Family Trust: Percy v. Percy

Beneficiaries of Percy Family Trust which is part owner of the Hawkes Bay farm where Shilo Stud breeds Santa Gertrudis cattle allege brother Vance Percy is cooking the books to their disadvantage.  Their request in advance of a High Court trial for the Trust to carry their legal costs was refused, despite Justice Doogue ruling there is a strong case brother Vance is in the wrong. 

Siblings Douglas and Virginia Percy want to see brother Vance and fellow trustee Stephen Lunn removed from control of the Percy Family Trust and damages paid to them as beneficiaries for alleged breach of fiduciary duty.  Battle lines have been drawn with relationships between the two sides described as ‘intensely acrimonious.’

Shiloh Stud is owned by Vance and Denise Percy. Their stud stock is grazed on farmland owned by FW Percy Farming Co Ltd, a company owned 50/50 by the Percy Family Trust and interests associated with Vance Percy.  Percy Trust beneficiaries complain that Vance sits on both sides of the fence; on one side as a trustee of the Trust which is part-owner of the farm and on the other as farmer leasing the farm.  In particular there are two major complaints: leasing fees paid by Shilo Stud to Percy Farming (which provide income for the Trust) are below market rates; and interest paid on a $220,000 loan from the Trust is at a below market rate. There is evidence from farm valuers supporting these complaints.  Vance says Trust beneficiaries have not taken into account below market annual salaries he charged the business and business expenses he paid personally.

Justice Doogue ruled Trust beneficiaries have a strong case that Vance has a conflict of interest.  It is for a future court hearing to decide if this conflict has been abused.  Beneficiaries request for a prospective costs order was refused.  This was not an exceptional case justifying a prospective costs order, she said.  Beneficiaries wanted Percy Trust to bear their legal costs with Vance as trustee not permitted to dip into Trust assets to pay his legal costs.

Percy v. Percy – High Court (29.04.20)

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Insolvency Practitioners: Tempest Litigation v. Davies

Machinery is now in place to force compulsory licensing of insolvency specialists and the back biting is starting. The High Court dismissed claims by Auckland insolvency specialist Damien Grant that a rival should be prohibited from all future insolvency work.

Damien Grant paid twenty dollars to take assignments of two debts owed by an insolvent Auckland property developer to then sue rival liquidator Kevin Davies alleging Davies was incompetent and dishonest and should be barred from all insolvency work.

In February 2019, Rahman Investments Ltd went into liquidation leaving a part-finished Remuera property development.  The building site was sold by a secured creditor for $665,000 with mortgages totalling some two million dollars secured over the property left only partly repaid and unsecured creditors claiming hundreds of thousands of dollars left out of pocket.     

The High Court was told a creditors’ meeting called early in the liquidation descended into chaos.  Mr Grant was in attendance representing an unpaid creditor, seeking to be appointed liquidator himself.  There were allegations Mr Davies in the chair solicited proxies from creditors to confirm his appointment as liquidator and that he dismissed votes from creditors seeking his removal.  One creditor recorded the meeting.  Mr Grant subsequently purchased disputed debts from aggrieved creditors through his company Tempest Litigation Funders Ltd.  In the High Court, Tempest challenged Mr Davies performance as liquidator demanding a full itemisation of creditor lists together with a court order that Mr Davies be denied any remuneration and be prohibited from ever again doing insolvency work.

Associate judge Andrew refused Tempest leave to challenge Mr Davies work.  While the creditors’ meeting arguably was run in an irregular manner, the evidence fell well short of demonstrating any serious issue of bad faith or material procedural irregularity justifying court intervention, he said.  Tempest itself failed to follow correct Companies Act procedures when suing Mr Davies, Judge Andrew said.  

Rahman Investments was hopelessly insolvent. Unsecured creditors would receive nothing.  There was substance to Kevin Davies complaint that Damien Grant initiated legal action against him for improper and personal reasons, Judge Andrew commented.

Tempest Litigation Funders Ltd v. Davies – High Court (24.04.20)

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Business Sale: Do Yay Ltd v. Wei

Café Brioche formerly trading at Takapuna on Auckland’s North Shore was ordered to pay $272,500 damages for misrepresenting turnover when selling to Yuen Fei Wei.

Café Brioche opened for business in February 2014, selling out to Mr Wei twenty months later.  The High Court was told Mr Wei later found business records hidden under the till recording weekly turnover well below figures he was told prior to the sale. Damages followed; Café Brioche’s turnover misrepresentations induced Mr Wei to buy the business.

Brioche’s owners advertised the business for sale in August 2015 at $220,000 plus stock.  Asking price steadily reduced over following weeks.  With Brioche later asking $120,000, Mr Wei offered $110,000. A deal was struck at $115,100, with a three week due diligence period.  Brioche provided sales data stating weekly turnover for the previous three months was some $9000 with a brief reduction down to $6500 when business was disrupted by construction of a neighbouring car park.  The High Court was told Café Brioche turnover for the period never averaged either $9000 or the lower figure of $6500.  Car park construction in fact had little effect on weekly sales.

Café Brioche said included in its turnover figures was food supplied to corporate events with payment direct to Brioche’s parent company.  Justice Gault said there was no evidence Brioche in fact provided the catering. Its parent company controlled many other food outlets.

Mr Wei went unconditional on his Café Brioche purchase after receiving turnover data during the due diligence period.  He was entitled to damages for the difference between profitability as represented by Café Brioche and actual profitability.

The court was told Mr Wei sold the café for $92,000 one year after his purchase.

Do Yay Ltd (formerly known as Café Brioche Ltd) v. Wei – High Court (20.04.20)

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Receivership: Mann v. Scutter

With his Marlborough Sounds contracting business underwater and bankruptcy threatening, Gary Mann was encouraged after a neighbour bought up secured debt when the mortgagee threatened sale of his family home.  His neighbour later bid to buy the property himself, over Mr Mann’s objections.  

Secured creditors need not have ‘purity of purpose’ gaining a collateral advantage in a forced sale, Justice Cooke said.  Neighbour David Wilson followed the letter of the law.  The High Court did not stop continuation of a forced sale of the family home.

The High Court was told Mr Mann’s company Silo Solutions New Zealand Ltd supplied large silos for bulk storage of crops and cement. It was in financial difficulty after a dispute with cement manufacturer LaFarge Holcim Ltd over installation of a cement silo in Wellington.  Mr Mann alleges payment was $380,000 short.  This put financial pressure on Silo Solutions.  The Mann family home at Waikawa, on leasehold land near Picton, was owned by Silo.  With mortgage payments in arrears, mortgagee Isso Holdings Ltd was threatening a forced sale.  Other creditors were threatening Mr Mann with bankruptcy.  Neighbour Dave Wilson offered to assist; he paid Silo the $242,3000 it was owed and he took an assignment of Isso’s mortgage.  At law, Mr Wilson then stood in Isso’s shoes. Within months, Mr Wilson exercised Silo’s rights to appoint a receiver selling up the Waikawa property.  The receiver called for tenders.  Seven offers were received.  Mr Wilson’s was highest at $370,000.

Mr Mann alleged his neighbour’s actions as secured creditor were in breach of the Personal Property Securities Act; failing to act in good faith and in accordance with reasonable standards of commercial practice.  His neighbour took unfair advantage of information learnt through his personal connection, Mr Mann alleged.  Each had a different perspective, Justice Cooke said.  Mr Mann felt deceived; Mr Wilson felt he was saving Mr Mann from bankruptcy.  The sale achieved a market price through use of a receiver acting as an independent third party, Justice Cooke said.

The High Court was told the receiver is negotiating with Mr Wilson, seeking to increase the sale price by about $20,000 to cover rates and leasehold rentals owing on the Waikawa property.  The court signalled that Mr Mann was not going to leave quietly. The receiver was looking at an eviction order from the Tenancy Tribunal.

Mann v. Scutter – High Court (17.04.20)

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Fraud: Pou v. R.

Two years jail was not excessive for Lulu Amberleee Pou’s second Facebook fraud conviction for selling fake tickets to live shows, the High Court ruled.  An earlier conviction for the same scam proved no deterrent.  She continued the scam while awaiting sentence following her first conviction and again continued scamming customers whilst on home detention and a subsequent period of supervision.

Two years’ imprisonment emphasised deterrence and denunciation, Justice Brewer said.  The High Court was told Pou set up fictitious Facebook profiles.  She offered tickets to popular concerts, while having no tickets to sell.  Customer payments were routed through bank accounts held by acquaintances. Defrauded customers lost about $23,300.

Pou v. R. – High Court (8.04.20)

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