich Road near Mangawhai in Northland has been cursed by over a decade of disputes, financial and otherwise.

At the turn of the century, entrepreneur Philip Cotton envisaged a lifestyle development in harmony with nature while providing extensive recreational facilities.

Local authority consent to the initial subdivision required formation of a legal entity to manage roading, utilities and communal facilities.  The Lake View Estate Residents Society Incorporated was born.

Mr Cotton ensured the Society’s constitution was drafted to give veto powers in favour of his development company: Mangawhai Developments Ltd.  Given the status of ‘controlling member,’ it could block any resolutions passed by owner/members.

By 2007, work was underway to develop what was intended to be 56 rural-residential lots of less than four hectares, and 14 rural-lifestyle lots larger than four hectares.

Pre-sale of many lots foundered when speculative investors defaulted on their contracts to buy following the severe recession in 2007-2008 styled as the Global Financial Crisis.

Mangawhai Developments was propelled into receivership, owing fifteen million dollars.  Few companies trade their way out of receivership.  Mangawhai Developments did; exiting receivership in 2022.

Much had happened during the intervening twelve years.

In particular, land intended to be developed as stage two came into the ownership of Chris and Karen Ruiterman.  They were to later join forces with Edward Sundstrum and his company Vermont Street Partners Ltd.  Mr Sundstrum, through a family trust, lived on the Lake View Estate.  Together, they put up proposals for an extension to Lake View, subdividing what historically was stage two land.

Heads butted.  Mr Cotton and the Ruitermans had differing views about further developments.

With Mangawhai Developments now out of receivership, Mr Cotton reclaimed what he said was his company’s right of veto as ‘controlling member.’  The Ruitermans claimed they were now the ‘controlling member’ having purchased the land intended for stage two.

The Court of Appeal ruled neither had status as controlling member.

Wording in Lake View Estate’s constitution cancelled the controlling member’s right of veto when the development was completed.  There was no definition of ‘completion.’

The court ruled that development of stage one and sale of all remaining undeveloped land owned by Mangawhai Developments amounted to completion.

Constitutional references to a ‘controlling member’ are now redundant.  Lake View owners, as members of their Society were now in control of their own destiny.

New rules approved at the Society’s 2019 annual general meeting became operative, the Court of Appeal ruled.  Reference to having a ‘controlling member’ sitting on the Society’s management committee was removed, with future Estate management decisions to be approved by a simple majority of those Lake View owners appointed to the committee.

Mangawhai Developments Ltd v. Lake View Estate Residents Society Inc. – Court of Appeal (26.07.24)

24.180

Incorporated Society: Lebanese Society of Aotearoa v. Lebanese Society of NZ

 

In 1978, an incorporated society known as the Grand Society, initially established for the benefit of all Lebanese living in New Zealand, was struck off the register for failing to file updated financial accounts.  Nearly half a century on, three different Lebanese groups claim ownership of the Grand Society’s land in central Wellington.

The site at 128 Abel Smith Street is now bare land after fire gutted the two-storey wooden building.  Online reports following the 2020 fire described the century old building as being previously used as a dwelling, private hospital, society headquarters and more recently as a community centre and hot-spot of political activism.

Since the Grand Society no longer exists, who owns the site was fiercely disputed in the High Court.

Evidence was given that Abel Smith Street was purchased in 1959 by the Grand Society following sale of its then property on Cambridge Terrace.  Funding for the earlier Cambridge Terrace purchase came from a mix of donations and loans drawn from members of the Lebanese community and the accumulated funds of Grand Society branches in Auckland, Hawkes Bay, Wellington, Christchurch and Dunedin.

After the Grand Society was struck off, members of the Wellington Lebanese community assumed responsibility for rates and maintenance of Abel Smith Street.  Over time they came to assume all rights of ownership.  Downstream legal issues following the 2020 fire required ownership to be regularised.

After earlier unsuccessful attempts by the Wellington Lebanese community to have the Grand Society reinstated to the register, they established a new incorporated society in 1991: the Lebanese Society of New Zealand.

In 2023, the Registrar of Incorporated Societies directed that ownership of the Grand Society’s land now lay with Wellington-based Lebanese Society of New Zealand.

A firestorm followed.  Separate ethnic Lebanese incorporated societies in both Auckland and Dunedin sued.

They claimed to be successor groups of the former Auckland and Dunedin branches of the Grand Society and as branches they had contributed to funding ultimately used to purchase Abel Smith Street.

The Registrar of Incorporated Societies told the High Court she was unaware of these competing interests at time ownership was passed to the Wellington based group.  The High Court was invited to reconsider rights of ownership.

Justice Churchman ruled all three groups were entitled to share in ownership of the Wellington property.  Share entitlements could not be determined because there were no existing records identifying the amount of funding coming from each region for the original Cambridge Terrace purchase.

Auckland and Dunedin were particularly angry that Wellington was now enjoying full ownership of Abel Smith Street when back in 1950 Wellington had demanded repayment by the Grand Society of its four hundred pound Cambridge Terrace contribution, and was repaid.

With the warring groups unable to agree with Justice Churchman’s suggestion that a new society representing all Lebanese in New Zealand be incorporated to hold title to Abel Smith Street, he ordered the property be sold and the proceeds split equally three ways between Auckland, Wellington and Dunedin.

Given the animosity and mutual distrust between Wellington and the other two claimants, he ruled the Registrar of Incorporated Societies is to manage the sale and distribution.

Lebanese Society of Aotearoa New Zealand Inc v. Lebanese Society of New Zealand – High Court (25.07.24)

24.179

Cash Hoard: Commissioner of Police v. Unknown

 

Recent immigrants were shocked and horrified in equal measure to discover $232,440 sealed in vacuum-packed plastic bags hidden in the roof of their Christchurch home; surprised because it wasn’t theirs, horrified that publicity would attract a potentially violent home invasion by criminal elements seeking to recover the cash.

Police got a High Court order seizing the cash as ‘tainted.’  A later criminal proceeds hearing will determine who gets to keep the money.

Six months after purchase of their Christchurch home, a contractor completing work in the ceiling cavity found five sealed bags of cash hidden under insulation.  This cache was hidden at the furthermost point from a manhole providing access.

Being predominately fifty dollar notes in bundles secured with rubber bands led the owners to suspect this cache was proceeds of drug dealing.  They reported their find to the police.

Police enquiries of past owners and recent tenants found no-one either acknowledging ownership of the cash or with a criminal record likely to suggest ownership.

One past owner had a sibling with a drug conviction and known association with the Mongrel Mob.  It was claimed he was unlikely to have ever visited the property.  This sibling is now dead.

The initial proceeds of crime hearing, in which police gained authority to impound the money, is round one in what is a continuing dispute over who can keep it.

Police acknowledge the family have some grounds to claim ownership.  The money was found on their property.  They have rights to possession against all but the true owner.

The complication is that this money appears to be proceeds of crime; a fact acknowledged by the family when reporting their find to police.

A later High Court forfeiture hearing will decide how much, if any, of the cash is to be returned to its finders.

The High Court supressed both the name of the family and their address.

Commissioner of Police v. Unknown – High Court (24.07.24)

24.178

Class Action: Simons v. ANZ

 

Chasing a bigger slice of the cake before it is baked, class action litigation funders are in court fighting what they claim is an existential battle over division of the spoils; seeking approval of Common Fund Orders to improve their returns.

Litigation funders hold themselves out as caped crusaders, fighting for the small guy.  Joe and Jill Citizen do not have the resources to fight large corporates over perceived slights to their legal rights.

Litigation funders offer to do the heavy lifting, funding legal action in the name of representative plaintiffs with a court ruling which can then be applied to hundreds, if not thousands, of consumers in a similar position.

Most publicity has surrounded class actions filed on behalf of Christchurch earthquake claimants alleging they were shortchanged by insurers’ payouts on earthquake claims.  The biggest class action success to date has been $54 million paid in an out of court settlement by government to kiwifruit growers affected by PSA virus imported by Primary Industries on pollen arriving from China.

Now it is banks in the firing line.

ANZ has admitted it did not make complete disclosure of changes to customer home loans and personal loans in 2015 and 2016, as required by the Credit Contracts and Consumers Finance Act.  A poorly formulated software programme applied to existing customer accounts was to blame.

ASB made a similar stuff up over a four year period: 2015 to 2019.

Both banks self-reported their mistakes to the Commerce Commission.         

Litigation funders LPF Group Ltd and CASL Management Pty Ltd are now on the hunt, seeking compensation from each bank on behalf of affected account holders.

These litigation funders offer investment opportunities in specific class actions, funding litigation on behalf of affected consumers.  Punters are invited to pool resources, funding what is speculative litigation with both an uncertain outcome and an equally uncertain investment horizon.

All money invested can be lost.  A class action may fail in its entirety; or drag on for so long that cash committed is exhausted.

To compensate for this risk, litigation funders seek a handsome return; agreement to keep forty to fifty per cent of any recovery from successful class action litigation is not unheard of.

Adding to headaches for litigation funders is the problem of ‘free riders,’ litigants who do not joint the class action but jump in later, collecting a payout without contributing to the cost.

Common Fund Orders (CFO) are seen by litigation funders as a panacea for the free rider problem; enabling recovery from all who benefit from a class action, whether they sign up to the funding agreement or not.

Approval of CFOs is contentious.

In Australia, the Federal Court is in two minds as to whether they are allowed.  No definitive ruling has been handed down.

In England, judges have only gone so far as saying they might be a good idea.

In New Zealand, the Court of Appeal was more decisive.

Over objections from both ANZ and ASB, the court stated procedural High Court Rules enable a judge to approve a CFO in class action litigation.  It further said that CFO orders should be approved upfront, not at a later stage when merits of a case are being argued.  Judges retain a supervisory role to review terms of any litigation funding agreement.

As a litigation funder, LPF Group told the court that a lack of CFO orders only added to the risk assumed.  Without CFO orders, litigation funders would be less likely to underwrite class actions, to the ultimate disadvantage of consumers, it said.

Prohibiting use of CFO orders has the potential of reducing, or even halting, ongoing use of class actions, funders claim.

ANZ and ASB argued there is no legal justification in New Zealand for CFO orders.  It was improper to have a trial judge use current High Court Rules, which govern court procedure, as a mechanism to approve CFOs since CFOs are not concerned with court procedure; they govern substantive legal rights as between litigants, they said.

Approval of Common Fund Orders does fit within the broad remit of the High Court Rules, said the Court of Appeal.

Simons v. ANZ – Court of Appeal (19.07.24)

24.177

Trespass: Tiller v. Auckland Council

 

Frustrated after two decades fruitless discussions with Auckland Council over stormwater management surrounding his Murrays Bay home, Brett Tiller sued for trespass after he was flooded out by the city’s January 2023 storm deluge.

The tort of trespass does not just require proof a person physically intruded on your land, it includes circumstances when a person causes some other person or thing to intrude.

Mr Tiller argued Council’s actions had caused extensive flooding which inundated the basement and ground floor of his home.  Repairs covered by insurance cost $341,000.  It was nearly a year before he could return to live at his Montana Avenue property.

He sued Auckland Council, claiming $10.3 million damages.  This figure included a claim for mesne rental: legal jargon for rentals due following unlawful occupation of land. 

High Court argument centred on Auckland Council responsibility for local storm water management.

The court was told Mr Tiller’s property included what was historically a ‘seasonal swamp,’ holding run-off during wet periods.  As the surrounding area was progressively subdivided, this area continued as a natural watercourse carrying away water from higher ground.

Mr Tiller argued Council had exacerbated the amount of water flowing through this watercourse; both by redirecting upstream stormwater water flows towards his property and by construction of an inadequate culvert downstream, causing water to back-up onto his property during heavy rain. 

The general rule is that property owners have to accept surface water which drains naturally from higher ground; lower land is described as subject to ‘natural servitude.’

But natural servitude does not include so-called ‘foreign water;’ water that has been accumulated or diverted by owners of higher ground.

Justice Gordon ruled there was no evidence before the court that Council’s stormwater network had caused more water to flood the natural watercourse on Mr Tiller’s property than would have occurred in any event.

The claim for trespass was dismissed.

Mr Tiller told the court he had no intention of joining the buy-out scheme currently on offer to at-risk flood damaged properties in Auckland.  Justice Gordon suggested he reconsider.

The Montana Avenue property is eligible.

Tiller v. Auckland Council – High Court (18.07.24)

24.176

Seismic Reports: Ruth Weine Family Trust v. Tadd Management

 

Engineers’ seismic assessments included in real estate marketing material are a professional opinion as to potential earthquake risk, not a statement of fact potentially leading to damages for misrepresentation, the Court of Appeal ruled, overturning a High Court ruling that a Wellington family trust pay $592,000 damages on sale of a Lower Hutt commercial building.

In 2017, Tadd Management Ltd paid $1.4 million at auction to purchase a three-storey building on Queens Drive from the Ruth Weine Family Trust.

Marketing material made available to potential buyers included a seismic report assessing the building at sixty per cent of New Building Standard (NBS).

After its purchase, Tadd Management obtained its own seismic report in readiness for a planned refurbishment.  This report put Queens Park’s NBS rating at time of sale between ten per cent and thirty per cent.

Tadd Management sued, claiming it paid too much.

 The Court of Appeal said engineers’ seismic reports are in the same category as property valuations and legal opinions; provided factual assumptions underpinning the report are correct, the concluded professional assessment is no more than a statement of opinion.  Opinions can vary.  Differing opinions can be equally valid.

A reasonably prepared professional opinion does not amount to a misrepresentation, even should it differ from another professional opinion, the Court ruled.

The seismic report at time of the 2017 sale describing Queens Park as having a sixty per cent NBS rating was not a misrepresentation, the Court ruled.

Ruth Weine Family Trust v. Tadd Management Ltd – Court of Appeal (17.07.24)

24.175

Family Trust: Rawson v. Prescott

 

Ten days after George Rawson took initial steps to remove spouse Lucinda Prescott as beneficiary under his will, he was found dead at the bottom of stairs at his Auckland Browns Bay home.  Brother Roy Rawson took his suspicions to police, later taking court action as trustee of his brother’s family trust attempting to evict Lucinda from the property.

Associate Judge Sussock put eviction on hold.  Factual detail surrounding George Rawson’s Family Trust ownership of the Redwing Street property had to be sorted out. 

Evidence was given that George put ownership of Redwing Street into a family trust in 2004.  Brother Roy is a trustee.  Named as final beneficiaries are George’s informally adopted son, Jacob, plus any further children George might subsequently have.

George and Lucinda commenced a de facto relationship six years later, marrying in 2013.  

Following George’s unexpected death in 2022, Roy as trustee told Lucinda it was time to leave Redwing Street.

Roy says she was paid some $8500 by Jacob to assist in payment of a bond for alternative accommodation, but then refused to leave.  A trespass notice was issued.  Lucinda countered by saying a ‘memorandum of wishes’ signed by George in 2013 gave her the right to stay at Redwing Street, despite it being Trust property, which together with a ‘protection clause’ in their relationship property ‘contracting out’ agreement entitled her to benefits potentially worth $1.14 million.

The High Court was told George and Lucinda signed a ‘contracting out’ agreement at time of their 2013 marriage acknowledging Redwing Street was not relationship property.  Lucinda says a provision in this agreement, headed ‘protection of Lucinda’ entitles her to a life interest in both the George Lawson Trust assets and George’s estate on his death.

Judge Sussock ruled a detailed court hearing is needed to establish operation of the 2013 memorandum of wishes and the agreed ‘protection’ provision.

As a general rule, a memorandum of wishes directed by a trust settlor to trustees is not enforceable.  Trustees may feel morally obliged to subsequently comply, but they are not legally required to do so.

Brother Roy says George was taking steps before his death to remove all benefits accruing to Lucinda after discovering she was having an affair with a mutual friend.  Lucinda admits to the affair, but says it was brief and that she and George subsequently reconciled.

She claims circumstances surrounding both the memorandum of wishes and signing of their contracting out agreement are such that she has the right to live at Redwing Street and cannot be evicted.

Rawson v. Prescott – High Court (15.07.24)

24.174

Fencing: Jin v. Narayan

 

Dispute between Auckland neighbours over the state of their boundary fence and construction of a replacement led to more than a war of words; police were called more than once to cool tempers.  They ended up in court arguing over compliance with Fencing Act notice requirements.

The Fencing Act general rule is that neighbours are expected to agree over both the form of any boundary fence and how costs are to be split.  Most neighbours do.

When neighbours cannot agree, the Act has a formal procedure for notices and cross-notices, setting out their respective proposals.  In the absence of any agreement, a default rule apples; if there is no response within twenty-one days of the last issued notice or cross-notice, then this last iteration is deemed to be accepted requiring each neighbour pay half the notified construction cost.  

Auckland neighbours wound up in court arguing over what amounted to a valid cross-notice.

The High Court was told Yuchen Jin’s property on Armstrong Farm Drive, East Tamaki Heights, adjoins the Narayans.

When constructing a new home, the Narayans raised concerns about stability of an existing retaining wall on the Jin boundary.  Neighbourly relations did not get off to a good start with Mr Jin alleging Narayans’ construction was causing damage.

He demanded the Narayans make good the alleged damage; they countered, saying Mr Yin caused the damage.

Subsequent to this December 2022 exchange, site meetings by the two neighbours, with building experts in attendance, saw no concluded agreement.

In May 2023, the Narayans had their lawyer send a Fencing Act notice to Mr Yin.  It referred to their previous December exchange and then set out in detail two options for a replacement boundary fence, both fully costed.  Mr Yin was invited to choose one of the two options.

One month later, the Narayans advised Mr Jin they were proceeding with the cheaper of the two, saying they had not heard back from him.  He subsequently refused to pay half the cost: some $10,200.

When sued, Mr Jin claimed he had responded by email within a week to the Narayans’ May 2023 Fencing Act notice, objecting to their proposals and suggesting a fencing upgrade would suffice at a cost of $4000.  The Narayans denied ever receiving such an email. 

Justice O’Gorman ruled that even if this email had been received by the Narayans, it did not comply with Fencing Act formalities for a cross-notice.

This meant the initial May 2023 proposal was deemed to have been accepted.  Mr Jin was liable to pay his half share of $10,200.

Fencing Act procedures are intended to ensure court involvement is minimised as far as possible, Justice O’Gorman said.  Failure to issue a proper cross-notice results in deemed acceptance of an earlier Fencing Act proposal.  This is intended to provide certainty about work to be done and how payment is to be shared.

The Narayans’ May 2023 Fencing Act notice was valid, despite earlier negotiations remaining unresolved.  A new Fencing Act notice offering a new proposal can be issued at any time, Justice O’Gorman ruled.  There is no requirement to wait out stalled negotiations or even wait for the twenty-one day period to expire on an earlier proposal, she said.

Jin v. Narayan – High Court (12.07.24)

24.173

Express Trust: Andrew v. McGinty

 

Working as a solicitor, Jennifer Andrews ensured her 2001 purchase of an Auckland residential property was structured having her two children hold title as trustees for herself and her spouse.  Two decades later, she was in court challenging her estranged daughter-in-law’s claim to an interest in the Panmure property as relationship property.

Daughter-in-law Rebecca Crowe claimed the property had become her family home and was now relationship property.

The High Court was told the Mareth Street property was purchased in April 2001 from a deceased estate.  Ms Andrews arranged for title to be taken in names of her son Mathew McGinty (then flatting elsewhere in Auckland) and daughter Rachel (then working overseas as a professional yachtswoman).  Both children signed written acknowledgements that they held title in trust for their parents.

Mathew and Rebecca took up occupation of Mareth Street four years later, after their 2005 marriage.  They paid rent to Mathew’s parents.  Over time, more than $300,000 was spent upgrading what was a rundown two bedroom state house.  This money came from Mathew’s mother, now widowed.

After Mathew and Rebecca separated in 2017, Rebecca identified that title to Mareth Street was held in the names of estranged husband Mathew and his sibling.  Rebecca lodged a claim against the title, saying Mareth Street was relationship property.

She said any landlord/tenant relationship was a fiction: there was no tenancy agreement or bond; rent paid was below market rates, amounting to a ‘rent to buy’ deal; and the money spent on upgrading the property was not evidence of her parents-in-law beneficial ownership but was a gift to their son.

Justice O’Gorman ruled Residential Tenancy Act rules do not apply properties occupied by a landlord’s family.  No tenancy agreement or bond was required.

The nominal rent paid did not evidence any ‘rent-to-buy’ arrangement.  Rent-to-buy arrangements typically see an above market rent paid; payment for the right to occupy plus contributions towards the purchase price.

Mareth Street was not relationship property, Justice O’Gorman ruled.  It was held in the names of Ms Andrew’s children on an express trust for their parents.  Subsequent to the death of her spouse, Ms Andrew became the sole beneficial owner of Mareth Street.

This express trust came into existence prior to Mathew’s and Rebecca’s occupation of Mareth Street.  Cash to complete purchase of Mareth Street came solely from Ms Andrews and her spouse.  There was clear written acknowledgement by the two children that the property was held by them in trust for their parents.  It was never Mathew’s relationship property.

Andrew v. McGinty – High Court (8.07.24)

24.172

Consultant: TS Training Ltd v. Lee

 

It was only after Toni-Anne Lee parted company with brother Scott that some $66,500 she received from their company TS Training Ltd was disputed as being either payment she could keep for work done or shareholder advances requiring repayment.

The two established Hamilton-based TS Training Ltd in 2020 to provide education and training courses, primarily for Ministry of Social Development.  They were not employees; they contracted their services to TS Training.

Each billed TS Training a little over one thousand dollars each week for consultancy fees.  Further invoices for consultancy fees, most lacking any itemisation, were submitted after provider contracts were negotiated with Social Development: a $100,000 contract in November 2020 and a $340,000 contract in April 2021.

The High Court was told their accounting adviser recommended these payments be recorded as shareholder advances; lump sum payments should not be recorded as payment for work done when in fact the work was yet to be done.  This advice was ignored.

Toni-Anne left TS Training Ltd in 2021, transferring her shareholding to brother Scott at no cost.  Scott, now in sole control of the company, subsequently claimed she had received some $66,500 in shareholder advances now due for repayment.

Financial statements for TS Training drawn up after Toni-Lee left the company recorded, for the first time, the existence of shareholder advances.

Justice Powell ruled there was no contemporary evidence at the time payment was made that that the disputed contract payments were to be treated as shareholder advances.

In addition, Scott argued that repayment was required because his sister had done no work for the company beyond that covered by weekly payments.  She was working for two other companies at the time.

Again, there was insufficient evidence, Justice Powell ruled.  Their practice of submitting pro forma consultancy invoices unsupported by any narrative or timesheet records to justify withdrawal of funds from their company meant there was no evidence of what work was, or was not, done.

Ms Lee was held entitled to retain the disputed $66,500.

TS Training Ltd v. Lee – High Court (3.07.24)

24.171

One Pure: Wang v. Kang

 

Yongnan Kang has gone to ground, current whereabouts unknown, whilst both Jianping Yang, majority shareholder in bottled water exporter One Pure, and offshore company Guangzhou Dongjiang Petroleum lay claim to Mr Kang’s 25 per cent interest in One Pure in satisfaction of money owed.

Mr Yang is owed $22.3 million; damages for Mr Kang’s misrepresentations and misleading conduct on sale of a majority stake in One Pure.  Guangzhou Petroleum is owed $1.7 million; the balance of a loan unpaid by Mr Kang.

Both have charging orders over Mr Kang’s minority interest, entitled to first dibs over proceeds of his stake in One Pure, when sold.

These charging orders have hampered company operations at One Pure.  Mr Yang wants to take full control of One Pure.  His own charging order blocks transfer to him of Mr Kang’s minority holding, a transfer otherwise permitted by their earlier signed shareholders’ agreement.

The Court of Appeal was told this problem has hindered company operations where signature of both shareholders is required; in particular, establishing new bank accounts and dealing with One Pure’s auditors.

Over Guangzhou Petroleum’s objections, the Court of Appeal removed Mr Yang’s current charging order.  Guangzhou said the charging order should not be lifted until the value of Mr Kang’s minority interest in One Pure has been valued.  It wants to clarify the economic value of its charging order.

No valuation is needed, the Court ruled.  Mr Yang is entitled to assume control of One Pure’s total shareholding, with ‘payment’ for the minority interest purchased being set-off against the $22.3 million owed.

Guangzhou Petroleum is no more than an unsecured creditor with the right to prove in Mr Kang’s bankruptcy, should he be bankrupted, the Court said.  The value of Mr Kang’s former minority interest in One Pure only becomes an issue on bankruptcy, with any adjustment between Mr Yang as a potentially part-paid unsecured creditor and Guangzhou as an unpaid unsecured creditor then relevant.

Wang v. Kang – Court of Appeal (2.07.24)

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