Contract: Jardboranir HF v. Summit Hydraulic

Iceland Drilling named one of its geothermal drilling rigs Tyr after the Norse god of war but was left helpless when suing for alleged negligence in servicing the rig.  Having signed a credit application which included terms limiting liability to the value of the maintenance contract, Iceland Drilling was unable to recover more than $46,444. 

Summit Hydraulic Solutions Ltd was sued for alleged negligence in servicing the main mast cylinder of an Iceland Drilling rig.  In a preliminary hearing, the High Court was asked to rule what terms of trade governed the service contract.

Summit Hydraulic first started maintenance work for Iceland Drilling in early 2013.  Summit management required Iceland to sign what it described as an application for credit before work would start.  The application covered two pages.  Page one was the credit application.  Page two set out Summit’s terms of trade, including a clause limiting liability for any loss.  Evidence was given that Iceland management signed the credit application on page one underneath a clause acknowledging that the terms and conditions on page two had been read and were agreed.

Justice Brewer ruled Iceland was bound by the effect of its signature.  It had agreed to accept the page two terms and conditions.  It did not matter that Iceland failed to sign page two as well, as required by Summit’s standard form instructions.

Jardboranir HF v. Summit Hydraulic – High Court (23.03.16)

16.048

Extradition: Mailley v. District Court

Extradition to Australia for alleged serial fraudster Martin James Mailley to face two miilion dollars in fraud charges has been confirmed by the Court of Appeal eight years after his arrest.  Appeals against extradition on health grounds were dismissed.

Mailley’s New Zealand birth was registered as Martin James Mailley, but he also holds passports in the names James Martin Caldwell, Martin James Craigie and Francis John Springhall.  When arrested in Queensland for fraud he was found to hold drivers licences in multiple names and more than 18 credit cards in 12 different identities.  His de facto partner, Sabrina Nutarelli, pleaded guilty in Queensland to involvement in credit card fraud, serving six months of a three year jail sentence.  Mailley pleaded not guilty.  He fled to New Zealand prior to trial, where he now lives with Ms Nutarelli and their daughter.

The Court of Appeal was told Australian police discovered hundreds of thousands of dollars under Mailley’s control had been transferred to New Zealand bank accounts in the name of Mailley or his family.  Mailley was arrested in New Zealand on an Australian warrant in July 2008.  There are streamlined procedures in the Extradition Act for trans-Tasman extraditions.  The District Court ordered extradition in March 2008.  Since then, Mailley has delayed extradition with a series of appeals.  He has been out of custody, on bail, since December 2008.

Mailley applied to have his extradition referred to the Minister of Justice on health grounds.  The Minister has a discretion: extradition may be delayed; or permitted subject to undertakings from the the extradition country.  The District Court refused Mailley’s application. Evidence was given that 64 year old Mailley has a significant personality disorder, suffering from bipolar affective disorder.  He is also affected by obstructive sleep apnoea, suffers significant back pain, has heart disease and was diagnosed last year as having a tumour on his neck, suspected to be a secondary cancer spread from an unknown primary site.  He had attempted suicide on previous occasions.

The Court of Appeal confirmed Mailley did not have sufficient grounds to seek intervention by the Minister.  Unfortunate though Mr Mailley’s health problems are, the Court said, they are not out of the ordinary.   There is no suggestion that the Australian authorities are not capable of dealing with these problems and the associated suicide risk, the Court added.

Mailley v. District Court – Court of Appeal (23.03.16)

16.050

Company: Meditrade Ltd v. Alcarin Ltd

Once friends, Milen Ganchev fell out with Anastas Markov alleging mispricing of specialty foods imported from Bulgaria.  A power of attorney issued in Cyprus concerning a Seychelles registered company was used in an attempt to wind up Mr Ganchev’s New Zealand company.

Mr Ganchev owns Meditrade Ltd, importer of European foodstuffs.  The European end of its supply chain is Alcarin Ltd, jointly owned by Mr Markov and Mr Ganchev.  The two dispute what mark-up Alcarin could charge.  Mr Ganchev alleges Alcarin was to supply product at cost, but in fact was adding margins of between 50 and 100 per cent.  Mr Markov denies product was to be supplied at cost only.

Their dispute surfaced in New Zealand courts with a winding up demand issued by Alcarin against Mr Ganchev’s Meditrade Ltd alleging a debt due, but unpaid.  This is a legal precursor to threatened winding up proceedings.  Evidence was given that Alcarin is registered in the Seychelle Islands but its sole director is Cypriot lawyer, Martha Spyrides.  She took a hands-off approach to company operations.  She gave a power of attorney to each of Mr Markov and Mr Ganchev giving them full authority to act on behalf of the company.  Mr Markov used this power of attorney to have Alcarin file winding up proceedings against Meditrade.  When Mr Ganchev told Ms Spyrides of his dispute with Mr Markov she cancelled the powers of attorney and purported to annul the Meditrade winding up application.   

Associate judge Doogue said the powers of attorney were given to allow individual shareholders to advance Alcarin’s interests.  It was not designed to give one party a tactical advantage in collateral disputes between the two shareholders, he said.  Cancellation of the power of attorney meant Mr Markov had no authority to act as Alcarin’s agent in continuing court proceedings.  The winding up proceeding was struck out.  Meditrade indicated it will be seeking court costs against Mr Markov personally.

Meditrade Ltd v. Alcarin Ltd – High Court (22.03.16)

16.049

Company: Draskovich v. Goodfellow

The High Court ordered investigative accountants analyse financial records of tourism company Auckland Dolphin and Whale Ltd after joint venture owners fell out over profit calculations when company annual revenue tripled to $1.1 million in six years.

Dolphin & Whale is jointly owned by Mark Draskovich from Mangawhai Heads and Auckland businessman William Goodfellow.  Mr Drascovich alleges excessive charges have been imposed by Mr Goodfellow since 2011 for marketing and management costs and for repairs and maintenance in respect of their Hauraki Gulf mammal watching business.  The High Court was told annual management fees rose from $67,500 in 2010 to $330,000 in 2011.  Gross revenue earned by Dolphin & Whale rose from $400,000 in the 2006 financial year to $1.1 million in 2012. Mr Drascovich took management control in April 2014. 

Mr Draskovich also alleges a satellite dish was missappropriated and there was a failure to pay survey costs for Dolphin Explorer, the joint venture’s vessel.

Mr Goodfellow says there has been no underhand behaviour.  Costs imposed were charged according to their prior agreement.

Mr Draskovich alleges Mr Goodfellow is overcharging exorbitantly for services provided.  He says all joint venture “profit” is being diverted by way of fees.  In particular, he is heavily critical of overhead charges for repairs and maintenance.  Mr Goodfellow also has interests in other sea-going enterprises such as former America’s Cup yachts used as a tourist venture, the “Pride of Auckland” vessels, ferries and vessels in the Bay of Islands, Sydney and Hamilton Island, Australia.  Evidence was given that costs of Mr Goodfellow’s Auckland repair yard were spread across his business opperations according to the revenue of each business.  This meant Dolphin & Whale was paying about thirty per cent of repair yard overhead costs in the years 2011-2013.

Justice Peters ruled fees charged were “oppressive” in the sense that they were substantial, were in dispute and were apparently imposed without prior consultation.  She ordered the appointment of independent chartered accountants as agreed between the joint venture partners to assess what should be a fair fee payable for repairs and maintenance, marketing and management.  She said she was not persuaded on the evidence that there had been any bad faith on Mr Goodfellow’s part.

Draskovich v. Goodfellow – High Court (22.03.16)

16.047

PPSA: Fisk v. Attorney-General

Import duties take priority over secured creditors having a mortgage over imported goods even when goods are released by Customs prior to payment, the High Court decided in a ruling which affects banks’ margin of security when financing imports.

Bank of New Zealand took issue with Customs Department claims it had first priority over the sale of a $438,000 aerial mapping camera imported in February 2014.  BNZ financed the importation by client NZ Aerial Mapping Ltd and held a mortgage over the camera.  Customs claimed $65,892 was due for GST payable at the border plus interest for late payment.

Customs can impound goods, holding a possessory lien over taxable imports until assessed duty is paid.  It also operates a deferred payment scheme.  Goods can be released, with duty to be paid in the month following.

The High Court was told Customs released Aerial Mapping’s imported camera before payment, later receiving two part-payments totalling $10,000 but was left with the balance unpaid after Aerial Mapping was put into receivership by BNZ on a $4.1 million debt.   Cashflow problems followed non-payment by a Saudi client.

BNZ argued Customs lost its priority under the Customs and Excise Act when the goods were released.  It was an unsecured creditor.

Justice Brown ruled exemptions in the the Personal Property Securities Act protect Customs priority for payment over secured creditors claims  Neither Aerial Mapping nor BNZ agreed to Customs priority; it is imposed by statute.  If the Customs and Excise Act is to be interpreted any other way, Justice Brown said, Customs would simply impound all taxable goods at the border prior to payment and not give importers the benefit of extended credit otherwise available under its deferred payment scheme.    

Fisk v. Attorney-General – High Court (21.03.16)

16.046