Asset freeze: Twentieth Century Fox v. Dotcom

Kim Dotcom has been forced to disclose the extent and value of his worldwide assets to Hollywood film companies who allege he profited from the piracy of movies through his Megaupload file sharing site.  His extravagant lifestyle together with promises to fund the Internet political party in New Zealand and further promises to pay a US$5 million “bounty” to any whistleblower dishing the dirt on US government behaviour and Hollywood business practices raised suspicions that Mr Dotcom was not complying with an existing court order which was presumed to have frozen all his assets.

The US government is seeking to extradite Mr Dotcom who faces criminal prosecution in the United States for alleged copyright infringement.  As part of those proceedings, assets held in Germany, Hong Kong, the Netherlands, the Philippines, the United Kingdom, Australia and New Zealand were frozen with Mr Dotcom permitted to draw down a monthly allowance for living costs and legal expenses.

Collectively, Hollywood film studios suspect the Megaupload site earned profits of about US$175 million.  At its peak, the Megaupload site was the thirteenth most visited site on the internet with an average of fifty million visits a day.   Site visitors who uploaded copyrighted material received rewards, including payments in cash, calculated by reference to how often their files were downloaded by others.

A consortium of Hollywood studios is claiming over $US100 million against Mr Dotcom alleging copyright infringement.  They fear Mr Dotcom might be running down his assets when they saw him splashing around cash at a time when they thought all his assets had been frozen.  He resisted their court application for a list of all his assets.  In the High Court, Justice Courtney ruled that disclosure is required.  She said the Hollywood studios have a good arguable case for damages in excess of the $11.8 million dollars in New Zealand assets currently subject to a freezing order.  The Motion Picture Association of America provided over 190 pages of evidence summarising a FBI investigation into the operations of Megaupload as tenable evidence of copyright infringement. 

Twentieth Century Fox v. Dotcom – High Court (30.07.14)

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Belgrave Finance: R. v. Hamilton

While not directly involved in management of failed finance company Belgrave Finance, Hawkes Bay lawyer Hugh Edward Staples Hamilton received a longer jail sentence at four years and nine months imprisonment than two Belgrave directors also convicted of fraud related offences.

Hamilton was convicted in May 2014 on fourteen charges of being party to theft by a person in a special relationship.  This followed legal advice and assistance provided to a Mr Raymond Schofield who acted behind the scenes at Belgrave Finance extracting funds for his own personal business ventures in breach of related party lending rules in Belgrave’s debenture trust deed.

The 1200 investors in Belgrave Finance, most retired and on fixed incomes, have received just under ten cents in the dollar since Belgrave went into receivership in May 2008.  Estimates of the amounts lost in lending to Schofield range from $12.5 million to $14.4 million.

The High Court was told Schofield was a valuable client for Hamilton.  He provided legal assistance for Schofield’s plans from 2005 to buy into Belgrave Finance while hiding his involvement in the company.  Hamilton set up a “clean” trust for Schofield, with Schofield’s mother-in-law as the settlor and named beneficiaries being the husband of each of her children – which would include Schofield.  Through this trust, an intermediary company, and compliant directors of Belgrave, Schofield controlled Belgrave Finance.  Hamilton, while notionally acting as legal adviser to Belgrave Finance, treated Schofield as his primary client.  Hamilton was convicted for his role in helping Schofield milk funds from Belgrave Finance.  Through his law firm, Hamilton prepared documentation for Schofield loans, backdating some documents at Schofield’s request and processed loan advances through his firm’s trust account.  Justice Faire said one of the aggravating features of Hamilton’s offending was the fact it arose through his role as a lawyer.  

Hamilton was sentenced to four years nine months imprisonment.  Belgrave directors Shane Buckley and Stephen Smith were earlier sentenced to three years and four years imprisonment respectively.

R. v. Hamilton – High Court (04.07.14)

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Maori: NZ Steel v. Butcher

Stalled Treaty negotiations between government and Waikato iwi are hampering operations at the Glenbrook steel mill owned by Australian listed company Bluescope Steel.  Further areas for mining were opened up after the High Court released Bluescope from a 25 year old court undertaking not to mine ironsand from four identified culturally sensitive sites.

Government granted NZ Steel, now a Bluescope subsidiary, a one hundred year licence in 1966 to mine ironsands on the coast near Waiuku.  Under New Zealand law, the crown owns oil and mineral resources regardless of who owns the land on which it is found.  About twenty per cent of the NZ Steel licence area is described by Ngati Te Ata as wahi tapu: sacred ground where human remains are buried.  The original mining licence did exclude one area where there is a known burial ground.  Local sensitivities were engaged in 1990 when mining exposed parts of a human skeleton.

The High Court was told tripartite discussions started in 1990 between government, NZ Steel and representatives of Ngati Te Ata over how best to protect local interests.  Fearing that its mining concession would be unilaterally reduced by government, NZ Steel filed High Court proceedings to protect its position.  As a temporary measure, NZ Steel gave a court undertaking that it would not start mining in the affected areas until a court hearing took place.  A hearing date was set for early the following year, but no trial ever eventuated.  Instead prolonged and protracted negotiations have continued.

Evidence was given that over the ensuing twenty-five years, various governments have faced an ever-changing queue of claimants and an ever-changing list of demands.  Initially, Ngati Te Ata indicated it would accept mining in the wahi tapu areas, provided mining royalties were paid direct to Ngati Te Ata rather than the crown.  Nothing eventuated after neighbouring iwi claimed customary rights over the same land, claiming a share of any royalties.  Further negotiations stalled completely in 1998 when Ngati Te Ata decided to merge its wahi tapu claim with an overall Treaty settlement claim, stating its bottom line demand is a $170 million settlement.

The court was told NZ Steel has all but exhausted mining in the southern part of its licence area bar the wahi tapu areas.  It asked to be released from the earlier court undertaking since the wahi tapu areas provide the most economic prospects for continued mining.

The High Court released NZ Steel from its undertaking.  The undertaking was intended to be temporary; it was never intended to extend beyond the proposed trial date.  Justice Fogarty said ongoing arguments about royalty entitlements are a dispute between Ngati Te Ata and government.   NZ Steel is entitled to have the 1990 litigation brought to an end, he said.  Ngati Te Ata has not seen any need to push on with the 1990 litigation.  Instead it filed substitute court proceedings in 2013 under a different name.

NZ Steel v. Butcher – High Court (04.07.14)

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Real Estate: Hokitika Property Ltd . Hurt

An immediate paper profit of some $217,000 was at stake when a company controlled by two chartered accountants with Gilligan Rowe and Associates failed in its High Court claim that there was a binding contract for its quick-fire purchase of an inner-city Auckland property from a cash-strapped family. 

Living at the O’Neill Street property in Ponsonby were Maria Hurt (who is on a benefit) and her daughter Wendy (who is separated and sole breadwinner for her four children).  The court was told they were in financial difficulty.  They were $3000 in arears on mortgage repayments.  Selling the O’Neill Street property and buying a cheaper property was being considered. 

Evidence was given that Wendy Hurt approached a Mr Toilolo, a South Auckland accountant and financial adviser who presents a radio programme on financial issues.  By coincidence, they discovered they were related.  Mr Toilolo offered to help and arranged to meet the family to discuss options.  He arrived late at O’Neill Street for their meeting, at a time when Wendy Hurt was leaving for work.  Mr Toilolo had with him a pre-prepared offer for sale of the property at $790,000 to a company called Hokitika Property Ltd: a company controlled by two chartered accountants with Gilligan Rowe, Mr Mathew Gilligan and Mr Salesh Chand.  Their valuer had earlier estimated the property’s value to be $872,000.  The court was told the then government valuation was approximately $900,000.  An independent valuation was to later assess the value as being $1.05 million at the time the sale was being negotiated.

Pressed as she was in a hurry to get to work, Wendy Hurt signed at $790,000 but asked Mr Toilolo not to tell the purchasers she had signed before he tried to get the price increased.  Wendy left and her mother Maria also signed after further discussions with Mr Toilolo.  He told Mr Chand the Hurts were looking for a better price.  Mr Chand authorised a $5000 increase and Mr Toilolo amended the agreement to $795,000.  Hokitika Properties thought it had a binding contract, but the Hurts refused to initial the amended price at $795,000.

In the High Court, Hokitika Properties said there was an agreed deal at $790,000 which had been varied by agreement to $795,000.

Judge Doogue ruled there had never been any binding contract in the first place.  The Hurts signed at $790,000 but the existence of their agreement was never communicated to Mr Chand at Hokitika Property.  He had been told only they were looking for a better price.  Hokitika Property had responded by offering $795,000 but this was never accepted by the Hurts.  There was no sale.

Hokitika Property Ltd v. Hurt – High Court (03.07.14)

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Defamation: Rafiq v. Meredith Connell

The legal profession is placed in a special position when it comes to defamation: anything said in court and everything said or written when preparing for a court hearing enjoys an absolute protection from actions for defamation.  Mr Razdan Rafiq faced a high hurdle in a claim for five million dollars against Auckland law firm, Meredith Connell, for alleged defamation.

As Crown Solicitor for Auckland, Meredith Connell appears in court on behalf of many government departments.  Like all good legal firms, its job is to represent its clients’ position without fear or favour.  The High Court was told Meredith Connell acted for the Immigration Service in 2013 defending a defamation action brought by Mr Rafiq against the Service.  Mr Rafiq subsequently sued Meredith Connell alleging he was defamed by unnecessary and damaging statements made about him in the written and oral submissions made by the law firm while acting for the Immigration Service.  

Judge Bell struck out the claim against Meredith Connell.  The Defamation Act grants an absolute privilege to lawyers in respect of what is done in the course of preparing for trial and conducting a trial.  Even if Meredith Connell had made defamatory comments during the trial, or in the course of discussions with their client about the trial, the firm could not be sued for defamation.  The policy behind the rule is that lawyers and judges should not be hindered in their work by the threat of defamation actions being used as a tactic to silence them.

Mr Rafiq also alleged he had been defamed in a December 2013 email sent by Meredith Connell’s IT manager to the Police.  Absolute privilege under the Defamation Act did not apply to this email.  It was an administrative response to a request for information.  Attached to the email was a string of prior emails containing comments which reflected badly on Mr Rafiq.  Judge Bell was moved to say this was a case of self-inflicted defamation in that many of the comments in the email string presenting Mr Rafiq in an unflattering light were made by Mr Rafiq himself.  Judge Bell said the IT manager’s publication of the emails was protected at common law by a qualified privilege.  This privilege factored in the identity of the publisher (a law firm), the readership (the NZ Police and not the wider public), the context (ongoing concern by both Meredith Connell and the Police about Mr Rafiq’s behaviour) and the subject matter (the element of harassment in some of Mr Rafiq’s emails).

Mr Rafiq also sought to have Meredith Connell held liable for an allegedly defamatory news report published on a commercial website: lawfuel.co.nz.  This report summarised his 2013 defamation action brought against the Immigration Service.  Meredith Connell denied that any of its staff wrote the report.  Judge Bell said this claim would be struck out also.  The Defamation Act gives a qualified privilege to any fair and accurate report of court proceedings.  Mr Rafiq criticised the report as not being fair or accurate, but Judge Bell disagreed.  There was comment in the lawfuel report on the fact that the High Court judge had referred to Mr Rafiq’s use of insulting and contentious language and to Mr Rafiq’s attacks on the integrity of the court and his scurrilous allegations against judicial officers but these references were not highlighted or unfairly reported, Judge Bell said.

Rafiq v. Meredith Connell – High Court (02.07.14)

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Relationship property: Jack v. Jack

Having given up her own career to support her husband in his career as a medical specialist, a former nurse was awarded seventy per cent of their net assets after their 26 year relationship came to an end.  The extra payment over and above her statutory entitlement to fifty per cent of relationship net assets amounted, in dollar terms, to thirty per cent of her husband’s current annual income.

A departure from the 50/50 rule in the Property (Relationships) Act is allowed where the division of functions within a family enhances the income-earning potential of one while reducing that of the other.  Any division of functions must be a real and substantial cause of the economic disparity.

The Jacks met in 1982 when Mr Jack was earning $100,000 a year as a registrar at Waikato Hospital.  She was a single mother caring for a three year old daughter while working as an enrolled theatre nurse.  The High Court was told she sold her flat and investment property in Hamilton and put the net proceeds of $40,000 towards a home in the capital when the family moved to Wellington.  Over the subsequent two decades, two sons were born and the family lived variously in Sydney, London, Norwich and back in Wellington as Mr Jack advanced his specialist medical skills.  After initially continuing to work part-time, Mrs Jack then concentrated on supporting her husband’s demanding career.  In her words: he did not have to come home and cook a meal; he did not have to tend to the childrens’ daily needs, make lunches, attend school functions or arrange play dates; he seldom attended their sporting commitments.  When the couple’s relationship came to an end in December 2008, net relationship assets amounted to $1.9 million.  Over the previous five years, Mr Jack’s annual income ranged from $800,300 to $1.06 million per year.

In the High Court, Justice Goddard ruled that Mrs Jack’s role in the home justified a departure from the usual 50/50 rule for the division of relationship property.  Her support for her husband while he studied for his specialist exams, her role as a homemaker and primary caregiver for the children while he established his practice, and her assistance with his networking and at times in his practice all provided a foundation for his successful career.

She said Mrs Jack sacrificed the opportunity to advance her own career as a nurse as a result of her role at home.  After separating she found work as a receptionist earning just over $25,000 a year.  Justice Goddard said Mrs Jack should not be criticised for not attempting to requalify as a nurse after the marriage came to an end.  Her lack of recent experience would count against her.

Jack v. Jack – High Court (1.07.14)

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