Fraud: Mehta v. R.

The Court of Appeal confirmed a sentence of two years jail for Vikram Mehta after conviction for fraud selling household and electronic goods from a ‘truck shop’ then not delivering.  Customers lost about $140,000.

The Court was told Mehta committed the fraud over a thirteen month period starting early 2013 operating as a mobile trader under the name Flexi Buy.  Between 300 and 360 customers were affected.  A total of nine customers ultimately received any goods, some only after they threatened to complain to the police, Fair Go, or the Commerce Commission.  Mehta personally signed up only two of the customers.   Sales staff dealt with the rest.  The court said Mehta lay at the heart of the offending.  He procured his sales staff to misrepresent delivery details to get customers signed up.  Customers were told delivery would be made before final payment was due.  After a five month holiday in India, Mehta arranged for a blanket deduction of $400 from each customer’s bank account: some owed less than this amount; others had already paid in full.

The sentencing judge said a deterrent sentence was needed to discourage mobile traders from ripping off vulnerable people, most on low incomes.  The Court of Appeal said there were no grounds to reduce the sentence or to replace jail with home detention.       

Mehta v. R. – Court of Appeal (31.10.17)

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Liquidation: Finnigan v. Ellis

Liquidators powers of examination do not extend to demands that directors of failed companies hand over details of their personal financial position, the Court of Appeal ruled in a test case.

Liquidators Peri Finnigan and Boris van Delden failed in attempts to extract personal information from lawyer Brian Ellis, previously director of failed Wenztro Co-operation Ltd formerly known as Trojan Foods (NZ) Ltd.  They are suing Wenztro directors for over $773,000 alleging failure to comply with their statutory duties when in charge of the company.  Before continuing expensive High Court litigation they wanted to see the extent of Mr Ellis’ assets.  They asked to see personal tax returns for the period 2102 to 2016, copies of his bank statements and a list of his assets and liabilities.

Australian courts have been sympathetic to liquidators demands.  English courts have not.  The question has never before been argued in New Zealand courts.  The Court of Appeal ruled New Zealand’s developing privacy rules counted against letting liquidators access private financial information.  The Privacy Act discourages information obtained for one purpose being used for another.  The New Zealand Bill of Rights Act gives citizens rights against unreasonable search.

Wenztro liquidators told the court they were concerned Mr Ellis might dissipate his assets, making himself ‘judgement-proof’.  If concerned, they can apply for a freezing order over Mr Ellis’ assets, the court said.    

Finnigan v. Ellis – Court of Appeal (30.10.17)

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Credit Contracts: Diners Club v. District Court

Financiers complaints that District Court staff are hampering debt collection procedures were overruled by the High Court.  Staff can unilaterally refer cases to judges where creditors’ demands are unchallenged and if there are any complaints about District Court procedures then they have to be specified in detail if a definitive court ruling is required.

Diners Club took a test case alleging misuse of the Credit Contracts and Consumer Finance Act by court staff questioning terms of credit contracts.  It tacked on to its case a generalised complaint about court staff involvement in debt-collecting procedures.  Debt collection claims often are not contested by debtors.  Creditors can then ask court staff simply rubber-stamp their claim as a default judgment; there is no need for any formal proof.  The High Court was told general guidelines have been established by the Ministry of Justice with most default judgment applications now being handled centrally from Wellington.  Debt collection agencies complain these guidelines fail to comply with the law.  They allege court staff are amending the amount claimed, disallowing costs incurred after a forced sale, wrongly referring default judgment applications for a court hearing and failing to distinguish between claims for trade debts and claims for consumer debt.  Justice Katz said courts cannot be expected to give an ‘advisory opinion’ on generalised complaints.  Specific pleadings and specific details are required.

In its test case, Diners Club challenged specifically the administrative practice of referring some default judgment applications to a District Court judge.  It said court staff have no jurisdiction to do this; they must simply seal the default judgment when requested.  It is for the debtor personally, or the Commerce Commission acting on behalf of consumers generally, to challenge a claimed debt, Diners Club said.

The Act does give the court jurisdiction to unilaterally reopen a credit contract, Justice Katz ruled.  A claim on the face of it may indicate oppressive terms.  The type of claim may follow a pattern of previous claims found to be oppressive.  Further evidence must be considered before such claims can be enforced.  Individual borrowers cannot reasonably be expected to protect their own interests under the Credit Contracts and Consumer Finance Act, she said.  The Commerce Commission said in evidence many debtors had limited financial means and were unaware of their rights.  The Commission said it did not have sufficient resources to intervene in individual cases.  Issues commonly arise outside the Commission’s one year time limit for action.  The Commission said it becomes involved when there are issues of significant general consumer detriment and when it is in the wider public interest to act.         

Diners Club v. District Court at Auckland – High Court (25.10.17)

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