Relationship Property: Hare v. Hare

Charging orders for unpaid child support registered over the family home are secured debts deducted from the sale price before division of relationship property, the High Court ruled in a test case.

Kelly-Anne Hare argued child support was her spouse’s personal debt and should not be taken into account when assessing value of relationship property.  Once a charging order for unpaid child support is registered against title to the family home under the Child Support Act it becomes a secured debt charged against the home, the High Court ruled. 

Ms Hare and her spouse Jonathon Keith Hare had been in a de facto relationship for over three years before Mr Hare was adjudicated bankrupt in March 2016.  Their family home in the Wellington suburb of Tawa was owned solely by Mr Hare.  The length of their relationship entitled Ms Hare to claim a share as relationship property.

Evidence was given that the house owned by Mr Hare now has a market value of about $320,000.  Registered against the title is a bank mortgage ($86,000) and a child support charge ($81,900).  The child support arises from a prior relationship.  This charging order was registered before his de facto relationship started with Kelly-Anne.

With the child support charge excluded on a notional sale of the family home, as Ms Hare argued, a half share of the equity would amount to $120,000.  Of this $120,000, she would receive $103,000 as a ‘protected interest’ specified in relationship property legislation.  With the child support charge included, as the High Court ruled, she is entitled to $78,500.  The court was told Ms Hare is negotiating with Insolvency Service to buy out her bankrupt spouse’s interest in the home.

Hare v. Hare – High Court (31.10.19)

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Partnership: Patel v. Patel

Having agreed to jointly develop an Auckland property eventually sold for $1.485 million, Pareshkumar Patel and Prakashkumar Patel were required to share profits equally.  Prakash put up most of the money; Paresh managed the project.

In May 2014, the two agreed to redevelop a property available for sale on Ashgrove Road, Mangere.  Prakash was a courier driver; Paresh a real estate agent.  They are not related, but had been acquaintances for many years.  The High Court was told their plans were to relocate a house on the 1.3 hectare property, then divide the property into three titles putting houses on the two new sites.  In what was later to be a point of contention, Paresh shifted a house off one of his other properties onto the Ashgrove site; a free gift said Prakash, a financial contribution said Paresh.  Justice Gwyn was to later count this relocated house as a $55,000 financial contribution by Paresh.

The High Court was told Prakash put $776,530 cash into the project.  Paresh’s financial contribution was assessed at $252,100.  When all three properties were sold, Prakash refused to repay Paresh his financial contributions or to hand over any share of the profit.  Prakash claimed their deal was limited to the two new sections carved out of the original site.  Paresh sued.  

Justice Gwyn ruled their business venture was governed by the Partnership Act.  They were carrying on a business in common with a view to profit.  There are no formal requirements to establish a partnership. An informal oral arrangement can amount to a partnership.  The default rule in the Partnership Act is that profits are shared equally.  The two had agreed financial contributions with interest calculated at six per cent would be repaid before division of profits, Justice Gwyn said.  After return of financial contributions plus interest, profits from development of all three lots are to be shared equally, she said.

Patel v. Patel – High Court (22.10.19)

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Constructive Trust: Avon Parnell Ltd v. Chevin

Bankrupted four times and with criminal convictions for dishonesty, Peter Louis Chevin is alleged to have fraudulently seized control of an Auckland property company, raising a million dollar loan on security of company assets.

Avon Parnell Ltd owns two properties in the Auckland inner city suburb Parnell.  On incorporation in 2015, ultimate ownership of the company lay with Auckland property developer Tim Edney.  It is alleged Mr Chevin, acting without authority, changed Companies Office records online in May 2019 naming Russell PKR Trustee Ltd as Avon Parnell’s sole shareholder and Mr Chevin’s associate Mr Clark Valmont as sole director.

In June 2019, Mr Edney’s son-in-law learnt a million dollar Kiwibank loan had been raised on Avon Parnell assets with $990,000 paid across to a bank account controlled by Mr Valmont.  Further transfer of this money was frozen by the High Court.

Avon Parnell sued, claiming the $990,000 frozen funds is held on constructive trust demanding the money be returned.  Late to file a defence, the High Court gave Mr Chevin seven days to get his defence filed in court.  Mr Chevin claims he has an agreement with Mr Edney to use Avon Parnell as a vehicle for the purchase of a family home.

The High Court was told Mr Chevin assisted with the 2015 incorporation of Avon Parnell.  It is alleged he retained Companies Office log-in and password details, later gaining online access to change ownership.

Avon Parnell Ltd v. Chevin – High Court (11.10.19)

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Family Trust: Addleman v. Lambie Trust Ltd

Beneficiaries of a family trust are entitled to copies of the trust deed and trust financial statements, they do not first have to prove any breach of trust by trustees, the Court of Appeal ruled in a case where one sister is looking to identify funding for assets valued at over $17 million dollars in November 2002 held in a trust controlled by her sibling.

Prudence Addleman was surprised to learn in 2002 that she was the beneficiary of a family trust.  This when receiving a cheque for $4.25 million and being told this was her full entitlement under the trust.  Trustees refused to provide any further information, other than later providing a copy of the trust deed.  After getting lawyers involved, she was told she was a discretionary beneficiary under a trust established with funds received by her sister Annette Jamieson as compensation for an accident in the 1970s when Annette was a teenager and left as a quadriplegic.  Disclosure of further information was refused; Annette was entitled to her privacy, trustees said.    

Prudence was entitled to more information, the Court of Appeal ruled.  Annette’s compensation was in 1990 put into a family trust called the Lambie Trust, used primarily for property development including the development of a 42 hectare block of land near the Auckland suburb of Howick.  Nominal settlor of the Lambie Trust was a cousin, property developer Robert Palmer.  It was unlikely that Annette’s compensation was sole source of funds for the Howick development, said the Court of Appeal.  With Annette’s one million dollar compensation payout being used for ongoing medical support and also used to buy houses in both London and later the United States, there would be insufficient free funds sourced from Annette’s compensation to finance large-scale property development.  She currently lives in Australia; Prudence lives in England.

The Lambie Trust could not be categorised as a ‘sole purpose’ trust for the benefit of Annette alone, the Court of Appeal said. Funding apparently came from sources other than Annette’s compensation.  Annette is not the sole trust beneficiary.  Sister Prudence was entitled to more information.  Prudence is now aged 70; Annette 66.  They are the only two named as final beneficiaries of the Lambie Trust remaining alive.  They have been estranged for the past twenty years.

Addleman v. Lambie Trustee Ltd – Court of Appeal (4.10.19)

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Money Laundering: Internal Affairs v. Jin Yuan Finance Ltd

Auckland-based Jin Yuan Finance Ltd was fined four million dollars for multiple breaches of money-laundering legislation after Internal Affairs identified use of immigrant staff without work permits processing off-shore money transfers together with wholesale failures to properly document customer details.

In April 2018, Internal Affairs got court orders blocking Yuan Finance and director Rex Young from carrying out financial transactions. This followed investigations stretching back to 2015.  The High Court was told Yuan Finance failed to properly respond to Internal Affairs demands that record keeping and reporting of suspicious transactions be improved.  Yuan Finance deliberately misled Internal Affairs, stating transactions were routed through only one bank account when in fact multiple third party accounts were also used.  For the year ended June 2014, some $122.2 million was transferred using Yuan Finance’s services with ninety per cent of its income coming from international money transfers.

Action was taken under the Anti-Money Laundering and Countering Financing of Terrorism Act.  Yuan Finance did not appear in court.  It was fined for failing to carry out due diligence on its customers, failing to keep proper records and failing to report high-value suspicious transactions.

Internal Affairs v. Jin Yuan Finance Ltd – High Court (3.10.19)

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Fraud: Lock v. R.

Convicted of fraud after customers lost $650,000 paid for manuka honey and infant milk formula not delivered, dairy scientist Trevor James Lock’s claim that he did not get a fair trial was dismissed by the Court of Appeal.  Evidence of fraud was incontrovertible said the court; Lock should instead have pleaded guilty allowing the possibility of a reduced sentence, the court said. 

Lock was convicted in 2017 on multiple charges arising from the operation of his Morrinsville-based companies: Nubiotics Ltd and Nu-Brands Ltd. Customers paying deposits on orders for honey and milk powder were strung along when deliveries were not made.  The trial judge was told Lock, then under financial pressure, diverted company funds to his own use.  He then lost money in an advance fee fraud, attempting to borrow funds offshore.  

Lock complained that his lawyer failed to follow instructions at trial, prejudicing his chance of an acquittal.  Lock said he had no intent to defraud and his lawyer did not put that as a defence.  His lawyer said that defence was not possible; Lock had told him how he actively deceived customers.  The only possible defence was a technical legal defence, a defence which proved unsuccessful.

The Court of Appeal was told Serious Fraud Office prosecutors were surprised Lock did not approach them with an offer to plead guilty, given how strong was the evidence.  A reduction in sentence is the norm when accused plead guilty.

Lock is serving a sentence of five and a half years imprisonment.

Lock v. R. – Court of Appeal (2.10.19)

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