Frederick Pereira: re Marlborough Country Ltd

Minority shareholders in Port Underwood forestry company Marlborough Country Ltd allege Auckland director Frederick Pereira conspired to rip them off, misrepresenting plans for the company while favouring family and associates.

Marlborough Country was established in 2005 with plans to buy a forestry block in Marlborough, harvest the trees and then subdivide the land for residential development.  Eight Wellington-based shareholders took a 35 per cent stake in the company.  Their investment has proved a disappointment.  The forest remains unharvested.  It has been sold, netting some $807,700.  Marlborough Country is in liquidation.

The Wellington minority claim the full $807,700 should be paid to them, with Mr Pereira and his allies getting nothing.  Marlborough Country’s share register indicates the majority shareholding is linked to interests in Malaysia.

The minority allege that Mr Pereira misrepresented the proposed development.  He did not first issue a prospectus; one was required, they claim.  It is claimed Mr Pereira used an intermediate company as part of a conspiracy, buying the forestry block for $800,000 before on-selling to Marlborough Country nine days later for a price in excess of $1.3 million.  Minority shareholders further claim Marlborough Country shares were issued to associates of Mr Pereira at an undervalue, diluting the value of their minority shareholding.

Forestry sale proceeds are currently held in trust by a neutral stakeholder.  The High Court was told Marlborough Country liquidators are content to sit on the sideline, leaving the two shareholding groups to fight it out in court.  At a preliminary hearing, Wellington minority shareholders were told to file in court specific details of the alleged fraud.

re Marlborough Country Ltd – High Court (26.02.21)

21.042

Ombudsman: Financial Services Complaints v. Ombudsman

The Ombudsman’s office acted unlawfully when not bothering to consider on its merits Financial Services Complaints Ltd’s application to use the word ‘ombudsman’ in its advertising.   It bordered on contempt of court for Chief Ombudsman Peter Boshier to procrastinate over a court-ordered reconsideration of Financial Services’ application while he lobbied parliament to block the application, Financial Services alleged.   

Financial Services requests for approval have been turned down three times with its first application declined in 2015.  The office of parliamentary ombudsman was established in 1962.  It deals with complaints that government has not complied with the law.  The Ombudsman’s Office is jealous of its standing; approval is needed for others seeking to use the title.

Privately-run industry dispute resolution services having approval are the Banking Ombudsman Scheme, Insurance and Financial Services Ombudsman Scheme and Financial Dispute Resolution Service Ltd.  Financial Services Complaints Ltd similarly wants to add the moniker ‘ombudsman’ to its services.  It currently serves schemes with memberships totalling some seven thousand.

In 2018, the Court of Appeal ruled the Ombudsman’s Office was being overly protective of its name and that Financial Services application should be reconsidered.  Some fifteen months later, the Office again turned down Financial Services’ renewed application.  In the interim, lobbying by the Chief Ombudsman saw government legislation passed prohibiting use of the term ‘ombudsman’ by private sector organisations with exceptions for those private sector organisations already having approval. Mr Boshier was to tell the High Court there was nothing sinister in this law change; it was intended to limit ongoing legal costs over disputes about the name.  Evidence was given that Mr Boshier initially sought to exclude in the legislative change Financial Services then ongoing application for use of the name.  While the changed rules did in fact allow Financial Services to continue with its third application, this application was eventually turned down.

Justice Grice ruled this third decision invalid. The Chief Ombudsman had made his mind up from the outset that Financial Services would not get approval, she ruled.  At law, a pre-determined decision is not a decision at all.

Financial Services application was sent back to the Ombudsman’s Office for a fourth round of consideration.  An independent outsider should be appointed to consider this application, Justice Grice suggested.

Financial Services Complaints Ltd v. Chief Parliamentary Ombudsman – High Court (26.02.21)

21.041

Civil Aviation: Helilogging Ltd v. Civil Aviation

When buying ex-RAF Wessex helicopters, Mark Ford took a punt on getting Civil Aviation certification to use them for heli-logging operations.  With certification refused, his $56 million claim alleging deceit and misfeasance by Civil Aviation failed.

Stratford-based Mark Ford intended to use the helicopters to lift logs out of remote central North Island forests for delivery to his sawmill.  At the time of his purchases, use of Wessex helicopters did not have a good track record; a pilot was killed in February 2001 and the Wessex written off when it crashed lifting logs near Motueka.  Owner of that helicopter, Bruce O’Malley, subsequently pleaded guilty to Civil Aviation charges of using the aircraft for commercial purposes in breach of its certification conditions.

The High Court was told Mr Ford applied in 2004 for Civil Aviation certification permitting use of his Wessex helicopters for commercial logging.  Since Wessex machines were ex-military and not commercial aircraft, detailed surveys and test flights were required.  Before committing to the cost of certification, Mr Ford sought acknowledgement from Civil Aviation that heli-logging would be permitted on ‘satisfactory completion of the test and analysis.’  No such pre-approval was given.  Civil Aviation did indicate his proposed certification testing programme was appropriate.

When Civil Aviation certification was subsequently refused, Mr Ford sued for ten years’ lost profits calculated at $56 million and as an alternative sued for $5.2 million considered wasted expenditure on purchasing the aircraft and paying for certification.  He alleged Civil Aviation did not consider his application on its merits, instead imposing a blanket restriction on use of ex-military helicopters for commercial use.  Lobbying members of parliament and laying complaints with the Auditor-General and Ombudsmens’ Office came to nothing.

Mr Ford alleged dishonesty by Civil Aviation in the way it sought expert advice and interpreted expert reports as part of the Wessex testing programme. After a seven week High Court hearing, the trial judge ruled Civil Aviation acted properly and did not act dishonestly; a ruling upheld by the Court of Appeal.

Helilogging Ltd v. Civil Aviation Authority – Court of Appeal (25.02.21)

21.040

Neighbours: Bilkey v. Kyriak

It was not just about the letterbox, but the letterbox proved to be the blue touch paper which set off legal fireworks following a falling out between two neighbours in Remuera, Auckland. Damage to a letterbox progressed to disputes over a boundary fence and a threat to sue for defamation.

Properties at 22 & 22A Arney Crescent sit in one of the city’s more expensive suburbs.  In September 2013, lawyer Michael Kyriak purchased 22A from the Bilkeys, owners of No. 22 next door.  Each property had a letterbox on either side of a shared driveway, both amounting to a cavity inside a brick pillar.  Mr Kyriak’s letterbox was badly damaged by a contractor using the shared driveway to work on the Bilkey property.  The errant contractor reinstated the pillar, but without any cavity for a letterbox.

A three and a half day trial followed in the District Court.  It transpired that the original letterbox in fact encroached onto neighbour’s land at No. 24 and that Mr Kyriak had no legal access to the site for either the old or the new letterbox used for No. 22A.  The trial judge ruled it was an implied term in his agreement for sale and purchase that Mr Kyriak had the right to use a letterbox at the top of their shared driveway. The judge refused Mr Kyriak’s request for a registered easement to protect access to his letterbox.

Bundled in with the letterbox dispute was argument over their boundary fence.  Mr Kyriak demanded the Bilkeys meet one half the cost of a new boundary fence plus a gate at the top of the shared drive.  The trial judge dismissed this demand; the existing fence could be repaired.  Mr Kyriak was held responsible for all repair costs.

This District Court trial amounted to round one. Round two was legal argument over payment of legal costs.  Scale of costs for winning litigants in the District Court would see Mr Kyriak awarded some $34,500.  District Court reduced the amount payable by 55 per cent: fifty per cent reflecting the fact most of the District Court trial was taken up with arguments about the fence and the gate (arguments Mr Kyriak lost) and another five per cent for both Mr Kyriak’s failure to comply on time with court orders to hand over documents and his unsuccessful attempt to introduce a claim in defamation just before the trial.  Round three was an appeal to the High Court.  The Bilkeys argued for a further reduction in the award of costs to Mr Kyriak.  The Bilkeys said they should be entitled to claim costs of their defence to the fence dispute, as if it were a successful claim by them against Mr Kyriak and that Mr Kyriak’s refusal to accept offers to settle out of court should be taken into account.  Their appeal was dismissed.

Bilkey v. Kyriak – High Court (25.02.21)

21.039

Property Development: Green & McCahill v. Ara Weiti Developments

Having lost control of Weiti Bay development north of Auckland, Taiwanese investor Tong-Kuang Liu failed in legal arguments that he still had part-ownership of the project now taken over by interests associated with fellow investor, Auckland lawyer Evan Williams.  

Development of the 900 hectare project at Weiti Bay, thirty minutes north of Auckland, has been through a long gestation.  In 2005, Liu family interests teamed up with Mr Williams.  Paying five million dollars for an option, Williams’ company put forward a development scheme which would see the Liu family receiving between $155 million and $295 million, the final figure dependent upon how the project developed.  It was not straight-forward; Weiti Bay is bordered by marine reserve. Environmental issues have received wide publicity.   

The High Court was told all co-operation between the two had fallen apart by early 2019, with the project only partly completed. Secured creditors called up their loan; just over twenty million dollars.  Mr Williams bought the remaining 33 lots at a mortgagee sale.  Mr Liu complained he had been robbed.  He had wound up paying the project debt, while Mr Williams ended up with the remaining land, he complained.  Legal action has been filed by the Liu family against Mr Williams plus his companies alleging they were in a joint venture and that Mr Williams broke terms of the joint venture when he bought in at the mortgagee sale.  In turn, Mr Williams alleges the Liu family tried to get paid ahead of secured creditors, with a mortgagee sale precipitated by Liu family intransigence.

Liu family registered caveats over the Weiti Bay land now owned by Mr Williams companies, bringing legal issues to a head.  Associate judge Andrew ordered removal of the Liu caveats.  Mr Williams purchase of Weiti Bay in a mortgagee sale was not challenged.  Liu family no longer had any interest in the land.  Any complaint Liu family has against Mr Williams and his companies is a claim for damages against them personally, he said. This issue has yet to be heard in court.

Green & McCahill Holdings Ltd v. Ara Weiti Developments Ltd – High Court (24.02.21)

21.038

Maori: Cowan v. Cowan

Having a wastrel for a father, Christine and Te Rahui Cowan tried to prevent him selling houses they said should be kept in the family.  The High Court said appeals to tikanga relating to papakainga required expert evidence of Maori custom.

Attempts to marry concepts of Maori customary land holding with Pakeha-inspired land law caused problems for brother and sister challenging their father’s behaviour.  The High Court was told they were fed up with their father’s failure to provide proper support for his family and his further failure to rearrange family financial affairs as agreed back in 2002.

Evidence was given that their father John Cowan gave up full-time work in the 1990s, trying what was obliquely described as ‘various activities.’  A tax investigation for unpaid taxes forced the sale of property owned by his wife to meet his tax debts.  A subsequent family conference produced a written agreement in which John agreed to gift the family home at Lyall Bay in Wellington to daughter Christine and further agreed to having no claim on any future assets coming into the family. Nothing came of this agreement. Some seventeen years later, with John’s wife Marama terminally ill with cancer, a relationship property agreement was prepared for a split of relationship property.  Marama signed shortly before her death.  John refused to sign, claiming over top of his children’s protestations that he had never agreed to its terms.

On his wife’s death, John became absolute owner of Lyall Bay and a property in Carterton.  The High Court was told Carterton was initially owned by son Te Rahui, but had been transferred into his father’s name out of deference to John’s mana as his father.  Te Rahui had been living in Carterton for many years and Christine at Lyall Bay for most of her life, both rent free.  As occupiers, they had paid bills and maintenance costs for each property’s upkeep.  They challenged their father’s right to claim absolute ownership of each property.

In Pakeha-inspired land law, claim to land owned by another requires proof of a constructive trust; proof of contributions to the property (most commonly direct or indirect contributions to the purchase price) such that there is a right to ownership or part-ownership. Associate judge Johnston ruled there was no evidence of such contributions by ether Christine or Te Rahui.

Maori customary law recognises a concept of papakainga; the existence of an original home or home base.  To recognise a constructive trust on the basis that John and his late wife had the intention to hold both Lyall Bay and Carterton on trust for their descendants as papakainga required expert evidence of Maori custom, Judge Johnston ruled.

Cowan v. Cowan – High Court (19.02.21)

21.036

Estate: Farquharson v. Farquharson

Ian Farquharson breached a moral duty owed his only son when he left everything to former wife Opal in a will signed before they had separated and divided all relationship property.  Son David was awarded $216,000, just under half his late father’s estate.

Ian’s last will was signed in 2005, when son David was aged 32.  Ian’s then wife Opal was named as sole beneficiary.  They separated four years later.  Formal agreement for division of relationship assets followed.  Ian did not update his will.  He died in 2017.

The High Court was told that after separation Ian and Opal kept in regular contact, though they lived in separate houses, living independent lives.  Son David had moved to Australia to live and work as a labourer.  He kept in contact with his father by phone, coupled with occasional return visits.  David returned to New Zealand for just under three months to help care for his father shortly before his death.

Opal resisted David’s claim to a share of his late father’s estate.  Evidence was given that the two had barely spoken to each other for some eight years. They held differing views over reasons for Opal’s separation from husband Ian.  David challenged Opal’s claim to have never received her promised share of Ian’s superannuation payments (a claim later proved to be untrue) and he criticised her use of estate money to pay lawyers’ fees challenging his claimed entitlement to a share of the estate.

Justice Davison awarded David nearly half the value of his late father’s estate under the Family Protection Act.  It was breach of a moral duty owed under the Act for Ian not to acknowledge the bond between father and son, especially given that Ian had separated from spouse Opal and divided their relationship property by the time of his death.  In calculating the final value of Ian’s estate, Justice Davison added back $49,300 in legal fees charged the estate.  It was inappropriate for Opal as executor to use estate money to defend a claim affecting her personal interest as sole beneficiary, he ruled.

Farquharson v. Farquharson – High Court (19.02.21)

21.035

Commercial Lease: Courtesy Motors v. Endeavour Commercial

Accidentally emailing the wrong file to its landlord’s lawyer triggered legal argument over whether there was any agreement forcing Levin Ford dealer Courtesy Motors to continue its Oxford Street tenancy.

The High Court was told Courtesy Motors was part way through lease-renewal negotiations with landlord Endeavour Commercial Ltd when covid-19 lockdown restrictions forced a rethink.  The landlord had previously sent Courtesy’s Gordon Powley a draft lease renewal.  Mr Powley signed and initialled the draft before sending it to Courtesy’s lawyer to hold, pending legal clarification on any new special clauses.  Courtesy was nervous that the landlord might have used the renewal to sneak in clauses imposing extra liability on Courtesy as tenant in a building over thirty years old.

As part of the usual online document exchange between lawyers acting for landlord and tenant, Courtesy’s lawyer accidentally transmitted the pre-signed renewal, along with documents marked up with legal queries still to be discussed with Courtesy.  Landlord Endeavour Commercial pounced; the signed renewal was evidence of a binding contract.  Courtesy denied there was a binding contract; Courtesy’s lawyer demanded the files be returned, they were protected by lawyer/client legal privilege.

Clients seeking legal advice can claim legal professional privilege for communications between themselves and their lawyer. These communications cannot be disclosed without client approval.  This rule enables clients to be completely candid with their lawyer, putting their lawyer in the best position to offer appropriate advice.

In the High Court, Justice Cooke ruled the marked-up documents containing legal issues for client discussion were privileged; landlord’s lawyer was required to return this file.  But the file containing the pre-signed lease renewal was not privileged; this was not a document seeking legal advice.

There is still a legal dispute whether Mr Powley’s signature alone on the lease renewal was sufficient to have the renewal enforceable against his company: Courtesy Motors Ltd.

Courtesy Motors Ltd v. Endeavour Commercial Ltd – High Court (19.02.21)

21.037

Xero: Buxton v. Xero Ltd

It was not a breach of privacy for Xero to disclose personal financial transactions of David Henderson’s spouse as part of Insolvency Service investigations into his financial activities.

Mr Henderson was bankrupted in 2010 following collapse of his Christchurch property developments headed by Property Ventures Ltd.  His subsequent relationship with Insolvency Service could not be described as cordial. Insolvency Service obtained court orders extending his bankruptcy to 2017 with a ban on him managing any business until December 2022.

As part of its bankruptcy investigations, Insolvency Service issued section 171 notices to Xero in 2014, requiring production of online financial records for a company called AFB Treasury Ltd.  Xero baulked; Mr Henderson was neither director nor shareholder of the company; control lay with Mr Henderson’s spouse, Kristina Buxton. AFB Treasury financial records were released on further evidence from Insolvency Service that Mr Henderson appeared to be using AFB to run a business whilst bankrupt, in breach of the Insolvency Act.  Xero requested the financial information be kept confidential, used only for the purpose of investigating Mr Henderson’s bankruptcy.  The existence of section 171 notices is not disclosed to individuals under investigation.  Insolvency Service confidential demands for information over-ride Xero’s policy of advising customers when account information is being disclosed to others.

Ms Buxton sued Xero, alleging it was a breach of privacy to disclose her personal financial information when target of Insolvency Service investigations was her husband.  In particular, she objected to disclosure of information about payments made for medical treatment.      

Identification of AFB Treasury data held by Xero was a valid use of section 171 information requests, the High Court ruled.  Xero could not be liable for any breach of privacy when complying with a valid section 171 notice.

Buxton v. Xero Ltd – High Court (18.02.21)

21.034

Relationship Property: Macnamara v. Macnamara

Noel Macnamara’s obstructive behaviour in blocking attempts to sell the family home at Karaka, part of a relationship property split, saw the High Court ordering him to allow real estate agents access or face liability for contempt of court.

Noel and Sheryl Macnamara separated in 2019.  Most of their assets are tied up in two family trusts: properties at Pauanui on the Coromandel and at Karaka south Auckland, together with ownership of central heating installer Oneheat Ltd.  Clear identification of the current financial position is proving difficult.

Each filed separate relationship property claims in the High Court.  In order to make progress, both signed a consent order giving up control of their family trusts to two independent trustees.  The new trustees sold Pauanui.  Sale of Karaka is proving problematic.

The High Court was told Noel is living at Karaka with his daughter.  He is not paying rent to the Trust.  He is refusing access for real estate agents.  Karaka has a market value of about four million dollars according to a valuation obtained by the new trustees.  They are keen to sell; a $250,000 mortgage is accruing interest at 10.5 per cent.  Noel said he would buy, offering three million. This was rejected by the new trustees. Noel asked the High Court to delay a sale until such time as Oneheat’s financial position had been established. He would then be in a position to make a firm offer for Karaka, he said.

Evidence was given that reconciliation of Oneheat’s financials is complicated by allegations Noel has drawn an excessive salary from the company and that he has borrowed money from the company, yet to be repaid.

Justice Downs emphasised the consent order signed by Noel gave independent trustees control of trust assets and the power to sell. Consent orders filed in court have the effect of court orders.  Noel was ordered to provide access to Karaka, allowing preparation for sale and holding open homes.

Macnamara v. Macnamara – High Court (16.02.21)

21.032

Relationship Property: Drummond v. Drummond

A pre-emptive strike in a relationship property dispute by Winton farmer Janeen Drummond in unilaterally taking $78,000 out of their family company bank account survived a High Court challenge by husband Russell. 

The Drummonds farm multiple sheep and beef properties in Southland, estimated to be worth between twenty and twenty-five million dollars.  The High Court was told the two separated in 2019 after some 24 years marriage.  Some months later, Janeen unilaterally withdrew $78,000 from a Rabobank account in the name of RG & JM Drummond Farms Ltd, one of many business entities and trusts holding their business assets. Husband Russell had blocked regular salary payments previously agreed, she said.

Russell sued, using company law arguments.  The two are both directors of Drummond Farms and have equal shareholdings.  Unilaterally taking money from the company was a breach of directors’ duties by Janeen, he said.  She should be removed as a director and ordered to repay the money, he claimed. He sued using the High Court fast-track summary judgment procedure, where payment of a debt is ordered unless the person sued has a believable defence.     

Justice Gendall ruled Janeen had a plausible cross-claim.  She says the company owes her personally about $224,000; money loaned to the company earlier.  While Janeen may have acted improperly in unilaterally taking $78,000 from Drummond Farms, Russell’s action in seeking summary judgment was not appropriate, Justice Gendall said.  The major issue is one of untangling their relationship property on separation, he said. Arguments over the $78,000 are merely a subset of this major issue.

Drummond v. Drummond – High Court (16.02.21)

21.033

Co-op Housing: Koanga Institute v. Kotare Community

Promoted as eco-friendly co-operative living, Kotare Village north of Wairoa has collapsed into an avalanche of claims and counter-claims as residents allege founders led by Robert Corker misrepresented the deal and have acted in breach of trust.  Proposals to sell off the village led to a storm of protests; founders will get an unwarranted financial benefit, residents claim.

Kotare Community Land Trust Board sits at the head of legal structures governing the co-operative.  Those joining the rural community purchased 34 year leases giving the right to build a house and share in use of land set aside for heritage plants and bio-intensive gardening.  The Trust is registered as a charity under the Charitable Trusts Act.  The High Court was told it should never have been registered; the private benefit enjoyed by community residents means it does not satisfy the legal definition of a charity.  The Trust has failed to file regular financial statements as required by the Act.

Antagonism between community founders and subsequent residents saw the founders take steps to liquidate the Trust.  This would see the underlying freehold sold, while leaving community members entitled to stay on their leased land.  A group of residents objected; the founders would escape providing compensation for allegedly promoting village operation in a misleading fashion, in breach of the Fair Trading Act, they say.  Net proceeds from sale of the freehold would not be divided equitably, they complain.  In addition, they dispute valuations of land offered for lease and allege breaches of rules governing GST.  An independent report criticises the current legal structure as potentially not being in the best interests of residents.  Aggrieved residents want the village kept intact, with village operations restructured.

In a preliminary High Court hearing, Justice Cooke set out guidelines for a subsequent full trial.  He signalled one possible solution is to replace current Kotare Trust trustees with court-appointed trustees.  Robert Corker resigned as a trustee in 2018.  There have been multiple changes to the positions of trustee since that date. 

Koanga Institute Incorporated v. Kotare Community Land Trust Board – High Court (15.02.21)

21.031

Intellectual Property: re Solar Bright Ltd

High Court ordered disclosure of patent discussions about PATeye and Dataeye, intelligent road-marking cats eyes providing real time data on road usage and road conditions.  Investors in Christchurch-based Solar Bright allege Patrick and Nicola Martin misrepresented patent ownership.

In 2019, Solar Bright Ltd went into liquidation. Investors had put in some $2.3 million to commercialise the PATeye and Dataeye products.  Founders Patrick and Nicola Martin were ordered to return intellectual property rights improperly stripped out of the company.  Arguments then followed over whether Solar Bright actually controlled patent rights the Martins had supposedly hijacked.  Meanwhile, Solar Bright liquidators are making regular payments to keep patent registration alive.

In the High Court, the Martins resisted investors efforts to scrutinise details of the Martins March 2017 discussions with patent attorneys over details of Dataeye patent registration.  They said these discussions were private and legally privileged.  Associate judge Lester ordered disclosure.  Legal privilege can be overridden on evidence of fraud or sharp practice.  Public presentations to investors highlighting Solar Bright’s control of patent rights at a time when patents were filed in the name of Mr Martin personally were evidence of sharp practice, Judge Lester ruled.

re Solar Bright Ltd – High Court (12.02.21)

21.030

Christina Domecq: Heartland Bank v. Ora HQ Ltd

Heartland Bank is chasing down money used by Andrew Jeffery to purchase property with long-term partner Christina Domecq at a time her business interests were in trouble.  Ms Domecq filed for bankruptcy in 2019 after held liable on debts exceeding $13.2 million following a failed attempt to float Fulcrum Group on ASX.

Software-based marketing company Ora HQ Ltd and consultant Wild Logic Ltd, both previously controlled by Ms Domecq, are in liquidation owing Heartland Bank in excess of three million dollars.  The High Court was told Heartland Bank threatened recovery action against Ora HQ back in June 2017 when debt was $1.2 million in arrears. Within weeks, Ora HQ sold part of its business, failing to pay the $650,000 deposit received into its Heartland bank account as required by Heartland’s loan agreement.  Some of this money found its way into a separate Wild Logic bank account.  Around the same time, Mr Jeffery paid $250,000 into Wild Logic’s bank account, transferring $240,000 out of that account the next day into a solicitor’s trust account to fund purchase of a residential property at 84 Watkins Road. Real estate records identify a property with this address sold near Hawea.

Heartland Bank’s security also covered Wild Logic’s assets.  The Bank claims security over the $240,000 paid out from Wild Logic for the Watkins Road purchase.  Watkins Road has since been sold.  Of the net proceeds: a $140,000 deposit put up by Ms Domecq on the purchase was paid to Insolvency Service as an asset in her bankruptcy; the balance of some $250,000 is held in a solicitor’s trust account with both Heartland Bank and Mr Jeffery claiming the money.

Mr Jeffrey was late filing his papers in court. Over Heartland Bank’s objections, he was given leave to file late.  Mr Jeffrey says the $240,000 was his own money; Wild Logic was simply used as a conduit to pass cash through to a lawyer for the Watkins Road purchase, he says. Provenance of this $240,000 awaits a full court hearing.

Heartland Bank Ltd v. Ora HQ Ltd – High Court (12.02.21)

21.029

Business Dispute: Rasela v. Thachankary

Doctors Vandana Rasela and Shigy Thachankary used differing corporate structures for their two jointly operated medical practices in south Auckland leading to complicated legal manoeuvring after falling out.

The two established a joint general medical practice in Papakura, then set up a secondary practice in Flat Bush.  The Flat Bush practice no longer operates; it is in receivership.  Dr Rasela alleges Dr Thachankary regularly behaves in a bullying and aggressive manner towards her.  He alleges he has been ripped off after providing financial support for establishment of Flat Bush.

Different corporate structures were used for the two separate medical practices: Papakura operates as Auckland City Medical Clinics Ltd owned 50/50 by the two; Flat Bush operated as Flat Bush Medical Centre Ltd owned 50/50 by Dr Rasela and her husband.  Mr Thachankary has no equity interest in Flat Bush but did loan money to Mr Rasela for costs of setting up Flat Bush.  He alleges Mr Rasela has failed to repay loans totalling $235,000 and further failed to authorise payment of fee income due him from Flat Bush. He complains Dr Rasela improperly inserted herself as a secured creditor of Flat Bush, claiming status as a secured creditor for money Dr Thachankary alleges she is not owed.  Legal writs have been flying.

Dr Thachankary is suing for money he claims owed in respect of Flat Bush.  Dr Rasela is suing to have their 50/50 Papakura practice wound up on grounds of her fellow shareholder’s behaviour.  Dr Thachankary wants the two cases heard together; what happened at Flat Bush is relevant to the situation at Papakura, he says.  Dr Rasela says the two practices operate as separate companies, different legal issues are at stake in each case and they should be heard separately.  Wording of a High Court ruling intending to have each case heard separately had the effect of allowing arguments about Flat Bush admitted as evidence in the Papakura case.

Back in court, Dr Rasela was ordered to hand over financial information about Flat Bush relevant to their falling out as owners of their Papakura practice, Auckland Medical.  In particular, Dr Thachankary wants details of loans from Auckland Medical to Flat Bush and an accounting for Auckland Medical supplies and staff time utilised at Flat Bush.

Rasela v. Thachankary – High Court (9.02.21)

21.028

Estate: re Estate Anne Brosnahan

Described as erratic, impulsive and lacking empathy, Anne Brosnahan was warned by lawyers preparing her will that failing to properly provide for her only son would lead to litigation on her death. So it came to pass.  The High Court ruled son Peter was entitled to half her $1.8 million estate.

Anne died in 2019.  Nominated charities were bequeathed nearly half her estate, with other specific bequests to her sisters, a friend and three god-daughters.  Two of Peter’s three children were gifted $200,000 each; the third child nothing.  The remainder was left to Peter; approximately $620,000 the court was told, with further estate expenses likely to reduce this amount.

Peter, a Wellington barrister, claimed against his mother’s estate under the Family Protection Act.  Successful claims require proof of failure to provide ‘proper’ support, breaching a moral obligation.  Courts have interpreted ‘proper’ to mean the need to acknowledge family members existence and role in family life.

The court was told of Anne’s virtual abandonment of Peter as a child, acting with frequent indifference as to his needs and upbringing.  This pattern of indifference continued on the death of Peter’s father; Peter was posted envelopes of unpaid invoices with demands they be paid.  She was not always truthful.  In one instance, invoices for extensions to a property were deliberately misdescribed as household maintenance.  Invoices totalling well over $100,000 were paid on his mother’s behalf, the court was told.  Peter was called in to smooth over differences arising between his mother and her neighbours and between her mother and tenants in properties she owned. Peter was left to pick up the pieces when his mother impulsively purchased properties, often against advice not to go ahead.

Justice Cull ruled an award of $950,000 better recognised the moral duty Anne owed her son.  An award of $100,000 was also made to Peter’s third child, left nothing in the will.  As a result, Peter and his children received two-thirds of the estate; gifts to others reduced as a consequence.

re Estate Anne Brosnahan – High Court (4.02.21)

21.027

Cheque Fraud: Tandem Group v. ASB

Taranaki chartered accountant Tandem Group is suing ASB Bank alleging it failed to properly follow up on forged amendments to a $200,000 cheque before paying out.

Tandem Group Ltd employee Shaun Quigley committed multiple frauds in 2016, amending client cheques made out to Inland Revenue, adding his name as payee then diverting payments into his personal bank account.  Quigley had a gambling habit.  The High Court was told he died shortly after the fraud was uncovered, committing suicide. Tandem reimbursed clients.

Before the fraud was discovered, a $200,000 cheque intended for Inland Revenue and signed by Tandem farming client Zena Clark was cleared by ASB Bank with payment made into Quigley’s personal bank account.  The funds were supposed to be credited to the Clarks’ farm equalisation account at Inland Revenue; a tax arrangement enabling farmers to smooth income across different tax years.  Having been reimbursed, the Clarks assigned to Tandem Group any legal rights they had against ASB.

ASB asked the $200,000 claim be struck out.  Bank terms and conditions applying to the Clarks’ ASB account protected it from fraud committed by others, ASB said.  ASB’s standard terms still held the Bank liable for any loss ‘directly caused by [the Bank’s] fraud or wilful negligence.’  ASB said clearance of the $200,000 cheque was actioned according to its standard procedures for high value cheques; a staff member rang Mrs Clark who verified cheque details before it was cleared for payment. Mrs Clark says she has no recollection of any phone call from the Bank.  She did not become aware that ‘S Quigley’ was added as payee until after the fraud was uncovered, she says.  A banking expert told the High Court alarm bells should ring for banks when a payee’s name on a cheque is altered in different handwriting.  Evidence was given that Mrs Clark emailed ASB the day the signed cheque was handed to Tandem Group, advising a $200,000 cheque payable to Inland Revenue had been given to their accountant.

Justice Katz dismissed ASB’s application to strike out the claim.  A full court hearing is needed to clearly determine whether the Bank was wilfully negligent.

Tandem Group Ltd v. ASB Bank Ltd – High Court (2.02.21)

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