Insurance: Moore v. IAG Insurance

 IAG Insurance and Graeme Moore were nearly two million dollars apart in agreeing the insurance payout on a Christchurch home damaged twice in earthquakes four months apart.  The Court of Appeal ruled against IAG.

Graeme Moore lived in an architect designed home on Scarborough Hill, above Sumner.  It was undamaged in Christchurch’s first major earthquake: September 2010.  Subsequently, it suffered $2.08 million damage in the February 2011 Port Hills earthquake; followed four months later by $2.77 million damage in a further earthquake.  Insured under IAG’s Supersurance House cover, Mr Moore was told his payout could not exceed $2.5 million.  The policy limit applied to a ‘series of events which have the same cause.’  IAG said the two earthquakes had the same cause, being part of the series of earthquakes in Christchurch following its initial September 2010 quake.

An earthquake specialist told the court that in a broad sense all earthquakes in New Zealand have a common cause; relative movement between the Pacific and Australian tectonic plates.  More narrowly: the February 2011 earthquake was caused by a rupture of the Port Hills fault; the quake four months later by the rupture of two faults east of Christchurch.  These two quakes were quite separate events, the Court of Appeal ruled.  IAG’s $2.5 million policy limit applied separately to each claim.

Damage spread over several days following a tropical storm would be a typical example of a series of events with a common cause attracting a capped payout, it said.  Day one: high winds might topple trees on to a house causing structural damage.  Day two: lightning causes electrical damage and a fire.  Day three: heavy rain floods the house.  All these events have an underlying common cause: the one tropical storm.

Moore v. IAG New Zealand Ltd – Court of Appeal  (31.07.20)

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Restaurant: Il Forno Ltd v. Kleine

 Long-standing family bakery and café Il Forno in Auckland’s trendy Ponsonby has seen legal fisticuffs behind the scenes; Andrew Kleine fended off older brother Jim’s claims to a half share in the business.  In turn, Jim was ordered to pay $14,100 damages; tax fines racked up following Jim’s failure to properly action Il Forno’s tax filings.

The High Court was told Andrew Kleine gained full control of Il Forno in 2006, after buying the other half interest then held by fellow restauranteur Antonio Crisci; a buy-out funded with cash from both Andrew and other family members.  Andrew ran the bakery; brother Jim provided ill-defined administrative support. Nearly a decade on, tensions between the two were ratcheting up.  Evidence was given that the final trigger was a difference of opinion over food deliveries: Andrew preferred an in-house driver; Jim, use of couriers.

In court, Jim claimed he owned fifty per cent of Il Forno; the result of him contributing $10,000 towards the $135,000 paid Mr Crisci on the 2006 buy-out.  Justice Jagose ruled the $10,000 was not an equity contribution; it was a loan.  In all his dealings with suppliers, Inland Revenue and lawyers Jim had not once claimed to be a part owner.  He had always represented brother Andrew as ‘proprietor’ and as ‘sole shareholder and director.’

Jim’s claim to $650,000 compensation for unpaid services provided to Il Forno was dismissed.  Jim provided no evidence of what his actual duties were, Justice Jagose ruled.

Il Forno in turn sued Jim for negligence.  There was evidence of Jim being paid a retainer to look after Il Forno’s accounting functions and tax filings.  The High Court was told inadequate accounting records were kept.  In addition, Jim failed to file Inland Revenue returns on behalf of Il Forno for income tax, PAYE and GST on a range of dates from 2007.  Il Forno was convicted and fined some $14,100.  Jim was ordered to compensate Il Forno for this negligence.

Il Forno Ltd v. Kleine – High Court (31.07.20)

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Cannabis: re Medicann NZ Holdings Ltd

 Medicann touted plans to develop and commercialise medical cannabis when seeking two million dollars private investment capital in 2018.  In the High Court twelve months later, co-founder Ross Smith said his plans were for a quick ‘pump and dump’ operation, getting out quickly with a few million in his pocket.  Now he has been shut out by a court ruling over entitlement to a projected $152,000, all that is left on Medicann’s liquidation.

An information memorandum made available to potential Medicann investors described Mr Smith as a ‘cannabis visionary’ and a ‘global cannabis consultant.’  About $1.5 million was raised from outside investors.  He was credited with a twenty per cent shareholding in Medicann.

The High Court was told of subsequent disagreement between Mr Smith and Medicann’s chief executive officer Brendon Ogilvy over Medicann’s strategic objectives.  Smith told the High Court he viewed himself as an investment banker, putting together early stage companies, then getting out; making his millions tax free, he said.

Attempts to settle differences through mediation came to nothing.  Medicann management then chopped Mr Smith’s holding from the share register, leaving him with no equity interest in Medicann and no entitlement to share in the $152,000 expected to remain on current liquidation of Medicann.

Associate judge Andrew ruled Medicann management was justified in removing him from the share register.  Documents created on the formation of Medicann required shareholders to sign a subscription and shareholders agreement within one month of their share issue; a provision designed to keep Medicann under tight control. Mr Smith and interests associated with him never signed.  Their shareholding was void, Judge Andrew ruled.

Mr Smith cried foul, claiming to be dyslexic and unaware of the company’s legal requirements.  Mr Smith had a far greater awareness and understanding of the company’s requirements than he was prepared to acknowledge, Judge Andrew said.

re Medicann NZ Holdings Ltd – High Court (31.07.20)

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Fair Trading: Ballance Agri-Nutrients v. Quin Environmentals

 Outdated technical standards for farm fertiliser were the weapon of choice between competitors Ballance and Quin disputing the validity of industry qualmarks applied to the other’s product in a fight over market share.

Farming in New Zealand has profited from imported phosphate fertilisers being applied to farmland: by hand, by spreader truck and topdressed from the air.  To assist farmers, a quality mark system operates signalling solubility, and hence effectiveness. RPR (reactive phosphate rock for direct application) Fertmark branded fertiliser must satisfy a specified solubility test: the Citsol test.  The lesser the solubility, the slower the fertiliser breaks down with a resulting reduced loss through leaching and run-off.  Fertmark-branded RPR products can demand a premium price.  It is generally accepted within the industry that the Citsol test is outdated.  Because it is tied to the RPR Fertmark qualmark, Citsol became the relevant test in a fight over market share between Ballance Agri-Nutrients Ltd and Quin Environmentals (NZ) Ltd.  

Ballance imports its phosphate rock from Peru.  It objected when Quin advertised its Algeria import as ‘true’ RPR and ‘the best all-round RPR in the world.’  The product did not satisfy the Citsol solubility test, it said. Ballance sued.  No damages were sought.  It simply wanted the courts to uphold the integrity of the Fertmark qualmark, it said.

Justice Venning ruled Quin Environmentals in breach of the Fair Trading Act.  Quin was ordered not to advertise its Algerian rock as RPR without further explaining it did not comply with the Fertmark Code.  The product was not banned.  Quin is free to compete in the market, provided it is made clear that it does not satisfy the Fertmark test when branded as RPR, Justice Venning said.

Quin in turn sued Ballance, claiming its Hi P RPR product was a non-compliant blend.  Ballance blends waste phosphate rock into its Peruvian rock to reduce cadmium levels which would otherwise disqualify its Peru product from using the RPR qualmark.  Justice Venning ruled Balance was not in breach; mixing phosphate rock with phosphate rock was not a ‘blend’ under the Fertmark rules.

The court was told Quin Environmentals new V2 product line does satisfy RPR test protocols; reducing levels of dolomite in its Algerian imports enabled V2 to pass the Citsol solubility test.

Ballance Agri-Nutrients Ltd v. Quin Environmentals (NZ) Ltd – High Court (31.7.20)

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Economic Duress: Dold v. Murphy

 Complaining that fellow investor Peter Murphy held a pistol to their heads to extract an extra four million dollars on sale of their Queensland tourism business was to no avail.  It is not unlawful for private individuals to act in their own self-interest, refusing to sign a contract, the Court of Appeal ruled.

Refusals to deal are a matter for competition law, governed by statute, the court said.  Competition law governs misuse of market power, to the detriment of consumers; not private contract law disputes.

Roger Dold’s dispute with Peter Murphy was about sale of their joint Queensland tourism business.  Their relationship went back nearly three decades, starting with operation of Fullers Cruises in Northland.  Nearing the end of their business careers, they were looking to sell their company Cruise Whitsundays Pty Ltd for some $A75 million.  Dold and fellow investor Chris Jacobs each held a 46.9 per cent stake; Murphy 6.2 per cent.  They were astonished to find a buyer offering $A112 million.  Clinching the deal required all three to sign.  Murphy refused.  He demanded a bigger slice of the pie; compensation for the extra work he had done in recent years, particularly during Mr Jacob’s illness, he said.  The court was told Dold and Jacobs grudgingly agreed to Murphy receiving an extra four million dollars; in economic terms raising his interest in Cruise Whitsundays to 9.8 per cent.  Dold then sued Murphy alleging economic duress, demanding back his two million dollar contribution.

Mr Murphy’s opportunistic behaviour in withholding his signature at the eleventh hour was not unlawful, the Court of Appeal said. At law, he was entitled to act in his own self-interest, even if his actions were both unexpected and ungenerous, it said.

Dold v. Murphy – Court of Appeal (31.07.20)

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Fua'amotu Hotel: Commercial Factors v. Scenic Hotel Group

 Auckland financier Commercial Factors, owned by the Haydon family, stuck with a Tongan hotel it does not want failed in High Court legal arguments that Scenic Hotels had taken the problem off its hands.  Scenic pulled out of Tonga’s Fua’amotu Hotel in March 2019.  The two are also arguing over control of insurance payouts due following damage by cyclone Gita in 2018. 

Terry Haydon’s Commercial Factors Ltd financed construction of Fua’amotu by entrepreneur Sam Wong.  The High Court was told repayments fell into arrears almost immediately.  Owed $5.7 million, Commercial Factors took steps in 2011 to recover its money.  It planned to buy the hotel, join forces with a hotel management company and then sell the business as a package deal. Negotiations commenced with Christchurch-based Scenic Hotel Group Ltd, controlled by Hagaman family interests. The High Court was told of extensive discussions between Commercial Factors and Scenic.  Commercial Factors was under tight time constraints; it needed to line up its ducks before submitting a bid for Fua’amotu.  The hotel’s forced sale was under control of a Tongan court-appointed receiver.  Scenic was cautious; the level of Commercial Factor’s interest rates was critical to Fua’amotu’s future profitability.  An interim hotel management agreement was concluded, part of negotiations for formation of a joint venture company.  Commercial Factor’s bid to buy Fua’amotu for the value of its outstanding debt was successful.  Pacific Hotels Ltd was subsequently set up with Commercial Factors and Scenic each holding a fifty per cent stake.  Fua’amotu proved to be a big drain on cash.  By March 2015, Pacific Hotels had an estimated negative equity of $2.8 million. With Commercial Factors refusing to provide further financial support, Scenic subsequently demanded Pacific Hotels repay $2.43 million it had poured into the company.  Plans to liquidate Pacific Hotels stalled with Commercial Factors and Scenic at loggerheads over how tax losses would be used.  With no resolution in sight, Scenic packed up and left, clearing its property out of Fua’amotu and telling guests to move.

In the New Zealand High Court, Commercial Factors argued Scenic had agreed to buy Fua’amotu.  Justice Osborne ruled there had been no agreement for either Scenic or Pacific Hotels to buy the hotel.  There was no concluded joint venture either at the time Commercial Factors purchased Fua’amotu, or subsequently.  Their relationship was one of mutual co-operation; working together, until they fell out.

The High Court was told insurance payouts for cyclone Gita damage are being withheld; Commercial Factors and Scenic dispute who gets payment.  An interim insurance payout of one million dollars sits in a Tongan trust account.

Commercial Factors Ltd v. Scenic Hotel Group Ltd – High Court (19.09.19 & 30.07.20)

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Erceg: Sain v. Millie Erceg Trustee Ltd

 More evidence that having too much money can bring misery; Erceg family members are in court arguing over their late mother’s former home on Withiel Drive in the leafy Auckland suburb Epsom: daughter Vinka and son Ivan both claim ownership.

Vinka says Withiel Drive was purchased using family money with the intent she would inherit following their mother’s death; Ivan says their mother was absolute owner and she bequeathed the property to him on her death.

The fount of Erceg family wealth was son Michael’s ownership of Independent Liquor, rumoured to be worth in excess of one billion dollars after his 2005 death in a helicopter crash.  Lawyers have been kept very busy with litigation over Michael’s wealth, primarily claims by brother Ivan to a greater share.  Ivan was bankrupted in 2010.  Their mother Millie died in October 2019.      

The High Court was told Withiel Drive was purchased at auction in late 2004 for $1.7 million.  Michael put up the money.  Millie Erceg’s name went on the title.  On Millie’s death, family dynamics played out in the High Court.  Vinka said brother Michael made it clear at the time of purchase their mother had only a life interest in the property; it was hers on their mother’s death.  Whilst alive, Millie transferred ownership to a family trust, over which Ivan ultimately had control.  There was evidence of family steps taken in 2007 to protect their mother from what was viewed as inappropriate behaviour by Ivan.  Vinka said their mother was concerned Ivan was placing heavy financial demands on her; Ivan had already taken some two million dollars from their mother’s bank account, she said.  Millie signed a ‘dummy’ mortgage in favour of Vinka, enabling Vinka to lodge a caveat against title to Withiel Drive preventing any further registration against the title without Vinka’s approval.  This was later removed, at her mother’s request said Vinka.  Her mother appeared to have forgotten the original reason for setting up the ‘dummy’ mortgage, she said.

In the years prior to her mother’s death, Vinka lodged a series of caveats against title to Withiel Drive to protect her claimed rights to ownership.  This was done at times when their mother fell ill, with the caveat later lifted.  After their mother’s death in 2019, Ivan disputed Vinka’s right to ownership.

Justice Downs ruled Vinka’s current caveat over title to Withiel Drive remain, pending a full court hearing over the two siblings disputed claims.  There is no documentary evidence supporting Michael’s statements about ultimate ownership of Withiel Drive.  Vinka said other family members and an independent witness support her claim of conversations with Michael promising her eventual ownership.

Sain v. Millie Erceg Trustee Ltd – High Court (16.07.20)

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Joint Ownership: Minehan v. McGuigan

 Family ties are strong on the West Coast, but not between cousins the Minehans and the McGuigans with ongoing disputes over operation of a dry stock farm in Mikonui River Valley, near Ross. To break their deadlock, Justice Doogue ordered Bede McGuigan’s quarter interest in the farm be bought out and McGuigan pay an increased share of his cousins legal costs because of his uncompromising and unhelpful behaviour.

Farming in Mikonui Valley has been in Minehan hands for three generations.  After the deaths of second generation owners, Jim in 1994 and Martin in 2014, ownership came to be split between Martin’s two daughters Dea and Julie (jointly holding a 75 per cent stake) and a distant relative of Jim, Bede McGuigan (with a 25 per cent stake).

The High Court was told Dea has been actively managing farming operations since 1998.  Julie helps out as required.  Bede has been obstructive.  He refused permission to build a new homestead on the property.  His refusal to sign mortgages has hampered attempts to raise loan finance for further development of the farm.

Justice Doogue ruled the best remedy was to make a Property Law Act order forcing Bede McGuigan to sell his share to Dea and Julie. The alternative of subdividing one quarter of the land for Bede was not practicable; farming operations are split across three separate properties.  Justice Doogue called for an updated property valuation.  In 2019, the farm was valued at $1.6 million.

Justice Doogue signalled increased legal costs would be imposed on Bede because of his unreasonable behaviour.  After leaving his cousins with no alternative but going to court, he did not attend at court to challenge their Property Law Act application. 

Minehan v. McGuigan – High Court (14.07.20)

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Relationship Property: O'Brien v. Parkinson

 Working from a shed at the back of his Auckland property, Kevin Parkinson manufactured Namuru GPS receivers and provided electrical engineering consultancy services, trading as General Dynamics Corporation Ltd.  The High Court upheld Companies Act rights for estranged spouse Louisa O’Brien to challenge her former husband’s actions; unilaterally transferring General Dynamics’ assets across to a new company, allegedly shutting her out of a relationship property claim over their former business.  

The High Court was told the two were in a relationship for nearly thirty years, before separating in 2013.  A dispute over what assets are relationship property is before the Family Court.  Ms O’Brien lays claim to a share of General Dynamics’ business; she is a director and 50/50 shareholder.  Also in dispute is a property in Wanaka, allegedly purchased with assets spirited out of General Dynamics.  

Evidence was given of Mr Parkinson shutting down General Dynamics business operations immediately following their 2013 separation. In a lawyer’s letter, he said the company was a ‘one man’ operation; he was free to take his expertise elsewhere and set up a new business.  Ms O’Brien said General Dynamics was more than a mere consultancy; it also manufactured and sold GPS receivers.  Mr Parkinson took away four truckloads of plant and equipment when he left, she said. There was evidence of sales revenue totalling $228,000 booked by Mr Parkinson in the nine months after separation.

Associate judge Andrew ruled there was evidence Mr Parkinson breached Companies Act fiduciary duties, taking company assets when setting up his new business.  Judge Andrew gave permission for Ms O’Brien to sue her former husband in General Dynamic’s name for his alleged breach of fiduciary duty.  Whether Mr Parkinson did in fact convert General Dynamic assets to his own use requires a full court hearing.

O’Brien v. Parkinson – High Court (14.07.20)

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Relationship Property: Annan v. Douglas

 Mihiteria King’s film company Blacklime Ltd used a circuitous route to pay wages for her son, allegedly part of scheme allowing him to escape child support liability but later leading to a relationship property argument whether $21,600 was relationship money or a loan.

Ms King’s son Scott James Douglas lived with Rebecca Annan for over three years.  Ms Annan alleged the ‘money-go-round’ was set up by Mr Douglas in 2013 to cheat on child support payments arising from an earlier relationship.  Reducing declared wages reduced his personal liability for child support.

The High Court was told Mr Douglas and Ms Annan purchased a house at Browns Bay on Auckland’s North Shore in late 2013. Title was taken in the name of their family trust: Fresh Start Trust.  From that date, weekly payments of $600 were paid by Mr Douglas’ father into the Fresh Trust bank account.  This money was used to pay down bank borrowings.  When the two later separated, Mr Douglas and his parents claimed the weekly payments were a loan; demanding repayment of $21,600 from sale of the Browns Bay house.

Evidence was given that Mr Douglas’ parents resisted disclosing source of the weekly payments.  Only after concerted legal pressure was it identified that the payments came from Ms King’s film company, being first paid into her husband’s bank account and then transferred to Fresh Start Trust.  Justice Lang ruled the weekly payments were from Blacklime and intended to supplement Mr Douglas’ reduced wages as a Blacklime employee.  The payments were never intended to be a loan, he said.  The $21,600 was not to be deducted as a debt before splitting 50/50 the net proceeds from selling Browns Bay, he ruled.

Annan v. Douglas – High Court (13.07.20)

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Mainzeal: Mainzeal Property v. Yan

 Attempts to bankrupt Mainzeal director Richard Yan are on hold while he appeals a High Court order to pay $18 million damages for his role in Mainzeal losses exceeding $110 million.

In 2019, liquidators of Mainzeal Property & Construction Ltd successfully sued the company’s directors for insolvent trading having found $26 million of Mainzeal’s funds were transferred offshore between 2004 and 2005 in purchase of assets in China, replaced by promises to repay which proved worthless.  Directors collectively were ordered to pay damages totalling $36 million.  Mr Yan individually, is liable for $18 million.  All directors have appealed.

Liquidators took action to bankrupt Mr Yan.  The High Court was told he has provided no meaningful offers of payment.   Professional indemnity insurers for the other directors have provided security, to ensure payment of damages should their appeal fail.

Mr Yan said he cannot pay anything.  He has no economic interest in Chinese companies controlled by him, he said.  There are two properties in Auckland with a combined market value of some ten million dollars registered in his name.  He holds these assets as trustee of family trusts, he said.  One Auckland property is occupied by his spouse and their son, who attends school in Auckland.  Mr Yan spends most of his time in China.

Associate Judge Andrew ruled Mr Yan’s Mainzeal appeal was not frivolous; there were concrete legal issues to be aired before the Court of Appeal.  If bankrupted, Mr Yan’s rights of appeal would pass out of his hands; any decision to further his appeal would be at the discretion of Insolvency Service.

The High Court was told any bankruptcy order against Mr Yan made in New Zealand would not be recognised by China’s courts and would not be enforceable in China.

Mainzeal Property & Construction Ltd v. Yan – High Court (10.07.20)

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Money Laundering: Internal Affairs v. Ott Trading Group

 Multiple breaches of money-laundering legislation coupled with efforts to frustrate Internal Affairs investigations resulted in fines totalling $7.58 million for money remitters OTT Trading and related business MSI Group. 

OTT Trading Group Ltd was controlled by Tonghui Qi; MSI by Ye Duan.  According to Companies Office records, OTT will soon be struck off for failing to file annual returns.

The High Court was told of Internal Affairs inspectors given the run around when they attempted to audit money remittance businesses controlled by Qi and Duan.  An August 2014 visit at MSI’s Auckland office to audit compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act was met with a quick response; MSI was closing down operations, it said.  Further investigation into MSI was then closed.  An April 2015 audit of OTT’s Auckland operations discovered that OTT was acting as a conduit for MSI and that MSI was still in business. Neither OTT nor MSI could provide evidence of compliance with money-laundering protocols required by the Act.

Internal Affairs investigations identified that MSI had actioned money remittances totalling $213 million over a five year period, failing to complete customer due diligence on some 750 transactions valued at over $50,000.  MSI said the larger the amount being transferred the less willing customers were to provide detailed information.  It did not press for required information about source of funds and customer identity for fear of losing custom.  Trading separately on its own account, OTT transferred funds totalling at least $196 million, also without proper due diligence required by the Act.

Tonghui Qi and Ye Duan each agreed to a three year ban. OTT employee Lee Chon Woon agreed to an indeterminate ban from all work as a money-laundering ‘compliance officer.’

Internal Affairs v. OTT Trading Group Ltd – High Court (15.05.20 & 10.07.20)

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Mortgagee Sale: Heartland Bank v. Haines

 Otago farmer Tony Haines was ordered to pay Heartland Bank $754,200 after a bank loan was called up because Mr Haines failed to pay stock sale proceeds into the farm’s Heartland account. His claim that Heartland failed to properly handle its forced sale of farm stock was dismissed.  

Hillend Station Ltd ran dry stock on farmland near Milton.  Tony Haines was majority shareholder, with a sixty per cent stake.  Heartland Bank provided working capital.  Mr Haines guaranteed Hillend’s borrowing.  Its loan agreement contained a common banking provision that proceeds of all stock sales were to be banked with Heartland.  When Heartland learnt in December 2017 that sales of $85,740 were diverted by Mr Haines to a BNZ account, it moved swiftly. The balance of the Heartland loan was called up.  Several weeks later, Heartland took control of all cattle and sheep on Hillend’s two farm properties.

It was to come out in High Court evidence that Heartland did not maintain an accurate count when mustering into Hillend’s stock yards. Heartland said it was intended that Mr Haines’ father would assume control of Hillend’s debt and resume farming at Hillend.  There was no commercial urgency to get an accurate count.  As it turned out, Tony Haines’ father lost interest in the proposal. Heartland cleared the farm, selling some stock at auction, sending others to the freezing works and selling some cattle diseased with ‘pink eye’ to a neighbouring farmer.

Hartland sued Tony Haines, claiming its shortfall on sale of farm stock plus legal expenses.

Mr Haines complained Heartland Bank had not accounted for all stock on the property.  In return, Heartland alleged Mr Haines had been using his own transport company to rustle Hillend stock, selling it privately.  Justice Osborne ruled the tally figures provided by Heartland may have understated stock levels on the property, but it was for Mr Haines to provide evidence as to any shortfall.  He did not do so.  Justice Osborne also ruled Heartland did not have adequate arrangements in place to care and manage the stock after taking possession.  Just leaving animal husbandry in the hands of Mr Haines’ father was not sufficient.  Mr Haines failed to provide evidence of stock values dropping because of poor management.  

Even if Mr Haines could substantiate his claims that Heartland did not get a reasonable price for stock covered by its mortgage, Heartland was protected by provisions in its loan documents exempting it from liability for acting carelessly or negligently, Justice Osborne said.

Heartland Bank Ltd v. Haines – High Court (10.07.20)

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Relationship Property: Poros v. Bax

 In a decade long relationship, model Kylie Bax and fashion photographer Spyridon Poros lived variously in Los Angeles, New York, Athens, Sydney and Cambridge; living costs met by a family trust: the Goldeye Trust, controlled by her parents.  Their marriage over, Mr Poros laid claim to properties purchased with Goldeye funds as relationship property.

Investigations revealed their 2005 marriage was invalid; Mr Poros was a bigamist, still married at the time he married Ms Bax in Las Vegas.  Under New Zealand law, their enduring de facto relationship was governed by relationship property rules, as if they were married.  Battle lines were drawn in the Family Court.  While full details of their dispute remain concealed by Family Court anonymity, the trial judge commented neither Ms Bax nor Mr Poros were entirely reliable or credible in their evidence.  Earnings during their relationship were described as modest at best. Their expansive lifestyle was funded variously by sale of Ms Bax’ assets and by loans from Goldeye Trust.

On appeal to the High Court, evidence was given of a Bax family arrangement in 2000 which saw legal restructuring of Matamata horse stud Blandford Lodge resulting in two family trusts, both controlled by Ms Bax’ parents, each owning a half share of Blandford.  Ms Bax was named as beneficiary of one trust, Goldeye Trust, and also as creditor having lent $1.5 million to Goldeye.  Funding sources for purchases of properties in Auckland, Los Angeles, New York, Athens and Cambridge became critical in determining which assets, and any subsequent profits on resale, were relationship property or were instead Ms Bax’ separate property.  Poor record keeping clouded the issue.

Justice Jagose ruled there was no reason to overturn rulings made by the Family Court.  In particular, a ruling Goldeye’s half interest in a $3.25 million property in Auckland purchased prior to Ms Bax’ 2005 marriage was not relationship property and a further ruling $2.3 million borrowed subsequently from Goldeye Trust by Ms Bax was to be treated as a relationship debt since evidence indicated the funds were used for relationship purposes.

While the value of relationship property awarded Mr Poros by the Family Court was not made public, the High Court was told Mr Poros had rejected pre-trial settlement offers in excess of the amount awarded.

Poros v. Bax – High Court (7.07.20)

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Medical Misadventure: Accident Compensation v. Ng

 Accident Compensation successfully appealed a High Court test case requiring ACC to compensate all adverse medical outcomes.  Accident compensation for ‘treatment injury’ requires an outcome outside the ordinary, occasioning a measure of surprise, the Court of Appeal ruled.

Since its 1970s introduction, ACC statutory insurance cover for accidents has struggled to accommodate compensation for medical misadventure.  Clinicians can never predict surgical outcomes with certainty.  What is a medical ‘accident’ has proved difficult to define.  The Accident Compensation Act has been amended multiple times.  Since 2005, patients claiming accident compensation for ‘treatment injury’ must prove their injury was ‘not a necessary part or ordinary consequence of treatment.’

Consumer advocates sued ACC in two test cases.  In the first, a woman had suffered a stroke following emergency surgery to isolate an aneurysm in the brain.  Specialist advice was that strokes were possible in 15-22 per cent of cases.  The second suffered partial paralysis after surgery on her spine.  This adverse consequence might occur in 10-38 per cent of cases, specialists said.

The High Court ruled any outcome with a statistical probability of less than fifty per cent was ‘not an ordinary consequence of treatment.’  For ACC, practical effect of this ruling was that all adverse surgical outcomes became eligible for accident compensation.  The Court of Appeal was told it was very rare for surgeons to operate when there was a risk of adverse outcomes in excess of fifty per cent; such surgery would be attempted only when the patient’s life was otherwise at risk.

To be ‘not an ordinary consequence’ the outcome must be unexpected, the Court of Appeal ruled.  Chemotherapy cancer treatments provide an example, it said.  Many patients suffer severe side effects, but this is not a ‘surprise;’ it is an ordinary consequence of treatment.

Accident Compensation Corporation v. Ng – Court of Appeal (7.07.20)

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Caveat: WNY Group v. Crown Range Holdings

Estate of Auckland financial adviser Mark Norrie has been frozen following allegations he deceitfully rerouted funds from a planned Queenstown development prior to his death.  Fellow investors Melvin Jones and James Grove allege he acted fraudulently, misrepresenting investment plans to an Asian investor.

The High Court was told of Queenstown investment plans set up in 2018 by Crown Range Holdings Ltd, a company controlled by Grove, Jones and Norrie.  During an informal directors’ meeting at a Newmarket café, Mr Norrie was deputised to seek $1.2 million working capital from Asian clients; Mr Norrie operated a financial advice service, Norrie & Daughters Ltd.  He approached Li Wu, a client who at various times had several million dollars in Norrie & Daughters’ trust account.  It was impressed upon Mr Wu that Crown Range would not be asking for any money unless Mr Wu was happy with the project.  Mr Wu was content to proceed after being hosted around the proposed Queenstown development by Mr Jones.  Unbeknown to Mr Jones, Mr Norrie was asking Mr Wu to put up $1.6 million, not the expected $1.2 million.

Evidence was given that after Mr Wu agreed to go ahead, Mr Norrie had Mr Wu sign a bank authority to transfer $1.6 million to Saturn Holdings 1957 Ltd, an investment company then owned by Mr Norrie.  Mr Wu was duped.  He thought the money was going direct to Crown Range.  Subsequent inquiries identified that some, but not all this money did eventually find its way to Crown Range.  Mr Norrie died in August 2019.

The High Court was told Mr Wu has since been repaid all he is owed except $100,000 principal, some interest and his legal costs incurred setting up the 2018 loan.  Mr Wu lodged a caveat over the Queenstown development to protect the balance he claims is owed.  Crown Range sued in the High Court saying there was no contract between Mr Wu and Crown Range; Mr Norrie acted without Crown Range authority, it says.  Justice Down ruled the caveat remain.  It is arguable Mr Jones held out Mr Norrie as having authority to finalise a loan at the time Mr Wu was hosted around the proposed Queenstown development, he said.  If so, Crown Range is liable for Mr Norrie’s actions, even if deceitful. A full court hearing is necessary to establish whether Mr Norrie did have authority at law to commit Crown Range to the $1.6 million loan.

WNY Group Ltd v. Crown Range Holdings Ltd – High Court (6.07.20)

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Real Estate: Wynyard v. Bremner

 Bay of Islands real estate agent Dianne Wynyard failed in a claim to commissions totalling $457,000 earned by former business associate Irene Bremner after she joined rival Bayleys.

Ms Bremner said the claim against her was baseless, part of a long running campaign of harassment including bogus allegations against her to the Real Estate Agents Authority and a false $31,800 debt collection action.

The two previously sold real estate jointly from Russell under the Century 21 brand.  The High Court was told they parted ways in 2013 following disagreements over how their business should be run.  Ms Wynyard sued five years later, alleging Ms Bremner had unlawfully taken company records using them to generate sale commissions more properly belonging to their former business.  In particular, claim was made to commissions totalling $457,070 earned on sixteen sales in the years 2014-2019.

Both Ms Wynyard and her husband gave evidence that they saw Ms Bremner copying business records when leaving mid-2103.  Ms Bremner said she simply took away from the office her personal belongings and deleted from the company database personal emails not related to the business.  She neither took nor deleted any company property records, she said.

The High Court was told Ms Bremner was offered employment with competitor Bayleys after returning from a short trip overseas.  Justice Down ruled Ms Bremner did not take business records belonging to her former company.  She did not use information from her former company in making the subsequent disputed sixteen sales, he said.  In exchanges by email and through lawyers’ letters immediately after Ms Bremner’s departure, Ms Wynyard did not raise the question of supposedly missing business records.

The court was told Ms Wynyard laid a complaint about Ms Bremner in 2014 with the Real Estate Agents Authority; the complaint was dismissed.  When Ms Bremner offered in 2014 to sell her shares in the Century 21 business to Ms Wynyard for one dollar, Ms Wynyard claimed Ms Bremner owed money to their company and instructed Baycorp to sue Ms Bremner to recover $31,800 allegedly owed; the claim was abandoned.   

Wynyard v. Bremner – High Court (6.07.20)

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Family Trust: Abel Trust v. Johnson Preschool Ltd

One million dollars lent to Craig Johnson as beneficiary of a family trust is centre of a relationship property dispute as estranged spouse Maria contests legal action to force repayment.

Living in Wellington, Craig and Maria Johnson benefitted in June 2011 from the one million dollar loan when purchasing an Auckland preschool business operating in St Heliers.  Craig’s father, as trustee of a family trust called the Abel Trust, agreed a loan on commercial terms, charging interest at six per cent.  This money was paid into a joint account controlled by Craig and Maria; purchase of the St Heliers preschool by their company Johnson Preschool Ltd followed immediately after.  Craig and Maria are 50/50 shareholders; both are directors.

With Craig’s and Maria’s relationship at an end, the Abel Trust sued to recover its one million dollars.  The High Court was told Preschool financial statements did not record the one million dollars as a liability.  Including this debt as a Preschool liability dramatically reduces the value of Johnson Preschool.  Craig said the loan is a Preschool debt; Maria alleges the one million dollars was used for other purposes and that Craig is in breach of director’s fiduciary duties by belatedly including this as a Preschool debt.  She asked the High Court for Companies Act authority to sue Craig in their company’s name for this alleged breach of duty.  Associate Judge Johnstone refused.  It would complicate what in essence is a debt collecting claim by Abel Trust, he said.  Maria and Craig are deadlocked over control of Johnson Preschool; other Companies Act rules are more appropriate for dealing with deadlocked companies, Judge Johnstone ruled.

Abel Trust v. Johnson Preschool Ltd – High Court (3.07.20)

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Joint Venture: Forest Holdings v. Sheung

Scott family interests from Oropi, near Tauranga, failed in their claim Malaysian investor Thean Kai Sheung owed $1.17 million for harvesting rights over native timber in a Kaimai forest.  While a joint venture agreement was signed, Mr Sheung was never committed to the deal.

The Scotts own Forest Holdings (NZ) Ltd.  They allege Mr Sheung agreed in 2017 to take up fifty per cent of Forest Holdings rights to harvest rimu and tawa in the Kaimais. Unpaid, the Scotts sued.  Terms of a 2017 joint venture agreement came under minute scrutiny in the High Court.

Justice Duffy ruled wording of the agreement required payment of $1.17 million by a specified date before the joint venture became legally effective.  Since no payment was made, the joint venture had no legal effect from that specified date. It did not matter that the joint venture agreement was in fact signed off after the specified date.  Mr Sheung personally did not sign; a company Mr Sheung was considering investing in had signed up to the proposed joint venture.

Forest Holdings (NZ) Ltd v. Sheung – High Court (1.07.20)

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