Relationship Property: Taylor v. Vernon

 

Now living at Sanctuary Cove on the Gold Coast in Queensland, Dianne Taylor is in the High Court alleging spouse Scott Vernon deliberately lied about his net worth when negotiating her relationship property entitlements.

Mr Vernon’s property interests, most notably an interest in Auckland’s Fairview Lifestyle Village, are claimed to total some $170 million.

Ms Taylor alleges her spouse is being deliberately obstructive, failing to properly disclose his net worth.

She was criticised by the High Court for accessing Mr Vernon’s personal emails seeking to identify the extent of his assets.

Justice O’Gorman ruled these emails could not be used as evidence at any court hearing; they were privileged communications between Mr Vernon and his lawyer regarding their dispute.

Offers made to settle their dispute similarly could not be used in evidence.  They were part of ‘without prejudice’ discussions.

The High Court was told the two met in 2005, separating briefly in 2016 before reconciling, finally separating in 2022.

Six years into their relationship, the two agreed on terms should they later split.  In a strictly legal sense, it was not a Property (Relationships) Act ‘contracting out’ agreement; rather an agreement setting out potential entitlements for Ms Taylor.

This 2011 agreement entitled Ms Taylor to a half million dollar lump sum payment plus $100,000 per year for the next five years, should they later separate.

No disclosure was made of Mr Vernon’s then net asset position, other than Mr Vernon admitting to owning a ‘small portion’ of the value of several retirement villages.

The agreement provided for a review in five years.

The High Court was told a failure to carry out this required review on due date led to tensions between the two and a temporary separation.

They reconciled after a new agreement was negotiated, including an immediate payment of AUD two million to Ms Taylor.

Evidence was given that their final separation was triggered by a failure to agree on terms for a subsequent review, a further five years later.  Disclosure of Mr Vernon’s net worth was a key issue.

With their final separation, Ms Taylor claims the two prior agreements setting out her entitlements on separation are invalid; void and unenforceable because of what she alleges were fraudulent misrepresentations by her former spouse about his net worth.

She is claiming a share of the increased value in Mr Vernon’s net assets during the period of their relationship.  She claims his assets increased by about $145 million during this time.

The exact figure is not known.  Mr Vernon’s net worth is split across a multitude of entities, primarily a trust known as the Horizon Family Trust.

After a preliminary court hearing, Mr Vernon was ordered to make an interim payment of two million dollars, subject to Ms Taylor undertaking to make repayment, in full or in part, if she is found entitled to a lesser sum in later court proceedings.

Ms Taylor said this money is needed to pay her legal fees, plus living costs.

Mr Vernon questioned the need for an interim payment.  Ms Taylor holds property interests in her own right totalling some AUD 4.8 million, he said.

Ms Taylor said she does not want to immediately sell any of these properties to free up cash as this would trigger a capital gains tax liability in Australia.

Taylor v. Vernon – High Court (29.08.24)

24.208

Arbitration: Stockco Ltd v. The Big Basin

 

Often touted as a quick and relatively inexpensive way to deal with commercial disputes, arbitration was prolonged and expensive in a $1.2 million claim by livestock financier Stockco over funding for purchase of nearly 800 bulls rising two years old with allegations of dishonesty over delivery and ownership of the livestock.

Marcus Kight’s Hawkes Bay livestock financier Stockco Ltd was incensed by what was viewed as dishonest, opportunistic and obstructive behaviour by client The Big Basin Ltd.

Big Basin claimed stock were never delivered.

Stockco reserved particular ire for then Big Basin director, Oamaru-based Leonard Bourton, alleging he drove a ‘false narrative’ seeking to make a windfall gain.  Companies Office records state Mr Bourton resigned as director in 2018.

Arbitrations are usually private.  There is no public record.

Stockco’s private dispute with Big Basin made it into the public arena when Stockco disputed in the High Court the level of fees awarded by the arbitrator after its successful claim against Big Basin.

Stockco said it had spent $743,000 on legal fees.  Much of this followed a pre-arbitration review of Big Basin’s allegation it never received the promised livestock.  A prolonged arbitration hearing lasting ten days added to costs.  Stockco said it had reduced its $743,000 claim down from the $850,000 cost actually incurred.

The arbitrator allowed a fee recovery at 51 per cent of costs claimed, payable by Big Basin.

Stockco challenged a reduction of this size as unreasonable.

Justice Radich confirmed the arbitrator’s assessment.  Costs incurred lost proportion against the true nature of the dispute, he said.

The High Court was told Big Basin was able to dispute delivery of the bulls because Stockco was not initially aware of where the livestock were located.  All Stockco knew was that the bulls were, or had been, in the hands of Mr Bourton and that some had reached Big Basin’s property near Lindis Pass in South Island’s Mackenzie Country.

The arbitrator resolved that there was a real possibility that some of the bulls were never in Big Basin’s possession.  Shortcomings in Stockco’s systems and records created uncertainty.

Ultimately, the arbitrator found Big Basin liable for finance costs on a plain interpretation of Stockco’s financing contract, independent of any dispute about delivery.

Stockco Ltd v. The Big Basin Ltd – High Court (28.08.24)

24.207

Construction: Stevensons Structural v. McMillan & Lockwood

 

Retention clauses in construction contracts delaying payment until after a project is complete cannot be enforced against sub-contractors.  Construction Contracts Act prohibits any requirement linking subcontractor payment to final completion by the head contractor.

BDO Wellington as liquidators of insolvent Palmerston North engineering company Stevensons Structural Engineers 1978 Ltd recovered some $225,000 retentions withheld by McMillan & Lockwood for sub-contracting work on two projects: Sarjeant gallery in Whanganui and a NZ Army project at Linton Camp.

Stevensons went into liquidation without completing its share of the work on these two projects.

Mc Millan & Lockwood claimed it could keep retentions held in name of Stevensons to cover the cost of getting new sub-contractors to finish this work.   

In its sub-contract, Stevensons had agreed to funds being withheld from progress payments.  Its contract stated fifty per cent of retentions would be released on satisfactory completion of Stevensons’ work, the balance within thirty days of each of the two projects being complete.

In the High Court, Associate Judge Skelton ruled this retention clause was void and ineffective.

Construction Contracts Act prohibits clauses which tie payment to performance by someone else.  This saw the end of ‘pay when paid’ clauses, in which head contractors could refuse to pay sub-contractors until they themselves were paid.

Judge Skelton ruled the McMillan & Lockwood retentions clause was similarly in breach of the Act; it sought to refuse full payment until the project was complete, something over which sub-contractors had no control.

McMillan & Lockwood had no right to retain the $225,000 held back.

It could not set off these retentions against the cost of having another contractor complete Stevensons’ steel work.

This retention money was held in trust.  Claiming a set-off against a company in liquidation requires ‘mutuality;’ the set-off must arise from mutual dealings between the two parties having the same interest.

There was no mutuality of interest in this case.  McMillan & Lockwood as trustee holding retention money was not the same as McMillan & Lockwood claiming breach of contract.

It could not set off monies held as trustee for the benefit of Stevensons against its corporate claim against Stevensons for damages.

Stevensons Structural Engineers 1978 Ltd v. McMillan & Lockwood Ltd – High Court (27.08.24)

24.206

Uber: Rasier Operations BV v. E Tu Inc.

 

Uber drivers will be carefully storing their digital record of hours worked following Court of Appeal ruling that they are employees whilst logged on with Uber.  Hours worked will assist in assessing rights to minimum wage, holiday pay, parental leave and bereavement leave.  Employee status also opens rights to union membership and to pursue personal grievance claims against Uber.

Based out of the Netherlands, Uber claimed the six thousand Uber drivers in New Zealand are independent contractors.

Uber’s ‘take it leave it’ contract was described by the Court of Appeal as window-dressing.  It gives the impression drivers are not employees when Uber drivers in fact are not in business on their own account: they are not able to make decisions typical of an independent contractor; they neither bear the risks nor enjoy the returns of an independent contractor.

Central to the Court of Appeal ruling was the fact Uber drivers have no opportunity to establish any goodwill of their own, or to influence the quantity of the work received, or the quality of work, or (with limited exceptions) the revenue.

Drivers provide services for riders referred to them by Uber for remuneration determined by Uber while subject to a high level of control and direction from Uber.

Uber claims to be no more than a technology business, linking drivers with those seeking transportation.

This oversimplifies the relationship, the Court of Appeal ruled.

Uber has detailed control over driver operations.

Drivers are free to accept a ride for a fee different from that specified by Uber; but it cannot be higher than the rate set by Uber.

Uber unilaterally decides whether a particular fee should be later adjusted: downwards if a rider complains about the route taken; upwards for cleaning costs if an intoxicated rider throws up.

Uber specifies the pick-up point, and determines the route, while monitoring vehicle location with GPS tracking on the driver’s mobile device.

A driver’s failure to maintain a specified average customer rating results in a warning.  Driver ratings, which, should they be made available to the public, could be considered an aspect of business goodwill attaching to individual drivers.  Driver ratings are not public.  Riders cannot access them to assist in choosing a particular driver.

Uber, rather than individual drivers, obtains the benefit of customer loyalty and goodwill.

Uber uses ratings to measure driver performance and to discipline poor performers.

This is a classic form of subordination characteristic of employment contracts, the court said.

The flexibility and choice supposedly reserved to drivers in Uber’s standard agreement are largely illusory, the Court of Appeal said.

Uber’s high level of control over drivers, while logged in, is evidence of an employer/employee relationship as defined in the Employment Relations Act, the court ruled.

An employer/employee relationship also exists with the Uber Eats app, where members of the public use an Uber app to order food from a restaurant, the court ruled.

Similar litigation in England saw Uber drivers ruled to be ‘workers.’  Employment law in that country defines ‘worker’ as a separate intermediate category between employees and independent contractors.  In England, ‘workers’ share some, but not all, of the employment protections afforded employees.

Rasier Operations BV v. E Tu Incorporated – Court of Appeal (26.08.24)

24.204

Asset Forfeiture: Commissioner of Police v. Doyle

 

Police pulled together two decades of covert surveillance backed up with forensic examination of banking records to support a High Court ruling that Wayne Stephen Doyle operated as de facto head of Auckland’s Head Hunters East Chapter, resulting in a $11.9 million proceeds of crime order with forfeiture of bank accounts and real estate under his apparent control.

Police provided evidence of methamphetamine supply, extortion, money laundering and benefit fraud.

Justice Andrew ruled proceeds of crime were laundered through property purchases and operation of a supposedly charitable trust named the That Was Then This Is Now Trust.

Mr Doyle’s claim to be no more than a father figure, standing in the background providing pastoral support for disaffected youth, was described as an incomplete picture of his activities.

Justice Andrew ruled Mr Doyle exercised substantial control and influence over east Auckland Head Hunters, including its illegal activities.

Mr Doyle is said to control a property portfolio valued at over $13.6 million.

Nationwide, gangs’ commercial operations share some similarities with law-abiding franchises; branding in the form a common uniform, prescribed rules regarding member conduct and a requirement to pay a tithe or contribution from earnings across to those controlling the franchise.

Within gangs: loyalty is fierce; transgressions punished swiftly.

The High Court was told of Head Hunters support for methamphetamine supply with Mr Doyle approving short term loans having interest rates of up to one hundred per cent; funds used to finance drug purchases.  Head Hunters’ members provided ‘protection’ for dealers and collected overdue drug debts under threats of violence.  A proportion of money received was paid across to entities controlled by Mr Doyle, described in bank deposits as ‘rent,’ or ‘koha.’

Meth pills pressed with Head Hunters symbol ‘88’ attracted a royalty, with a share of revenue on sale paid by dealers to Head Hunters.

Interlopers found to be exploiting the ‘88’ branding without authority were dealt with severely, ‘taxed’ for unauthorised use.  Pretenders purporting to have Head Hunters links when muscling into the local illegal drug trade were similarly ‘taxed.’  Proceeds extorted by ‘taxing’ found their way into accounts controlled by Mr Doyle.

Where ‘taxing’ took the form of seized vehicles, Head Hunters practice was to then put the vehicle up as the prize in a lottery.  Sale of lottery tickets brought in more cash.

Evidence was given that the winning ticket was often the one unsold ticket; the winner was pre-selected with those holding losing tickets unaware of the ruse.

Convicted in 1985 for his involvement in the murder of a King Cobra gang member, Mr Doyle was released on parole in 1994.  He was re-imprisoned four years later following conviction for supply of LSD.

Since his 2001 release, Mr Doyle has not been charged with any criminal offences.

The successful Criminal Proceeds (Recovery) Act application against Mr Doyle is a civil procedure, not a criminal prosecution.  Police had to prove Mr Doyle knowingly benefitted from ‘significant criminal activity’ committed by others.

Evidence was given of Head Hunters’ assets under the control of Mr Doyle being registered in the names of entities over which he had no apparent control.

Police phone intercepts identified Mr Doyle directly or indirectly controlling Head Hunter activities.  Communications between Head Hunters members made it clear they followed his instructions.

Mr Doyle was never a trustee of the That Was Then Trust.

Evidence was given of Mr Doyle banking cash to Trust bank accounts and making Trust decisions single-handedly.  This cavalier disregard for named trustees was illustrated by one instance of a high-ranking police officer being publicly named as a That Was Then trustee without his knowledge or consent.

The Trust holds at least ten different bank accounts.

Justice Andrew described this multiplicity of accounts as probably a deliberate ploy, to obfuscate income from legal and illegal sources.

Residential real estate beneficially owned by Mr Doyle was purchased with proceeds of crime, Justice Andrew ruled.  In one instance, cash was found to complete a purchase when Mr Doyle was in jail with no available assets and supposedly no income.

Gang headquarters on Marua Road in Auckland suburb of Mount Wellington was ordered sold as proceeds of crime.  Current valuation is $4.1 million.  Marua Road was purchased in 2003, funded with commercial loans totalling $330,000.  These loans were repaid within four years.  

Mr Doyle was also held liable for benefit fraud and ordered to repay benefits received since 1994. It was claimed Mr Doyle received some $630,000 he was not entitled to, primarily unemployment benefits, domestic purpose benefits and unsupported child benefits.

A proceeds of crime claim was also made against Mr Doyle’s former partner Harata Raewyn Papuni.

She was held jointly liable with Mr Doyle to pay $2.9 million.

Ms Papuni died in 2023.  The proceeds of crime order is a claim against her estate.

Commissioner of Police v. Doyle – High Court (26.08.24)

24.205

Software: Mediaflow Ltd v. Marin

 

Software developer Lucas Marin was ordered to provide Queenstown company Mediaflow Ltd full access to its computer system and online records while a dispute still rages over ownership of software and source code.

Mr Marin claims ownership of all software and source code used by Mediaflow.  He resigned as director and shareholder of Mediaflow last July, offering to provide ongoing services at $130 per hour with additional charges for ‘any communication.’

Fellow Mediaflow investors David Akal and Nahuel Lukomoski fiercely dispute his claim to ownership of digital assets used by the company.     

Mediaflow was established in 2020, providing digital photo and recording systems for central Otago tourism operators.

Within two years, company management was in turmoil.  Mr Akal and Mr Lukomoski briefly resigned as directors, returning to management after Mr Marin, then in sole control, awarded himself a substantial salary.

Their dispute over ownership of digital assets then extended to argument over validity of Mr Marin’s increased salary arrangements.

Having heard argument from all sides, Justice McHerron imposed an interim injunction requiring Mr Marin to allow access and provide logon passwords for Mediaflow’s access to Amazon Web Services, Zoho email and Xero accounting services.

He strongly recommended the warring sides reach agreement to have one side buy out the other, rather than continue their commercial dispute through the courts.  The evidence was that Mediaflow’s business continues to prosper despite the backroom fighting.

Mr Marin’s undertaking to allow continuing access without the need for a formal court injunction was considered insufficient by Justice McHerron.  Having recently resigned as both a director and employee of Mediaflow, Mr Marin has no continuing involvement with Mediaflow beyond shareholder.

There was evidence of one customer subsequently giving notice to Mediaflow that it no longer required its services.

Mr Marin claims digital programmes used by Mediaflow were developed by him before Mediaflow was incorporated.

The legal rule is that work carried out prior to incorporation of a company, which is for the benefit of that contemplated company, is held on trust for the company later incorporated, Justice McHerron pointed out.

Ownership of the disputed digital assets has yet to be decided.

Whether Mr Marin should repay part of the increased salary awarded himself is also yet to be resolved.

Mediaflow Ltd v. Marin – High Court (22.08.24)

24.203

Guarantee: Pacific Crest v. McDonald

 

It was a local deal: Blenheim-based transport company Smart Assets Ltd quit a truck and trailer unit with the sale financed by a company down the road, Smart Money Ltd.

The two companies appear to have little in common other than similar names, a geographic proximity and now confusion over who owns the truck and trailer.

It currently sits in the yard of purchaser, Auckland scrap metal dealer Brian McDonald.

He says the truck is a lemon.  It has a ‘transplanted’ engine under the bonnet and is not fit for its advertised purpose, he claims.  Smart Assets can come and pick it up, he says.

Meanwhile, liability for Smart Money’s financing is disputed.

The High Court ruled Mr McDonald is not liable as guarantor on a $70,800 loan paid across to finance the purchase.

Evidence was given of Mr McDonald arranging finance with Smart Money at the time negotiations were underway in 2020 for the purchase of Smart Assets’ Freightliner Argosy truck and trailer unit, being sold on Trade Me ‘as is where is.’

Smart Money was acting as agent for Partners Finance Ltd, a finance company then operating out of Christchurch.

Mr McDonald signed as guarantor on the arranged loan.

The High Court was told Partners Finance did not release the loan moneys to Mr McDonald’s business; the money was paid directly across to Smart Assets.

Partners Finance said Smart Money had relayed a message to it from Smart Assets that the deal was complete and that payment could be made.

This was the wrong way round, Justice Palmer ruled.

It was for Mr McDonald to advise his business loan could be released.

The loan contract was not linked directly to the truck purchase.

Partners Finance had released Mr McDonald’s funds without his approval.  He was not liable on any guarantee.

The High Court was told this disputed loan and guarantee was on-sold to Wellington-based Pacific Crest Ltd.

The current state of play: transport company Smart Assets has been paid for its truck and trailer; Pacific Crest’s enforcement of the loan guarantee failed; the identity of the actual borrower is unknown (Mr McDonald says the paperwork did not properly name his business as borrower); and no-one wants the truck and trailer.

Pacific Crest Ltd v. McDonald – High Court (22.08.24)

24.202

Share Buyout: Kirby v. Tekplas Ltd

 

Paid four million dollars selling her late husband’s interest in Hamilton-based Tekplas Ltd, Correna Kirby is in court alleging directors Ian McDougal and Tony Schramm used excessive related party lease expenses to drive down Tekplas’ value before the sale.

Plastic engineering specialist Tekplas, was founded in 2004 with ownership split equally between three families then represented by directors Rex Kirby, David Ford and Tony Schramm.

Mr Kirby died in 2018.  His widow replaced him on Tekplas’ board, assuming ownership of his one third stake.  Wanting out four years later, Ms Kirby resigned from the board and negotiated sale of her shares to the remaining two shareholders.

This sale process came under close scrutiny in the High Court.

Evidence was given that an early indicative price at eight million dollars resulted in a subsequent 2022 sale at half that price: four million dollars.

As expected for a transaction at this value, lawyers on all sides scrutinised several iterations of the sale document.  The final document saw Ms Kirby renouncing any future beneficial interest in the Tekplas Trust, owner of Tekplas Ltd.

When founded in 2004, Tekplas was structured as a trading trust with each of the three families sharing equally in the Trust.

Continuing owners of Tekplas say Ms Kirby cannot challenge the price; her payout amounted to a ‘full and final’ settlement.

In the High Court, Associate Judge Sussock decided it is not that simple.

Critical sections of sale documentation referred exclusively to the Trust.  There is no mention that Ms Kirby was giving up legal rights she might have as a shareholder of the company: Tekplas Ltd.

Judge Sussock ruled Ms Kirby can proceed with a Companies Act claim that she was ‘oppressed’ as a minority shareholder of Tekplas Ltd.

Ms Kirby alleges that fellow directors blocked access to critical information.  She claims that a lease between Tekplas Ltd as tenant and interests associated with Mr Schramm, allegedly at above-market rent, reduced the value of her shareholding.

If proved at a later court hearing, damages awarded will add to the return received on sale of her shareholding.

Kirby v. Tekplas Ltd – High Court (19.08.24)

24.201

Trustee: re Petane Marae

 

Takitimu’s Petane Marae on North Island’s East Coast was severely damaged following Cyclone Gabrielle in 2023.  Assistance, both cash and kind, poured in.  After complaints about marae trustees awarding themselves cash payments, the Maori Land Court stepped in; retrospectively validating some payments, requiring marae members’ approval for others, and in one case ordering repayment.  

Judge Stone reminded all marae trustees that they must comply with the Trusts Act.  Trustees are expected to act gratuitously, without any payment.  The Act does allow reimbursement of expenses properly incurred in carrying out marae business.

Travel costs attending an All Black match in Auckland did not amount to expenses properly incurred, he ruled.  Petane trustees charging these costs as marae expenses were ordered to make repayment.  These tickets were donated to the marae following Cyclone Gabrielle, but any decision to attend was a personal decision, Judge Stone said.

Payment for services as trustee is permitted where allowed by marae rules, or otherwise approved.

Petane marae members imbued with the tradition of work on behalf of their marae being unpaid took exception to substantial payouts approved by trustees after Cyclone Gabrielle.  Marae chair Rose Hiha received $12,000; treasurer Mary Martin $10,000; with $3000 each paid to fellow trustees Barbara Smith, Kanui Allana Hiha and Kuini Marewa Reti.

There was no evidence these payments had been approved by marae members.

Judge Stone validated payments of $3000 to each of the trustees in recognition of what was described as their remarkable work and long hours spent dealing with consequences of Cyclone Gabrielle.

Courts have Trusts Act powers to award reasonable remuneration to trustees when it is appropriate to do so.  Recently, this power was used to validate payments made to trustees of a Tauranga marae for their work responding to a PSA infection damaging the marae’s commercial kiwifruit orchard.  

Judge Stone ruled payments above $3000 to Rose Hiha as Petane marae chair and Mary Martin as marae treasurer be put to a vote from marae members.

Mary Martin was ordered to repay $4025 she had billed the marae as payment for her services at $35 per hour.

There was no contract agreeing to this payment.  Judge Stone questioned why she should be billing for work done following the cyclone when she was already receiving payment of a least $3000 for this same work.

Meeting fees paid to trustees of $150 per meeting were also unauthorised.  Repayment was ordered by Judge Stone, subject to marae members agreeing to these payments.

re Petane Marae – Maori Land Court (16.08.24)

24.200

Restrictive Covenants: Commerce Commission v. Foodstuffs

 

Foodstuffs North Island might like to call it six months of madness: the short period up to early 2015 when it registered restrictive covenants over seventeen different properties designed to keep out competition; a process leading to fines totalling $3.5 million.

A formulaic approach to penalties set out in the Commerce Act saw Foodstuffs facing a maximum fine of $7.3 billion: ten per cent of Foodstuff North Island’s annual turnover multiplied by seventeen.

A much lesser $3.5 million fine was approved by Justice Radich in light of Foodstuff’s steps to remove existing covenants, its claim the covenants were not a deliberate attempt to restrict competition and a misunderstanding back in 2015 that its actions did not breach the Commerce Act.

The High Court was told Foodstuff’s board decided as a matter of policy in 2014 to tie up nearby commercial sites to protect local market share.  This came immediately after the 2013 merger of Foodstuffs Wellington and Foodstuffs Auckland to create Foodstuffs North Island.

Covenants were registered against title to land adjoining existing or potential Foodstuff sites, primarily in central Wellington, the Hutt Valley and Napier, to prohibit businesses at those sites selling food products.

This had the effect of hindering competition to its Pak ‘n Save, New World and Four Square stores, in breach of the Commerce Act.

Foodstuffs agreed to remove the restrictive covenants only after Commerce Commission intervention.

In the High Court, Foodstuffs pleaded naïve innocence, while agreeing that registration of restrictive covenants was an anti-competitive practice in breach of the Act.

The court was told Foodstuffs has removed covenants from land it still owns and has advised third parties who purchased land containing restrictive covenants benefitting Foodstuffs that the covenants will not be enforced and that Foodstuffs will assist in their removal.

Their removal will increase resale value of land previously encumbered by the restrictions.

Commerce Commission v. Foodstuffs North Island Ltd – High Court (16.08.24)

24.199

Consultant: Scully v. Holland

 

Tony Scully’s claim against Madeline Holland seeking AUD 1.2 million for consultancy advice on a building contract in Papua New Guinea failed because payment was conditional on funding being available.  Justice Tahana described Ms Holland as being untruthful and lacking any credibility, but there was no evidence of any funding coming available for the proposed project.

There was evidence of Ms Holland’s subsequent involvement in a different Papua New Guinea project.  Mr Scully suspected his unpaid work underpinned this different project, leaving him out in the cold. 

The High Court was told discussions between the two started in late 2011.  Mr Scully was asked to sign a confidentiality agreement in advance of work on an unidentified building project being promoted by Ms Holland.

He was director of a New Zealand based business: C-Style Homes.  She claimed to be legal advisor/advisor to a Papua New Guinea organisation called Hela Cultural Foundation and also property development co-ordinator for a business called Getsmart Steel Kitset Homes of New Zealand.  No such business existed in either New Zealand or Papua New Guinea. 

Over the next five years, Ms Holland requested and obtained information from Mr Scully regarding costs for various housing types plus expected infrastructure costs.  In 2012, the two met in Cairns, discussing in detail necessary project requirements.

After one year without any payment, Mr Scully pressed for a formal consultancy contract.

A contract was signed in 2013.  Details were disputed.

Justice Tahana ruled the contract contained a special condition specifying no payment would be made to Mr Scully until ‘release of funding.’

Mr Scully was led to believe available funds were currently sitting in a Westpac account.

He later heard from a third party that these funds had been uplifted, used for a different project.

When he complained, Ms Holland cut off contact.

Justice Tahana said Ms Holland’s conduct was misleading, suggesting she had funding when she did not.  She continued to mislead Mr Scully so he would continue to provide documents she could use elsewhere, Justice Tahana said.

Justice Tahana said it is more likely than not that Ms Holland was deliberately deceitful, making up a project that did not exist and misrepresenting that funds were available.

Email exchanges indicated Mr Scully took the commercial risk that he would not be paid if funding did not eventuate, Justice Tahana said.

There was no breach of contract, she ruled.

Payment was conditional on ‘release of funding.’  No funding was released.

Scully v. Holland – High Court (16.08.24)

24.198

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 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)

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