Construction Contracts: Poly Wealth Trustee Ltd v. van Vlerken

Enforcing a Construction Contracts Act payment claim stalled because the claim form omitted details required by the Act. It was irrelevant that the debtor was a lawyer with professed expertise in construction law who was expected to recognise the legal significance of a payment claim even if all necessary rules had not been complied with.  

Construction Act payment claims trigger a ‘pay now, argue later’ regime if they comply with the format demanded by the Act.  Do not pay then threats of liquidation follows. The High Court was told the tenant of a property at Coatesville on Auckland’s upper harbour demanded $100,000 from his landlord, Poly Wealth Trustee Ltd, for work done on the property. Poly Wealth is controlled by Auckland lawyer Winston Wang.  The tenant had agreed to buy the property for $3.2 million.  It had been agreed the value of remedial work to be carried out by the tenant could be deducted from the purchase price.  Two years later, the deal fell apart amidst a dispute over the value of work done and the status of a $100,000 deposit paid earlier by the tenant. The tenant claimed Poly Wealth owed $100,000 for construction and repairs to the property.  Attempts to wind up Poly Wealth for non-payment failed. The tenant’s Construction Act payment claim did not comply with the Act.  In particular, no due date for payment was specified and the required statutory notice of debtor’s rights under the Act was not delivered.  It did not matter that the debtor was a construction lawyer presumed to know his rights.  The website of Mr Wang’s law firm advertises expertise in construction law.  Failure to comply with the Act meant the claimed debt was not due.  The tenant was left to go to court to prove how much was owed, and when.

Poly Wealth Trustee Ltd v. van Vlerken – High Court (25.03.20)

20.067

Memelink: Memelink v. Collins & May Law

Refusing permission to appeal his bankruptcy nearly one year out of time, the Court of Appeal described Harry Memelink as a debtor whose modus operandi is prevarication, disputation and obfuscation.

Wellington-based Mr Memelink was bankrupted in August 2018 for non-payment of a court costs order.  In March this year he was bankrupted a second time on a subsequent court costs order.  Insolvency Service is handling his concurrent bankruptcies.  The Court of Appeal was told Mr Memelink is not co-operating.  He has refused to disclose assets and liabilities to Insolvency Service, saying he cannot provide up-to-date information because his accounts have ‘lapsed.’   

In the Court of Appeal, Mr Memelink asked for annulment of his first bankruptcy, challenging the bankruptcy adjudication made in August 2018.  First, he needed approval to appeal out of time.  The Court refused.  Mr Memelink’s proposed appeal had no merit, the Court said.  He was simply attempting to relitigate legal arguments which found no merit at his August 2018 bankruptcy hearing, it said.

Mr Memelink claims that what he calls the Memelink Group has equity of around $8.5 million.  If so, why does Mr Memelink not pay debts leading to his bankruptcy, the Court asked.

Memelink v. Collins & May Law – Court of Appeal (25.03.20)

20.066

Environment: Cowley v. R.

Angered by council resource management procedures, Peter Cowley pruned a Moreton Bay fig overhanging his daughter’s property in the New Plymouth suburb of Fitzroy challenging Council staff to prosecute.  He was fined just over $9000; his daughter’s fine was reduced on appeal to $4500.

The High Court was told Amie Cowley’s Fitzroy property is overshadowed by a one hundred year old Moreton Bay fig, twenty metres high. It is a protected tree under New Plymouth District Plan.  When getting building consent for a house and shed built on the site, Ms Cowley stated the buildings would not intrude under the tree dripline.  On completion, they did.  In 2017, Ms Cowley had discussions with Council about an approved aborist to come trim the tree.  She was concerned about branches and debris from the tree falling on to her property. Trimming was postponed when a neighbour intervened, halting work.  Some nine months later, Ms Cowley’s father, together with two others, took to the tree with a chainsaw.  By the time Council staff arrived, pruning was complete. Mr Cowley said he had ‘given himself permission.’  He said he was making a point because he was carrying out a subdivision in the district which he considered was being delayed by Council inefficiencies.  He challenged Council to prosecute, indicating a $10,000 fine counted for nothing since the trimming ‘added $100,000’ to the value of his daughter’s property.

Both Mr Cowley and his daughter were prosecuted under the Resource Management Act.  Pleading guilty: Mr Cowley was fined $9166; Ms Cowley $7275.  Ms Cowley’s fine was reduced to $4502 on appeal; she had made several approaches to Council regarding tree trimming, was concerned falling tree branches could injure her son, and had acknowledged the Moreton Bay fig was a neighbourhood asset.

Cowley v. R. – High Court (24.03.20)

20.065

Joint Venture: Luo v. Shiu

Just south of Auckland City boundary, Pokeno has mushroomed in size with a frenzy of residential construction. Looking to profit, Annie Shiu separately negotiated with Robert Luo and Anny Yip to buy neighbouring land suitable for rezoning.  Annie’s motives were questioned in the High Court.  She is currently on bail, forbidden from contacting her fellow investors.    

The High Court was told Xiaoling Shiu (known as Annie Shiu) approached Robert Luo in late 2016 with plans to develop rural land west of Pokeno.  It was agreed Mr Luo would put $4.6 million into the joint venture with profits split after rezoning and subdivision approval from Waikato District was obtained for both the land purchased and adjoining land on Munro Road Annie Shiu had separately agreed to buy.  Munro Road had no road frontage but had excellent commercial potential if subdivided in conjunction with Mr Luo’s joint venture land.

At a later date, Annie Shiu had Ms Yip agree to a similar proposal; Ms Yip would buy land also neighbouring Munro Road which would then be incorporated into a new residential subdivision for their mutual benefit with profits shared.

Mr Luo and Ms Yip only learnt later that they were both part of Annie’s overarching subdivision plans.  The two joined forces after both fell out with Annie, alleging she had no intention of honouring their separate joint venture agreements. In particular, they allege Annie plans to sell Munro Road without completing the promised rezoning and subdivision.  The High Court was told Annie made an initial two million dollar down payment on Munro Road with final payment of ten million dollars due in May 2020.  Obtaining finance may prove difficult.  Fearing Annie will sell and scupper subdivision plans, Mr Luo and Ms Yip sued asking the High Court to block any sale of Munro Road. Justice Lang refused.  Mr Luo and Ms Yip had no rights to or over Munro Road. Annie was free to sell, if need be. If proved at a subsequent trial that Annie made promises that all the properties would be subdivided in tandem, any proved loss is due in damages, he ruled.

Luo v. Shiu – High Court (23.03.20)

20.064

Monopoly: Commerce Commission v. Aurora Energy

Aurora Energy was fined $4.9 million for persistent power outages in its Otago distribution area after poor maintenance and deferred capital spending caused consumers economic losses in excess of eight million dollars. 

Owned by Dunedin City, Aurora Energy Ltd distributes power across the Otago region.  Commerce Commission took legal action because of the frequency and duration of power outages. Lines companies are in a monopoly position.  Service performance is monitored by Commerce Commission against agreed price/quality criteria.  Aurora was fined after failing to meet industry standards over a three year period ending 2019.  It was criticised for failing to properly maintain transmission infrastructure and for failing to properly plan and carry out tree trimming programmes.  Over a six year period, $36.7 million budgeted for asset maintenance was left unspent.  Poor record keeping meant Aurora’s data did not match what contractors found in the field.

A fine of $4.9 million negotiated between Commerce Commission and Aurora was approved by the High Court.  Payment was to be made immediately.  The High Court suspended immediate payment while business activities were affected by the covid-19 pandemic.

Commerce Commission v. Aurora Energy Ltd – High Court (23.03.20)

20.063

Relationship Property: B. v. A

The Family Court overturned as ‘unfair’ a relationship property agreement giving the husband a token 0.05 per cent share of the family home.

Their dispute moved to the High Court where husband and wife were identified only as A and B.  The wife claims there were good grounds for unequal division and that the Family Court misunderstood background facts.

The High Court was told the couple’s January 2015 relationship property agreement stated the husband would get only a token share of the family home on separation because it was purchased entirely with money from the wife’s family and it was intended that on separation the wife would ‘remain in residence at the family home so as to provide a stable family home’ for their children.

It came out in evidence at the Family Court that after separation the wife sold the family home using the funds to buy and then later sell two properties in Northland.  On remarriage, the wife put funds released from the Northland sales into buying a new family home with title to this home registered in the name of her second husband only.  The Family Court judge said her behaviour subsequent to separation cut cross the core purpose of the unequal relationship property agreement.  Unequal division was intended to ensure a stable family home; putting family home money into an asset under the sole control of her second husband put this core purpose at risk.  The Family Court set aside the unequal relationship property agreement. It was unfair when entered into and was also inconsistent with the wife’s subsequent conduct, the trial judge ruled.

The High Court gave the wife permission to appeal. Her subsequent behaviour was not raised at trial by her husband.  The trial judge raised the issue, without giving her an opportunity to explain the background.  She says there are legal mechanisms in place to protect her interest in the family home now registered in the name of her second husband.  Her appeal is yet to be heard.

B. v. A – High Court (20.03.20)

20.062

Relationship Property: Zhao v. He

Undocumented money transfers totalling $1.6 million benefitting Chongming Zhao were treated as relationship property by the High Court to be shared with his first wife Mu He, over objections that the money belonged to his relatives.

The two separated in 2014, having married in China seven years previously.  Shortly after separation, Mr Zhao’s sister purchased two properties on Auckland’s North Shore in cash for a total of $1.06 million.  Payment was made out of $1.2 million in Mr Zhao’s BNZ account.  These funds had been recently remitted from China. Ms He said this money was relationship property. Mr Zhao said the $1.2 million in his bank account belonged to his sister and her husband.  The North Shore properties were in her name.  He just managed them, he said.  The trial judge in the Family Court said he had ‘real doubts’ about Mr Zhao’s veracity. In July 2012, Mr Zhao and Ms He told ASB in a joint loan application that they had about one million dollars in a bank account in China.

The High Court was told there was no written evidence of the $1.2 million belonging to Mr Zhao’s sister and if it did there was no explanation as to why Mr Zhao retained control of the $140,000 left in his BNZ account after the North Shore property purchases.  Justice Hinton ruled the $1.2 million transferred from China to Mr Zhao’s BNZ account was to be divided as relationship property.

Also in question was $432,000 cash used to pay off a mortgage on their former family home.  Payment was made thirty months after separation.  Ms He said this money was also undisclosed relationship property. In the High Court, Mr Zhao said this mortgage repayment was funded by his second wife.  Previously he had claimed payment was funded out of post-separation earnings.  The $432,000 mortgage repayment was sourced from assets existing at the time of his first marriage and was also relationship property, Justice Hinton ruled.

Zhao v. He – High Court (18.03.20)

20.061

Guarantee: Primary Services New Zealand Ltd v. Fonagy

Property developer Andrew Fonagy was ordered to pay $850,000 on his guarantee of funding for a central Christchurch hotel project.  Nervous creditors are hunting down assets allegedly moved off-shore.

The High Court was told of financial difficulties surrounding Mr Fonagy’s $14.4 million project proposed for Colombo Street in Christchurch. In September 2015, a mortgagee sale was threatened.  Looking to refinance, Mr Fonagy met with David Short, a retired lawyer working as a property consultant.  New cash came from interests associated with Mr Short.  As well as interest on the funding, the deal promised a share of the finished project.  Mr Fonagy guaranteed payment.  The project fell over in mid-2018, with secured creditors recovering $1.35 million in a mortgagee sale.  Primary Services New Zealand Ltd, which provided a credit line organised by Mr Short, claims Mr Fonagy owes it $1.1 million.  It took immediate steps to sue Mr Fonagy on a signed guarantee for $850,000 and started identifying what personal assets he might own.    

In the High Court, Mr Fonagy denied liability.  He said he was conned into signing the guarantee: Mr Short said he was lawyer, when he no longer held a practising certificate; funding to complete the project was promised by Mr Short, but not delivered. Associate judge Paulsen ruled there was no contemporary evidence of a promise to fund the project to completion. It was ‘fanciful and contrived’ to say Mr Short was not a lawyer, he said.  Mr Short was a solicitor; albeit a solicitor who did not hold a current practicing certificate.  Mr Fonagy’s complaint that unbeknown to him Mr Short was subject of a complaint to the Law Society was irrelevant, Judge Paulsen said.  This had no bearing on Mr Fonagy’s decision to sign the guarantee. The $850,000 guarantee was enforceable.

Primary Services allege Mr Fonagy is looking to transfer assets out of New Zealand to Cook Islands’ company Ora Trustees Ltd. Ora acts as a corporate trustee for the benefit of off-shore beneficiaries.

Primary Services New Zealand Ltd v. Fonagy – High Court (18.03.20)

20.060

Motor Racing: Taupo Car Club v. TMP Ltd

Legacy rights for use of Taupo’s Bruce McLaren Motor Sport Park have boiled over with Taupo Car Club disputing a fifty dollar charge per car for its otherwise ‘free’ race days.

Taupo Car Club has raced at Centennial Park since 1959, leasing the site from Taupo District Council.  As part of a track upgrade two decades ago, TMP Ltd took over the site lease.  TMP was capitalised with funding from multiple individual race enthusiasts. Currently, biggest shareholders are Rotorua Energy Charitable Trust with a ten per cent shareholding and Taupo Car Club with five per cent.

The High Court was told Taupo Car Club was compensated on the surrender of its track lease to TMP with an agreement for subsequent yearly payments of $20,000 plus the right to host a specified number of track meets each year free of charge.  This deal was renegotiated in 2018 after TMP announced it was cancelling the then current deal.  The annual $20,000 payment was cancelled.  TMP was given the right to charge for use of track facilities it had developed including pit garages, hospitality suites, catering, signage and electronic track equipment.  Also included is the right to charge ‘participant levies.’  Taupo Car Club disputes it is now liable to pay a fifty dollar levy per car/per race day.  Its regular timetable of ‘free’ race days was not given up in the 2018 renegotiation, it says.

Their current agreement includes comprehensive dispute resolution and arbitration clauses to deal with interpretation arguments. Taupo Car Club wants to bypass these procedures, going straight to court.  It says TMP is refusing to budge on the proposed levy.  This is evidence TMP is ignoring the dispute resolution procedure, it says.  Associate judge Andrew ruled the 2018 contract in its entirety still stands. He ordered the parties into arbitration as specified in their contract.

Taupo Car Club Inc v. TMP Ltd – High Court (13.03.20)

20.059

Finance: Low v. Du

Having used a tradesman as front to finance property developments, Lenotre Low was required to compensate him when demanding an Auckland property be handed over.

The High Court was told of property developer Lenotre Low developing multiple sites as part of Auckland’s Glen Innes redevelopment. Mr Low kept a very low profile, using acquaintances together with his son, university student Gabriel Low, as signatories on all the paperwork.  Struggling to get mortgage finance, Lenotre Low had builder Xingwei Du lend his name to finance a property on Epping Street.  Documents signed had Mr Du agree to buy Epping Street at $1.2 million whilst also signing a declaration of trust agreeing to transfer title to Mr Low’s son Gabriel when demanded.  Mr Low put up $255,000; the balance a bank loan in Mr Du’s name.  The property was then tenanted, with rent used to meet loan commitments.

Some twenty months after the Epping Street purchase, a lawyer’s letter demanded title be transferred from Mr Du to Gabriel Low. Mr Du refused.  He said unwinding the deal was conditional on agreement to a joint venture project between himself and Lenotre Low.  Associate judge Bell ruled reference to a proposed joint venture in the declaration of trust was too vague to be enforceable.  But Mr Du was entitled to payment for his time as trustee, holding title to Epping Street.  Transfer of title to Gabriel was delayed pending payment into court of $89,000 claimed as trustee expenses.  The actual amount to be paid Mr Du requires agreement between the warring parties; failing that another court hearing.

Low v. Du – High Court (13.03.20)

20.058

Wine Fraud: R. v. Southern Boundary Wines

Management of Southern Boundary Wines deliberately mislabelled wine, pressured employees to carry out the fraud and bad-mouthed the whistleblower who told Primary Industries.  Scott Berry, Andrew Moore and Rebecca Cope were convicted of breaching the Wine Act. 

The High Court was told Primary Industries spent over $700,000 getting to the bottom of the wine fraud, much of that expense incurred unravelling misinformation provided by Southern Boundary management ‘explaining’ the mislabelling.  Andrew Moore was Southern Boundary CEO; Scott Berry production manager.

Southern Boundary produced wine from its own grapes and also produced wine on contract from other grape growers.  The Wine Act sets specific requirements for wine labelling; the so-called ’85 per cent rule.’  At least 85 per cent of the wine in any bottle must comply with any single grape variety, vintage or location described on the label.

Evidence was given of wholesale fraud: grapes from different regions were mixed together without labelling the blend; grapes from one region mislabelled as being from another; and years of vintage mislabelled. In a period when Southern Boundary produced about 40,700 litres of sauvignon blanc, the company bottled 70,100 litres supposedly all its product and exported 63,600 litres.  Much of the offending took place in 2012-2013.

Grape growers delivering grapes to Southern Boundary suffered damage to their reputation where the product sold under their label was not true to origin.  Wine had to be dumped.  One grower suffered losses in excess of one million dollars.  Names of growers affected were suppressed by the court.

Described as the principal offender, Berry faced imprisonment. Justice Dunningham replaced imprisonment with 42 weeks home detention and ordered payment of $25,000 reparations.  Berry pleaded guilty, sold his home to fund reparations and agreed to front industry workshops telling others of the consequences of his criminal behaviour.

Moore also potentially faced prison.  He was sentenced to ten weeks home detention and ordered to pay $20,000 reparation.

Cope was ordered to do 200 hours community service. She said she simply did as instructed, being a relatively new employee at Southern Boundary, overworked and poorly supported.

Whistleblower Joanne Eaton spoke bitterly about the consequences of alerting Primary Industries to the mislabelling fraud. Primary Industries told her to keep quiet while it investigated.  In the vacuum that followed she was bad-mouthed by Southern Boundary, hounded out of the industry and forced to retrain in a less lucrative occupation.

Southern Boundary Wines Ltd is in liquidation, insolvent.

R. v. Southern Boundary Wines Ltd, Berry, Moore & Cope – High Court (13.03.20)

20.057

Malicious Prosecution: Burgess v. Beaven

Bankrupted in 2017 after over a decade of relationship property litigation, Gary Owen Burgess failed in his High Court request for approval to continue legal action alleging malicious prosecution by his former spouse.

Mr Burgess alleged Ms Beaven cost him by improperly dragging out litigation.  Success in the tort of malicious prosecution requires proof a litigant had no reasonable or probable cause to take legal action and did so maliciously.

The two separated in 2003 after twelve months marriage. Mr Burgess retained Medbury, a rural property in north Canterbury they had jointly intended to convert into a vineyard and homestay business.  A cascade of legal cases followed; primarily arguments over whether unequal sharing of relationship property was warranted.  Initial rulings were in Ms Beaven’s favour: 65/35.  After grudgingly paying out, Mr Burgess won subsequent rounds adjusting the division ratio and reassessing the date for property valuation. These results saw Ms Beaven required to pay Mr Burgess.  Meanwhile, Medbury was sold at a mortgagee sale.

After being bankrupted, Mr Burgess started legal action, suing Ms Beaven alleging she and her legal team deliberately delayed and slowed down relationship property litigation.  He wanted damages.  His earlier payout from Ms Beaven came too late to save Medbury, he claimed.

On bankruptcy, Insolvency Service takes control of all assets, including current and potential legal actions.  Insolvency Service disclaimed his legal action against Ms Beaven, taking the view that pursuing the case was of no financial value. Mr Burgess sought High Court approval to assume control.  Associate judge Lester said the court record showed no evidence of deliberate delay or even negligent delay by Ms Beaven or her legal advisers in any of their relationship property litigation.  Mr Burgess did not explain why he himself was now pursuing a claim he could have brought some eight years ago, long before his bankruptcy, Judge Lester said.

Burgess v. Beaven – High Court (12.03.20)

20.056

Fraud: Wood v. R.

By voluntarily blowing the whistle and quickly pleading guilty to Serious Fraud Office charges, foreign exchange trader Kelvin Clive Wood was entitled to a reduction of nine months imprisonment, the Court of Appeal ruled.  Investors with Forex NZ Ltd, now in liquidation, await final payouts whilst Wood serves a term of imprisonment now reduced to five years six months.

Wood offered financial services from his Half Moon Bay business, in Auckland.  Clients were offered both retail foreign exchange deals and financial investments. The court was told over $22 million passed through Wood’s business from 2008.  Clients were told their capital was protected.  Foreign exchange speculation on client accounts by Wood ran at a loss. By late 2008, there was a shortfall. Wood kept trading through to May 2017. The court was told fictitious trading reports were sent to clients, falsifying account balances.  A ‘Ponzi scheme’ evolved; new investment money and rolled over investments were used to pay clients asking for repayment.         

In 2017, Wood himself blew the whistle, telling authorities of the fraud.  Client transactions were conducted through two companies.  Investigations identified there are 28 creditors owed $9.7 million by one company; four owed just over three million by the other.

Wood v. R. – Court of Appeal (11.03.20)

20.055

Family Company: Kelly v. Kelly Construction Ltd

William and Valerie Kelly are majority shareholders in their family company, Kelly Construction.  Their two sons sued in the High Court to find out where the money is going.

The Kelly boys are minority shareholders in Kelly Construction (2002) Ltd.  Living in Alexandra, central Otago, they are the only shareholders ‘on the tools’ doing the physical work.  Mum and Dad live in Dunedin, having shifted from Alexandra in the last three years. The High Court was told their parents are refusing to divulge important financial information.  A copy of 2017 Kelly company accounts was made available only after a lawyer’s letter.  The two sons were perplexed to find the accounts indicate payment to them of shareholder salaries, payments they say they never received.  There are unexplained cash withdrawals amounting to nearly $85,000, they say.  There are also questions about a Royal Terrace property in Alexandra which they thought was owned by the company.  Their parents say it is owned by a family trust.  It is currently listed for sale.

Associate judge Lester ordered disclosure of all Kelly Construction bank records for the last eight years together with details of any company payments for Royal Terrace in respect of mortgage repayments, rates, insurance and property maintenance.

Directors and management are accountable to shareholders, Judge Lester said.  The two sons as shareholders are entitled to the information.

Kelly v. Kelly Construction (2002) Ltd – High Court (10.03.20)

20.054

Phoenix Company: Inland Revenue v. Clooney Restaurant Ltd

Clooney restaurant owner Tony Stewart was ordered to pay Inland Revenue $585,200 after setting up a ‘phoenix company’ to stay in business while attempting to escape tax debts.  

Clooney was the place to dine in Auckland inner city suburb Freemans Bay from the mid-2000s.  Tony Stewart was sole owner by 2013, as fellow investors dropped out. The High Court was told Clooney was hopelessly insolvent.  Inland Revenue threatened legal action.  A scheme was hatched: all company assets were transferred to a new company trading under the name Clooney; all debts were also transferred, except debts owed Inland Revenue. The net purchase price was $3300, with tax debts cut free.  The ‘old’ Clooney business was then put into liquidation.  Having no assets, it left Inland Revenue high and dry.  A ‘phoenix company’ rose from the ashes to carry on his restaurant business.

Inland Revenue sued Mr Stewart personally for his companies’ tax debts.  Justice Jagose ruled Mr Stewart personally liable for tax debts of both his old business and his phoenix company.

As regards his old business, left to crash and burn, Mr Stewart was in breach of the Property Law Act (moving assets to the detriment of Inland Revenue as a creditor) and in breach of his duties as a director under the Companies Act (prejudicing creditors).  Damages were assessed at $385,958.

In addition, Mr Stewart was held personally liable for tax debts of his new phoenix company; $201,256 and counting. Company law prohibits directors of a failed company from carrying on the same business under a similar name for the next five years.

Inland Revenue v. Clooney Restaurant Ltd – High Court (10.03.20)

20.053

Bankruptcy: Haines v. Memelink

Notorious Wellington debtor Harry Memelink has been bankrupted whilst currently bankrupt.  Concurrent bankruptcies are seldom seen. 

Mr Memelink’s initial bankruptcy kicked off in August 2018 following non-payment of a court costs order totalling $122,000. Other debts surfaced after this date, primarily subsequent court orders against Mr Memelink.  Later creditors suggested to Insolvency Service that these debts be lumped into the existing bankruptcy, despite arising after the August 2018 adjudication.  Insolvency Service said this is not possible.  Mr Memelink’s assets as at August 2018 provide a pool for payment of pre-August 2018 debts; subsequent creditors cannot dip into this pool. Their claim is against post-August 2018 assets, if any.

Owed some $5500 on a post-2018 court costs judgment, Quentin Haines served a bankruptcy notice on Mr Memelink demanding payment. The effect of bankruptcy notices is that debtors are deemed insolvent if payment is not made within ten working days.

The High Court was told a trust associated with Mr Memelink paid Mr Haines $5500 by electronic bank transfer just before midnight on the last day of the ten working days.  This after a cheque earlier offered in payment bounced.  But an extra $828 claimed as part of the bankruptcy notice was not paid, being court costs on issue of the bankruptcy notice. Associate judge Johnstone put Mr Memelink into bankruptcy a second time for non-payment of this $828.

Insolvency law requires a debtor to owe at least one thousand dollars before being forced into bankruptcy.  The $828 still owed Mr Haines was under this threshold.  In this case, other post-2018 creditors collectively claiming several hundred thousand dollars from Mr Memelink lined up in court supporting Mr Haines application for a further bankruptcy.

Haines v. Memelink – High Court (9.03.20)

20.050

Gift: Hurlimann v. Noland

Early in their relationship he said he would never make a claim against her house, the matrimonial home from her previous marriage.  Over fifteen years later, she was forced by court order to pay $305,900 as his share of the house assessed as relationship property at the end of their marriage.  Eleven days after resentfully handing over the money, she responded to his invitation to meet for dinner at a restaurant. During the course of the meal he transferred $250,000 back to her using a banking app on his phone.  Later changing his mind, he sued to recover the money.  

The Court of Appeal was asked to decide whether he was rational but foolish, or irrational and taken advantage of, when handing back the bulk of his relationship property payout.  The court was told he suffered mental difficulties following solvent exposure working as an automotive spray painter and brain damage after competing as a kickboxer.  He said the $250,000 was a conditional gift, subject to the two getting back together permanently.

The Court of Appeal ruled payment of the $250,000 was an unconditional gift.  It was an attempt to revive their relationship.  Viewed objectively, it could be considered foolish, but it was not irrational, the court said.  A psychiatric examination two years after the gift was made could not specify he was under any mental incapacity when handing over the $250,000.  It was clear in recordings she made of their conversations, returning most of the relationship property settlement recognised his previous promise not to claim against her house and would clear the way to a possible resumption of their earlier relationship.  But payment was the first step along the way; there was no promise a long-term relationship would follow.  They did get back on familiar terms for some twelve months before she said she was now romantically involved with someone else and no longer wished to continue their relationship.  He then sued, demanding return of the $250,000.

Payment of $250,000 was an unconditional gift preparing the way for a possible reconciliation, the court ruled.  It was not conditional on their relationship continuing.  She could keep the money.

Hurlimann v. Noland – Court of Appeal (9.03.20)

20.052

Ebert Construction: Shephard v. Wakefield Plant Ltd

With Ebert Construction unsecured creditors owed $123 million, liquidators failed in their $2.04 million claim against related company Wakefield Plant Ltd.  Wakefield provided Ebert’s working capital.  Half Wakefield’s shareholding is hidden behind trustee company names; the other half mirror some shareholdings in Ebert Construction.  Wakefield is not in liquidation.  

In October 2018, Ebert Construction Ltd went into liquidation, insolvent.  Work stopped on some fifteen worksites across the country.  Bank of New Zealand was owed just over six million dollars. Liquidators identified that Ebert used related company Wakefield Plant as a conduit for BNZ funding.  Wakefield had a multimillion dollar credit facility with BNZ.  To smooth Ebert’s cashflow, Wakefield would drawdown the BNZ credit facility, passing funds to Ebert.  As Ebert received progress payments on construction contracts, it would transfer funds from Ebert’s BNZ account to Wakefield’s BNZ account, reducing the amount owing on Wakefield’s BNZ credit facility.

Ebert liquidators sued under ‘claw-back’ rules in insolvency law demanding repayment of $2.04 million paid by Ebert to Wakefield over a three day period before BNZ pulled the plug appointing receivers.  If successful, Wakefield shareholders would be forced to kick in money for Ebert creditors.  Wakefield gained an advantage as an unsecured creditor, liquidators said.

Wakefield gained no advantage, Associate judge Lester ruled.  Wakefield, together with Ebert, was jointly liable for all Ebert Group debts.  Both companies had given BNZ security for its funding.  The effect of these security documents was to create one group debt secured over all group assets.  It was not a case of Wakefield acting as a standalone banker sneaking to the head of the queue by being repaid an unsecured loan, he ruled.

Shephard v. Wakefield Plant Ltd – High Court (9.03.20)

20.051

Finance: Lu v. Industrial & Commercial Bank of China

After defaulting on a $2.9 million residential loan, Chinese investor Qiufen Lu unsuccessfully asked the High Court to block legal action taken against her in China by Industrial and Commercial Bank of China (New Zealand) Ltd.  ‘Anti-suit’ claims are rare.  

Courts throughout the world are very wary of making orders impacting on legal proceedings in another country.  One country’s courts telling another country what to do amounts to a declaration that it is subservient; declarations of war have followed on lesser grounds.  In rare circumstances courts will grant an ‘anti-suit’ injunction ordering a litigant before its courts not to proceed with related litigation in another country. It requires proof the related litigation is ‘vexatious, oppressive, or otherwise unconscionable.’

The High Court was told Ms Lu borrowed $2.9 million in August 2015 from the New Zealand arm of Industrial and Commercial Bank of China to complete her six million dollar purchase of an Albany property on Auckland’s North Shore.  It had potential for subdivision.  It did not run smoothly.  Auckland City Council objected to houses being relocated onto the property without appropriate consents.  It placed charging orders against the title for legal costs incurred.  A number of monthly mortgage payments were made late. From January 2018, Ms Lu stopped making any payments.  In October 2019, the property was sold in a mortgagee sale for some $2.2 million.  Ms Lu’s complaint that the Bank could have got a better price was dismissed by the High Court.  The price recovered by the Bank exceeded offers Ms Lu received in her attempts to sell.      

Before completing its mortgagee sale, the Bank took legal action in China, freezing Chinese bank accounts and company shares held by Ms Lu and her husband Liansen Mao.  Ms Lu now lives in China.  Under Chinese law, a spouse is liable for household debts incurred by a fellow spouse. This general rule no longer applies in New Zealand.  In the New Zealand courts, Ms Lu applied for an ‘anti-suit’ injunction, blocking the Bank from taking parallel legal action in China.  She said it should follow usual procedures; fighting its case in New Zealand courts, then registering any New Zealand court judgment in China for enforcement in that country.  The Bank claims Ms Lu still owes more than $850,000.

The High Court was told Ms Lu has no assets in New Zealand.  There is nothing untoward in a creditor pursuing a debtor in the debtor’s home jurisdiction, Justice Fitzgerald said.  The Bank started its legal proceedings in China before Ms Lu countersued in New Zealand; its legal proceedings were not a cynical or tactical response to New Zealand litigation, Justice Fitzgerald said.

Lu v. Industrial and Commercial Bank of China (New Zealand) Ltd – High Court (5.03.20)

20.049

Estate: Hall v. Radich-Chaytor

Anthony Chaytor died in 2018 aged 84 having married four years earlier a woman twelve years younger, this after a lifetime as a bachelor.  A legal firestorm followed as his widow fights six of his nieces over control of an estate valued in excess of $15 million.

The nieces are suspicious of Dorothy Radich-Chaytor’s late arrival on the scene and covert marriage to Mr Chaytor.  Living in Marlborough, their wedding took place in a Christchurch registry office with none of Mr Chaytor’s friends or relatives present. The marriage was kept hidden from family.  Prior to the wedding, Mr Chaytor suffered a stroke.

The High Court was told Mr Chaytor’s will provides for half of his estate going to his widow, the balance divided between his nieces and charities.  During her lifetime, his widow has the right to occupy the nearly 475 acre Marshlands property near Blenheim with all costs met by the estate.  Even before Mr Chaytor’s death, there were tense negotiations between Dorothy Radich-Chaytor and the nieces over dispersal of Mr Chayton’s assets.  They agreed to a private re-distribution of his assets, regardless of what his will stated. This private agreement is the subject of ongoing legal action.

Tensions accelerated after Mr Chaytor’s death, starting with an argument over who would handle the estate.  Mr Chaytor’s will is not yet legally operative; disputes have delayed probate being granted by the High Court.  Nieces allege Dorothy is mismanaging estate assets and taking money she is not entitled to.  One named executor resigned.  Dorothy as the other named executor agreed she would not apply for probate; a replacement executor was required.  The nieces recommended Perpetual Trust Ltd.  Dorothy objected.  She wanted Trustee Executors Ltd.  The High Court was asked to decide.

Justice Grice appointed Trustee Executors.  Both trustee companies are capable of doing the job, she said.  Everyone has to work with the appointed executor and Dorothy’s distrust of Perpetual, for whatever reason, meant it was expedient to have Trustee Executor appointed, Justice Grice decided.

The extent to which Mr Chaytor’s will is implemented depends on current litigation over the earlier private agreement between his widow and his nieces.  The High Court was told the nieces claim Dorothy agreed to give up rights under the will in return for a one-off payment of $5.5 million plus part of Marshlands.

Hall v. Radich-Chaytor – High Court (5.03.20)

20.048

Wendy's: re Cone Enterprises Ltd

After losing control of Wendy’s master franchise for New Zealand, Chang Xi is on the hook for $5.5 million.  This followed Mr Xi’s failed attempts to break free of franchise rules by rebranding as Shake, Shed and Co.

Mr Xi’s spat with Wendy’s offshore head office become public mid-2018 when he encouraged a number of franchisees to join him in new operations branded as Shake Shed.  Wendy’s sued.  The High Court was told a deal was struck.  This later fell apart.  Mr Xi and his companies were ordered to pay Wendy’s some $5.5 million damages.  Two months later, Heartland Bank appointed receivers. It has security over assets of Mr Xi’s companies.  Receivers are looking to sell Wendy’s New Zealand operations as a going concern.

The High Court was told 24 Wendy’s branded outlets were trading.  They are renting commercial space.  The Receiverships Act holds receivers personally liable for this rent should they keep trading beyond fourteen days from appointment.  The High Court gave receivers Colin Gower and Andrew Grace an extra fifteen working days grace, giving them extra time to keep outlets trading while they looked for a buyer.

re Cone Enterprises (New Zealand) Ltd – High Court (3.03.20)

20.047

Fraud: First NZ Properties v. Barnes

His address on the public register is Ruby Bay, Nelson.  Neil Allan Barnes is currently overseas in no hurry to return after being ordered to repay over one million dollars to syndicate owners of commercial properties in Auckland, Tauranga and Christchurch managed by Investments Services Ltd.

Whilst CEO of Investment Services, Barnes stole investors’ funds in a long running fraud.  The fraud was discovered in June 2018, after Barnes left Investment Services.  The High Court was told money was siphoned out through Barnes’ company: Inlandia Ltd.  The hunt is on to track down this money.  Barnes abandoned his company; Inlandia Ltd was struck off the companies register for failing to file annual returns.

At investors’ request, Associate judge Lester restored Inlandia to the register.  Bringing the company back to life enables Inlandia to take legal action against Barnes personally to recover assets passing through the company to him. 

First NZ Properties Ltd v. Barnes – High Court (3.03.20)

20.046

Bankruptcy: Official Assignee v. McCreath

Bankrupt for the fourth time, Mark Anthony McCreath’s discharge from bankruptcy was extended to July 2023, banning him from involvement in any business.

Insolvency Service took steps to block McCreath from further business activities before he was set free on automatic discharge from his fourth bankruptcy.  The High Court was told McCreath bankrupted himself on each of the four occasions. It was described as cynical use of bankruptcy law to escape his debts.  His fourth bankruptcy left unpaid debts of $41,200; his third some $125,000. He has a criminal record of 103 previous convictions, including: burglary; dishonesty; and gaining credit whilst bankrupt.

Insolvency Service alleged that prior to his most recent bankruptcy McCreath ran a Canterbury property maintenance business called On2It Property Care.  Insolvency Service said he operated under a number of aliases, all designed to avoid the impact of prior bankruptcies: Mark Framer, Mark Savelkoel and Mark Carpenter. McCreath denied he used those names. He said extending his bankruptcy would prevent him accessing a student loan for tertiary study.  Bankrupts are not eligible for student loans.

Official Assignee v. McCreath – High Court (2.03.20)

20.045