Extradition: USA v. Dotcom

Bail conditions creating an personal electronic prison will suffice for individuals held in New Zealand pending extradition.

Internet entrepreneur, Kim Dotcom, is wanted by US authorities who allege criminal use of the internet for commercial gain. In particular, it is alleged Mr Dotcom facilitated illegal downloads of copyright material. His net worth has been speculatively put in the hundreds of millions of dollars.

In January 2012, he was arrested in New Zealand at the request of US authorities. An extradition hearing is scheduled for August 2012. US authorities strenuously objected to Mr Dotcom being released on bail. They said he had the resources and ability to flee New Zealand. It was proving difficult to track down his bank accounts: $US 17.8 million had been found in bank accounts under his name or under aliases; up to $US 68 million had passed through these accounts over a four year period. Assets to the value of $NZ 20 million had been seized in New Zealand.

The court was told Mr Dotcom held valid passports for both Germany and Finland. The US has extradition treaties with both those countries.

Justice Brewer said there was no certainty that Mr Dotcom would not attempt to flee New Zealand. Bail conditions required use of an electronic tag.

“It essentially puts a perimeter around Mr Dotcom’s home and if he breaches the perimeter then the authorities will know about it very shortly. That is a significant impediment to a person as recognisable as Mr Dotcom who seeks to flee the country clandestinely.”

USA v. Dotcom – High Court (29.02.12)

12.004

Company: Wilson v. Blanchett

Any failure to properly document drawings from a closely-held company can result in court orders for repayment. Liquidators of an Auckland company chased after drawings from one company totalling more than one million dollars.

APG Holdings Ltd was wound up in 2007. Liquidators, Messrs Blanchett & Burns, found a total of $1,081,000 had been paid to a Rita Wilson in the three years prior to liquidation. She had no identifiable role within the company. Enquiries showed she was the daughter of a former director and the wife of Terry Wilson who was a director at the time the company went into liquidation.

Rita Wilson did not respond to the liquidators’ specific enquiries about the payments. They sued.

She first argued that the various payments were received into her bank account without her knowledge and that they were in the main instalments of a company salary due to her husband.

This argument was dismissed in the High Court. There was no employment contract between Mr Wilson and the company, no PAYE was deducted from the payments and the company’s accounting records made no mention of the payments as salary.

In the Court of Appeal, Rita Wilson argued that the payments were loans made by the company to her husband. This argument was also dismissed. There was no documentary evidence of the terms of any loan or of any obligation to repay.

The payments received of $1,081,000 were in the nature of gifts to Mr and Mrs Wilson and had to be repaid by Mrs Wilson. The court was told that Mr Wilson was bankrupt.

The Wilsons said Terry Wilson had lent some $750,000 to APG when the company was operating and this amount should be set-off against the one million required to be repaid. A further court hearing is required to establish the validity of this claimed set-off. Meanwhile, the court ordered that $249,000 be handed over to the liquidators immediately.

Wilson v. Blanchett & Burns – High Court (15.07.11), Court of Appeal (15.12.11) & Supreme Court (24.02.12)

12.005

Crafar Farms: Tiroa E v. Land Information

Interests associated with Sir Michael Fay and David Richwhite are running a canny strategy of disruption against Chinese interests looking to buy the Crafar farms. Using rules governing overseas investment in New Zealand farmland, they challenged the Chinese purchase at a time when they had no firm offer on the table themselves.

By having the Chinese purchase referred back to government for further consideration, Fay Richwhite interests bought themselves more time and left Chinese investors pondering whether the whole deal was worth pursuing.

The Crafar family had borrowed heavily to assemble a portfolio of sixteen North Island dairy farms and drystock units. This debt burden proved unsustainable. The farms went into receivership in 2009 with Messrs Gibson and Stiassney appointed receivers.

Receivers advertised the properties widely, with top bid from Milk New Zealand Holdings Ltd, a subsidiary of Chinese company Shanghai Pengxin. The ultimate owner of Shanghai Pengxin is successful Chinese businessman, Zhaobai Jiang.

Fay Richwhite interests challenged this sale using the Overseas Investment Act 2005. Sales of farmland to foreign interests require government approval.

The court was told that Fay Richwhite had no firm offer on the table at this point, having only nominated an indicative price well below the Shanghai Pengxin offer.

In the High Court, Justice Miller ruled it was not enough by itself that Shanghai Pengxin was offering the highest price, an overseas buyer must provide economic benefits over and above any on offer from a New Zealand purchaser.

Benefits could include increased economic output, more on-shore processing which add economic value to goods produced, creation of new job opportunities or the retention of jobs otherwise lost, and consumer benefits arising from increased competition.

Justice Miller said these benefits count only if they will not, or might not, arise without the overseas buyer completing its investment. The likely investment behaviour of any alternative New Zealand purchaser must be taken into account.

He referred Shanghai Pengxin’s offer back to government for further consideration.

Tiroa E & Te Hape B Trusts v. Land Information – High Court (15.02.12)

12.003