Relationship Property: M. v H.

Relationship property agreements signed ‘in contemplation of marriage’ require couples to have a clear and present intention to marry, the High Court ruled in a landmark case.  Living together in a de facto relationship with a vague prospect of marriage in the future is unlikely to suffice, leaving any ‘contemplation’ agreement unenforceable on subsequent marriage.

The Property (Relationships) Act which was grafted onto its predecessor, the Matrimonial Property Act, allows couples by mutual agreement to contract out of an equal-shares property regime.  It allows agreements ‘in contemplation of marriage’ but does not define what this means.  The High Court was asked to rule on the status of a relationship property agreement signed eight years before marriage and fourteen years before the couple separated.  At stake was over one million dollars in bank accounts and term deposits held in the husband’s name.  Their anonymity was preserved in the court judgment.

The court was told it was a second marriage for the husband.  He worked in professional practice on his own account.  A relationship property agreement was drafted and signed after 18 months of a de facto relationship.   Both husband and wife took legal advice.  The document was intended to apply if the two married, with references made to any ‘subsequent’ or ‘future’ marriage.  Justice Brewer ruled the agreement could not be viewed as ‘being in contemplation of marriage’ because when signing they had no immediate intention to marry and had made no plans to marry.  It was not valid as a ‘contracting-out’ agreement.

Nevertheless the agreement was binding, Justice Brewer ruled.  It did not comply with current Property (Relationship) Act requirements, but was enforceable under special provisions in the Act as a contract signed by a de facto couple prior to August 2001.  One million dollars held in bank accounts remained the husband’s separate property.   

M v. H – High Court (29.09.17)

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Receivership: Harris v. BNZ

CIT Holdings' liquidators took legal action against Keith Harris and Iain Nellies alleging they acted improperly as receivers of CIT assets with a sweetheart deal likely to allow developer Gregory Olliver easy possession.  Mr Olliver has made multiple attempts to shake off BNZ’s mortgage over his proposed development in the Auckland seaside suburb of St Heliers.  Receivership was blocked.  The liquidators application to have Harris and Nellies barred for five years from taking on any work as receivers was refused by the High Court. 

Vivian Fatupaito and Andrew Hawkes from KPMG were appointed liquidators of CIT Holdings Ltd last year.  CIT owns multiple properties in Waimarie and Glover Streets, St Heliers.  The company is owned by two family trusts, one controlled by Mr Olliver and the other by his former spouse, Sarah Sparks.  Mr Olliver has made multiple efforts to buy the Waimarie and Glover properties from CIT, failing to reach agreement with Bank of New Zealand which is by far CIT’s biggest creditor.

The High Court was told Mr Olliver had arranged in January 2014 for a general security deed to be signed by CIT in favour of Bankhouse Trust Ltd, a company he controlled.  After further negotiations to buy CIT’s assets failed in early 2017, Mr Olliver had Bankhouse Trust appoint Mr Harris and Mr Nellies as receivers of all CIT assets in respect of a $2.5 million debt he says CIT owes Bankhouse Trust.  After learning of dealings between Mr Olliver and the receivers, the liquidators challenged the receivers’ actions and sued to set aside the January 2014 general security deed.  Through the receivership, Mr Olliver was seeking to buy the Waimarie and Glover properties using another entity he controlled: GMO Trust.  The liquidators were critical of the price on offer, the favourable conditions allowing Mr Olliver access to properties without payment of any deposit or any rent and ties preventing the receivers from seeking alternative offers.  They allege the deal was uncommercial; nothing more than an option to purchase on favourable terms for GMO Trust, with no value for creditors.  No sale eventuated.  The liquidators allege Mr Harris and Mr Nellies as receivers were in breach of the Receiverships Act, failing to act in good faith and for a proper purpose.

Justice Jagose set aside the January 2014 Bankhouse Trust security.  It was established at a time when CIT Holdings was insolvent.  It had the effect of elevating unsecured advances to the level of a secured debt.  As sole director of both CIT Holdings and Bankhouse Trust, Mr Olliver had full knowledge of CIT’s perilous financial position, His Honour said.  He also prohibited any future receivership appointment being made under the January 2014 deed.

The liquidators deferred their claim to damages for alleged breaches of the Receiverships Act.

Justice Jagose declined to bar Mr Harris and Mr Nellies from acting in future as receivers.  Even if they did not comply with their statutory duties in this instance, he said, prohibition requires proof of “persistent” non-compliance.  The liquidators said Mr Harris has no formal accountancy or legal qualifications, is not an accredited insolvency practitioner and had no direct experience as a receiver or liquidator before joining Insolvency Management (Auckland) Ltd in 2013.     

Harris v. BNZ – High Court (29.09.17)

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Liquidation: Gemmell v. Norris

After conviction for theft, Nelson liquidator Patrick Dean Norris ground down replacement liquidators with ongoing litigation leaving them without cash and with little choice but closing down further investigations.

Ernst & Young insolvency specialists, Bruce Gemmell and Rhys Cain, took over liquidation of four companies after Norris was convicted in October 2012 of theft by a person in a special relationship.  Norris failed to account for $80,960 received in his capacity as liquidator of property company Astra Enterprises Ltd.  He claimed fees without justification, rendering false invoices.

Armed with a High Court “search and seizure” order, new liquidators sought to recover records held by Norris for the four companies.  They could not just march in and take the records as is normally done at the start of any liquidation; the companies were already in liquidation.  There was a real concern Norris might not voluntarily provide all required information, given his recent conviction for dishonesty.  Their access to any records was then disputed over a series of court cases, exhausting all resources of the companies in liquidation bar the $80,960 Norris is required to repay.  This has not been paid.  In the latest iteration of the “search and seizure” litigation, the new liquidators simply asked that the liquidations, except Astra Properties, be “closed down”.  It is not for the court to close down any liquidation in a “search and seizure” dispute, Justice Churchman ruled.  It is for liquidators to follow procedures in the Companies Act.  Norris is still liable personally to pay costs awards made against him in earlier litigation together with accrued interest, he said.       

Gemmell v. Norris – High Court (29.09.17)

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