Right-of-Way: Cornes v. Village Residential

Arguments over an upgrade for a Havelock North residential right-of-way proved fruitless as David Cornes and Rei Jones attempted to block redevelopment of a two hectare block of land sitting between them and Lucknow Road.

Hawkes Bay developer Village Residential Ltd has Hastings District Council approval to redevelop the two hectare Lucknow Road property, with subdivision into five separate lots.  Council consent required the right-of-way shared with Cornes and Jones to be upgraded as part of the development; it was in a state of disrepair, primarily disintegrating seal and loose metal.  Cornes and Jones objected to the proposed Village development, annoyed it would affect their privacy.  The court was told Mr Cornes at times parked his car on the right-of-way, attempting to impede contractors’ access.

Legal challenge to the development centred on wording of the easement creating the right-of-way.  Cornes and Jones said standard rules in the Property Law Act create mutual obligations to ‘maintain and repair’ rights-of-way.  That does not extend to an upgrade, they said.  Attempts to upgrade should be treated as a trespass and blocked by the court, they claimed.

Upgrading an existing right-of-way was compatible with Property Law Act rules for maintenance and repair, the Court of Appeal ruled.  Village Residential was allowed to upgrade the Lucknow Road right-of-way as required by Hastings District.

Terms of the right-of-way require Cornes and Jones to pay half the upgrade cost.  This creates an unfair burden, the court said, given that three of the newly subdivided properties would become entitled to use it.  It would be wise for Village Residential to negotiate with Cornes and Jones for a modification of payment obligations, the Court of Appeal warned.

Cornes & Jones v. Village Residential Ltd – Court of Appeal (31.05.21)

21.092 

Environment: Gifford v. District Court

The High Court gave Blenheim waste dump operator Mike Gifford the green light to challenge resource management charges laid by Marlborough District Council before he fronts up to any criminal prosecution; part of growing judicial control over potential misuse by local authorities of their ever-increasing powers to prosecute.

Power to prosecute lies with the state, commonly exercised by police.  Police procedures see decisions to prosecute reviewed, minimising the chances of prosecutions in pursuit of personally motivated vendettas.  With increased regulatory controls on business being passed over to government departments and local authorities, all backed by the power to prosecute, courts have stepped in to regulate use of their discretions to prosecute, allowing pre-trial judicial review of prosecutions.   

Marlborough District’s allegations that Mr Gifford failed to properly manage a landfill site at Redwood Pass south of Blenheim were given extensive publicity.  It filed criminal charges under the Resource Management Act.  Specifically, Marlborough District alleges a failure to properly contain grape marc dumped as a residue from wine production.  It is alleged marc has leached into both ground water and nearby Pukapuka Stream.

Mr Gifford has elected trial by jury on the resource management criminal charges.  Before any criminal trial, he asked the High Court to review the decision to prosecute. Charges should never have been laid, he said.  Council inspectors did not do their job properly and he should not face criminal charges to prove otherwise, he claims.

As a general rule, courts will not review before trial any decision to prosecute.  Criminal law allows an appeal as of right, if convicted.  The Attorney-General applied to have Mr Gifford’s judicial review application struck out.  Justice Isac declined.  It is unattractive that a citizen should have to either plead guilty or be convicted of an offence, and all that goes with that, before they can challenge the lawfulness of a prosecution, he said.

A full review of Marlborough District’s decision to prosecute has yet to be heard.

Gifford v. District Court – High Court (31.05.21)

21.091

Forestry: Kauapepe Forest v. Scott

Murray Ferris’ company was entitled to $162,000 for the value of trees planted out on a Northland forestry site, after left waiting for over five years with Mangamuka owners failing to sign paperwork extending existing forestry rights.

Forestry company Kauapepe Forest Ltd, controlled by Mr Ferris, acquired forestry rights over 488 hectares in 2010, buying trees ready for harvest.  This forestry right was to expire in 2020.  Kauapepe Forest clear-felled the site over the next four years.  In anticipation of replanting, Mr Ferris discussed with landowner Peter Scott the possibility of extending the forestry right for twenty years beyond 2020; sufficient time for the next harvest cycle.  The two agreed with a handshake, leaving it to lawyers to finalise the paper work.

The High Court was told Mr Scott was at that time finalising a relationship property settlement after separation from his then spouse.  This resulted in land beneath the trees being transferred to a family trust.  Mr Scott was no longer sole owner of the land; he became co-owner with fellow trustee Thomas Cowlishaw.  As co-owners, both had to sign off on the forestry right extension. Mr Cowlishaw refused to sign.  He first required an investigation into Kauapepe Forest’s financial stability, Mr Scott told the court.

Meanwhile, Kauapepe Forest had upgraded forestry roads, sprayed the logging slash with herbicide and replanted; Mr Ferris presuming all along that the paper work would be finalised.  Lawyers acting for Mr Scott prepared the necessary forestry right extension, but Mr Cowlishaw refused to sign.  Mr Scott told the High Court he was considering a court application to have Mr Cowlishaw removed as trustee of his family trust.

Frustrated at lack of progress, Kauapepe Forest sued. Justice Woolford awarded damages. Mr Scott had represented that an extension beyond 2020 would be formalised and Kauapepe Forest had incurred considerable expense relying on a promise that was not honoured.  Damages of $162,000 were calculated on the current market value of the trees planted.  This was some $17,500 greater than the replanting costs.

Kauapepe Forest Ltd v. Scott – High Court (27.05.21)

21.090

Family Trust: Tunku Family Trust v. Ballantyne

Convicted murderer Anthony Ballantyne was removed as trustee of his family trust by court order, part of a deal awarding him a half share of trust assets.

Ballantyne was sentenced to life imprisonment for the 2015 murder of acquaintance Ivan Kapluggin after an evening socialising at Ballantyne’s Whangamata home.  The Achilles Avenue property in Whangamata is owned by a family trust: the Tunku Family Trust.  The Trust also owns a property at MacDonald Road in Hamilton, occupied by former spouse, Eugenia.  Ballantyne is one of three trustees; Eugenia Ballantyne is also a trustee, along with third trustee Wallace Jones.

The High Court was told rates on Achilles Avenue have not been paid since Ballantyne was convicted and local council is threatening a forced sale.  The property has been valued variously at between $1.05 and $1.5 million.  From prison, Ballantyne agreed to a sale, but the remaining trustees foresaw difficulties in getting legal documents signed while he is behind bars; current rules require detailed in person identification procedures when selling property.  Requests he resign as trustee have been refused.

Justice Davison approved Anthony Ballantyne’s removal as trustee.  Ballantyne’s inability to actively carry out duties as trustee meant trust property was ‘endangered.’  The two remaining trustees are free to complete a sale and deal with the proceeds. Along with sale of Achilles Avenue, the court approved a rearrangement of Trust assets with half the Trust's net value being paid to Mr Ballantyne. 

Ballantyne had told the court he was willing to ‘step down’ as trustee during the sale process, provided he was reinstated afterwards. He is a discretionary beneficiary of the Tunku Trust.  His removal as trustee means he has no say in future trust decisions.

Tunku Family Trust v. Ballantyne – High Court (26.05.21)

21.089

Fraud: Specialist Roofing v. Hollis

Katarina Cherie Hollis declared bankruptcy while in prison for theft of nearly one million dollars from Gisborne employer Specialist Roofing Solutions Ltd.  Since she had shared some of her ill-gotten gains with her partner and with her mother, a High Court case was needed to identify the amount Specialist Roofing could claim in her bankruptcy.

The High Court was told Hollis stole some $969,500 from Specialist Roofing while working as a part-time office administrator between March 2016 and August 2109.  Thefts started within six months of her going on the payroll.  The fraud was picked up by accountants preparing Specialist Roofing’s tax accounts.

In a subsequent High Court civil case, Justice Gault ruled Hollis was liable to pay damages totalling $969,513 for breach of duties as an employee; this amount to be reduced by an undisclosed out-of-court settlement with Hollis’ mother Anne Marie Hollis and any recoveries made from Hollis’ partner Jason Peach.  Specialist Roofing could trace only $7500 of its money as going to Peach, but suspected he had received more of the stolen funds than this amount.  Peach was ordered to pay Specialist Roofing $7500. Neither Katarina Hollis nor Jason Peach defended Specialist Roofing’s claim.

Hollis claims to have no assets.  Part of Insolvency Act bankruptcy procedures is intended to track down any assets available to meet creditor claims.

Specialist Roofing Solutions Ltd v. Hollis – High Court (26.05.21)

21.088

Estate: Comins v. Public Trust

Advancing $50,000 to one daughter to help purchase a home created confusion after father Ian Cameron died, leading to a dispute between sisters over whether this was a gift or a loan.

In 2003, parents put $50,000 towards daughter Brenda’s purchase of a Masterton home.  The transaction was not documented.

The High Court was told that her father Ian Cameron died in May 2019, ten days after the death of his spouse.  Ian’s will stated that the $50,000 given Brenda was a loan to be set off against her share of the estate.  If a loan, this would increase the amount going to Brenda’s sister, Sheryl; both were to share the estate balance 50/50.  Brenda denied there had ever been a loan; it was a gift, she said.

The High Court was told statements made by Ian some three years after the Masterton purchase indicated repayment was not required. There had never been a demand for interest, or for repayment of the money.  In contrast, Ian’s earlier 2010 will and final 2016 will both stated the $50,000 was a loan.

Justice Mallon ruled this evidence indicated Ian’s intention was to make a $50,000 interest-free loan, not repayable in his lifetime.  Specific wording in his 2016 will applied; the $50,000 loan fell due on his death and was to be taken into account when dividing up his estate.

This ruling increased the value of assets in Ian’s estate by $50,000 to about $227,000.

Comins v. Public Trust – High Court (25.05.21)

21.087

Class Action: Claims Resolution v. Pfisterer

Class action promoters promising ‘no win, no fee’ on insurance claims are always on to a winner; any increased payouts over insurers’ typical low-ball opening offers will count as a win ensuring they get paid.

Legal argument over ‘no win, no fee’ contracts was fought out in Lucia Pfisterer’s claim against Christchurch-based Claims Resolution Service Ltd when she challenged its work on a claim for her earthquake damaged Opawa property.

Like many insured Canterbury homeowners, she struggled in dealings with Earthquake Commission and Southern Response over insurance entitlements.  An initial 2013 assessment offered $117,000, later increased to $321,800.  A supposedly negotiated settlement two days before a scheduled 2016 court hearing saw Southern Response offer to pay $642,000 plus an extra $303,000 for enhanced foundations if a decision was made to rebuild.  After apparently agreeing to this offer, Ms Pfisterer backed out, saying she had been pressured into the pre-trial settlement. Southern Response left the file open. After hiring new lawyers, she later reached a final settlement with Southern Response on much the same terms as the aborted pre-trial agreement.

Ms Pfisterer refused to pay the $93,700 legal bill incurred by Claims Resolution for lawyers Grant Shand preparing for the cancelled High Court hearing and negotiating the aborted settlement.  She alleged Claims Resolution had misrepresented details of the ‘no win, no fee’ deal, had a sweetheart deal with lawyers Grant Shand which worked to her disadvantage and that she had never agreed to her insurance dispute going to court.

When signing up, Ms Pfisterer was aware Claims Resolution was offering a ‘one-stop shop’ from damage assessment through to claim settlement with the possibility of litigation, Justice Hinton said.  She paid, when asked, the court filing fee for her claim against Southern Response and received without complaint a copy of the claim filed in court.

Ms Pfisterer was not prejudiced by the close working relationship between Claims Resolution and Grant Shand, Justice Hinton ruled.  In return for the steady flow of work, Grant Shand agreed to reduce legal fees charged. Claims Resolution clients were free to engage their own lawyers; some did.

Grant Shand did breach professional obligations owed Ms Pfisterer as client when it continued dealing with Southern Response after suggesting her change of mind over the aborted settlement meant she should get new lawyers.  Grant Shand was not liable to pay damages, Justice Hinton ruled.  Grant Shand’s actions in wrongly continuing to negotiate did not cost Ms Pfisterer; her new lawyers finalised negotiations.

Ms Pfisterer was ordered to pay the $93,750 legal fees billed Claims Resolution by Grant Shand.  She did not challenge Claims Resolution’s entitlement to an eight per cent commission on her insurance recovery as being a ‘win.’

Claims Resolution Service Ltd v. Pfisterer – High Court (21.05.21)

21.086

Bankruptcy: re Burchell

Failing to recognise that neither Insolvency Service nor Inland Revenue had any intention of delaying his discharge from bankruptcy, Llewellyn William Burchell in court proceeded to accuse them of assault and harassment, all part of a conspiracy.  He accused the trial judge of bias.  Despite making it hard for himself, Burchell was discharged from a bankruptcy which had run for a decade; all his own fault.  

The High Court was told Burchell was bankrupted by Inland Revenue in 2011 on a $34,000 tax debt.  It was his second bankruptcy. As a general rule, bankrupts are automatically discharged from bankruptcy after three years.  The three years start running from the date a ‘statement of affairs’ is provided to Insolvency Service.  In the form of a checklist, this sets out a bankrupt’s financial circumstances: assets and debts.  Burchell never properly completed a statement of affairs following his 2011 bankruptcy. While acknowledging he owned property, he refused to provide details of what it was and where it was.  In answer to a question seeking to establish levels of household income he answered a question about his spouse’s income with the retort: ‘none of your business.’  Personal details like IRD number were left out.  He protested, without success, police seizure of motorcyles he owned, seized at Insolvency Service request.    

Evidence was given that Burchell chose to pursue unsuccessful legal actions against both Insolvency Service and Inland Revenue rather than provide the full information required in his statement of affairs. Ten years later, the three year time clock for automatic discharge had yet to start ticking.

Burchell applied to the High Court for his discharge from bankruptcy.  Associate judge Bell commented Burchell had failed to comply with Insolvency Act rules requiring public notice of any application for early discharge.  Burchell alleged Insolvency Service had conspired with media outlets to block advertising.

When approving the discharge from his second bankruptcy effective May 2021, Judge Bell described Burchell as being aggressive and rude, short on social skills and harbouring groundless conspiracy theories. Burchell is unlikely to be much of a credit risk for the public, Judge Bell said.  In insolvency law, the risk comes from beguiling rogues.  Burchell is not one of them, he said.

re Burchell – High Court (21.05.21)

21.085

Relationship Property: Hare v. Aitchison

Eighteen months after Craig Aitchison died, his mother is trying to force a sale of his Christchurch home currently occupied by former partner Sonya Hare.  The two women are arguing over who has control of Craig’s estate.

Craig died in November 2020, leaving no will. Default rules in the Administration Act see inheritance on intestacy going primarily to any surviving spouse. The definition of spouse includes any partner in a long-term de facto relationship.  Sonya says she and Craig were in a relationship for more than three years; Craig’s mother disputes this.

The High Court was told Craig’s estate has a current value of around $300,00: equity in his Mortlake Street home in Christchurch suburb Islington plus cash held in a lawyer’s trust account.  After Craig’s death, his mother applied for and was granted Letters of Administration by the High Court to administer her late son’s estate. In so doing, she told the court Craig was not survived by any de facto partner.  Sonya says Craig’s mother will not accept that she and Craig were in a de facto relationship.  She obtained a freezing order over estate assets from the High Court.

With estate assets frozen, the two will next be in court arguing whether Sonya’s relationship with Craig did amount to a long-term de facto relationship.  If proved, Sonya will inherit the bulk of Craig’s estate.

Hare v. Aitchison – High Court (21.05.21)

21.084

Insurance: Church Property Trustees v. Carrell

Christchurch Anglican Diocese received a windfall $9.8 million gain on its insurance payout following the 2010 and 2011 earthquakes after a GST miscalculation.  High Court approval was needed to approve a pro rata allocation of the surplus to church parishes and schools suffering earthquake damage.

Entitlement to share in the $9.8 million surplus was left hanging because of the way Christchurch Diocese arranged insurance. Church Property Trustees manages diocesan assets across Canterbury and Westland.  It is paid a management fee from rents, interest and dividends on diocesan investments.  The High Court was told building and content insurance for diocesan churches and schools was covered by a global policy, in the name of Property Trustees but for the benefit of specific diocesan property.  As a matter of practical necessity, Church Property paid annual premiums out of its funds, later seeking reimbursement from individual parishes.

After the 2011 earthquake, Property Trustees received an insurance payout totalling some $183 million, including an allowance for payment of GST.  It was later discovered that no GST was payable.  Under terms of the payout, Property Trustees was entitled to keep this over-payment; it did not have to be refunded to the insurer.  This left Property Trustees holding surplus insurance monies relating to assets it did not own; it holds diocesan assets in trust. The High Court was asked to approve a proposed distribution.

First, reimbursement was made to those parishes which made ‘free will offerings’ towards premium renewals in the year following the earthquake series.  Cost of earthquake insurance rose dramatically after the quake.  For 2012/2013, parishes voluntarily contributed $241,000 of an annual premium renewal for property insurance then exceeding $1.1 million. Property Trustees initially sourced this $1.1 million payment out of its insurance recovery; it was the only source of ready cash at the time.   Justice Mander ruled Property Trustees could dip into the insurance surplus to recover this $1.1 million cost as reimbursement for the expense incurred, but it was appropriate to then repay the $241,000 contributed by individual parishes.  Property Trustees should not recover its costs without reimbursing parishes that later contributed, he said.

Second, the remaining money was added to individual trusts held by Property Trustees on behalf of each diocesan property damaged in the earthquakes, divided according to the value of their claims.  The insurance payout was triggered by losses parishes and schools suffered.  The fortuitous surplus should be divided between them according to the value of claims each made, Justice Mander ruled.

Church Property Trustees v. Carrell – High Court (20.05.21)

21.083

covid-19: BNZ v. Matsis

Accelerating the sale process and accepting a reduced price for a business in receivership during the covid-19 national lockdown did not mean receivers PwC failed to sell for the best price; they obtained the best price reasonably obtainable in the circumstances, the High Court ruled.

Lower Hutt-based artisan cheese maker Zany Zeus Ltd was tipped into receivership by Bank of New Zealand in December 2019.  Michael Matsis, director and majority shareholder of Zany had guaranteed Zany’s BNZ debt to a total of two million dollars. When sued by BNZ on the guarantee he said he was not liable; if receivers had sold the business for full value he would have had nothing to pay, he said.  The business was sold for $1.8 million.

PriceWaterhouseCoopers were appointed receivers.  They told the High Court Zany Zeus Ltd was put up for sale in early 2020.  Business interests associated with Gerald McDougall put in the best bid at $3.5 million, but this bid was subject to substantial conditions.  Before any sale was concluded, government put the entire country into lockdown.  This seriously affected Zany Zeus’ profitability; about 65% of its customer base was in the hospitality sector, also forced to shut down.  PwC considered closing down Zany Zeus’ operations and selling off assets piecemeal; the receivers could not continue to trade the business at what would be a continuing loss during an indeterminate lockdown.  Valuers assessed Zany Zeus’ assets at some $960,000 on a break-up value.

Evidence was given that PwC then again approached Mr McDougall.  After some negotiations, sale of the business as a going concern was clinched at $1.8 million, with the previously negotiated conditions dropped.

Associate judge Johnston ruled Mr Mastis was liable on his BNZ guarantee of Zany Zeus’ borrowing.  This figure is yet to be finalised.  The manner in which receivers concluded the sale during the covid-19 lockdown complied with their legal obligation to get the best price for assets covered by the BNZ security.

BNZ v. Matsis – High Court (19.05.21)

21.082

Export: Settlers Honey v. First Honey

Bank accounts of Wairarapa beekeeper First Honey NZ Ltd controlled by Daniel Watson have been frozen following a High Court ruling there was an arguable case that First Honey wrongfully got its hands on $648,250 export sale proceeds remitted from the US; funds claimed by Whanganui honey exporter, Settlers Honey Ltd.

Henry Mathews, Settlers Honey’ director, claims First Honey NZ has no right to the money and alleges his money is at risk; First Honey is in financial difficulty, he alleges.

The High Court was told of a deal in late 2020 where US-based First Honey US purchased a shipping container load of medical grade manuka honey from Settlers Honey at a price of $648,254.  It was agreed Mr Watson’s First Honey NZ would get a commission calculated at one dollar per kilogram for arranging the export deal.  There is a family connection between First Honey NZ and First Honey US.  Mr Watson’s brother-in-law manages First Honey US.  Settlers Honey billed First Honey US as its customer.  No payment was received.  Enquiries identified that First Honey US had made payment; not to Settlers Honey, but to First Honey NZ who refused to hand over the funds.  It claimed a set-off; First Honey NZ says it is owed money by Settlers Honey.

Ordering First Honey NZ’s bank accounts with ANZ and ASB frozen, Justice Campbell ruled there was an arguable case that First Honey NZ went beyond its authority as an export agent by arranging to receive payment from the US and by retaining the money.

When agents act as brokers to arrange a deal, there is no general legal rule that the agent also has authority to collect payment. 

A further court hearing is needed to determine whether First Honey NZ did have authority to receive the $648,254 and for First Honey NZ to prove its claimed set off against Settlers Honey.

Settlers Honey Ltd v. First Honey NZ Ltd – High Court (14.05.21)

21.081

 

Post judgment note: One week later, the freezing order was lifted by order of the High Court with the proviso First Honey NZ was to first provide pre-trial financial security in favour of Settlers Honey sufficient to meet Settlers' claim should it be successful. 

Chorus: Creative Development v. Chorus

Consequences of Chorus putting on the charm, using grossly misleading flattery to garner support from potential business partners in rolling out a national fibre network, featured in unsuccessful litigation by Marlborough-based Creative Development Solutions when alleging Chorus stole its intellectual property.

Creative Solutions, part-owned by former journalist and member of parliament Brendon Burns, joined forces with Marlborough District Council on plans to get fast broadband in place across Marlborough.  Learning that Chorus had withdrawn from Crown Fibre’s initial bidding round for rural Marlborough’s network coverage, Creative Solutions met with Chorus in early 2018.  It was intended the two would jointly progress a bid for the Marlborough network. Creative required Chorus sign a non-disclosure agreement to protect what it perceived to be confidential and commercially sensitive information. Creative sued when Chorus later turned around and bid separately for the rural Marlborough franchise; Chorus had stolen Creative’s confidential information and used it to formulate a bid, Creative alleged.  Neither Creative nor Chorus were successful in their bids.

The High Court ruled that the supposedly confidential information provided to Chorus by Creative added little to Chorus’ existing accumulated knowledge and experience, and that information which was new was of little commercial value.  Creative failed in attempts to overturn this ruling on appeal.

In the High Court, the trial judge referred to ‘substantial posturing’ by both sides during negotiations.  Chorus talked up the benefits Creative Solutions could bring to the project, such that Creative came to over-value its own expertise and the information it held.  Behind the scenes, Chorus was dismissive. Chorus also turned on the charm with Marlborough District Council in the then belief that Council would provide significant financial funding for the project.

Creative Solutions was forced into liquidation by Chorus in December 2020 for unpaid court costs following the High Court trial. Prior to the High Court trial, Creative Solutions turned down an offer intended to avert litigation: $750,000 in full and final settlement.

Creative Development Solutions Ltd v. Chorus New Zealand Ltd – Court of Appeal (13.05.21)

21.080

 

Construction Liability: BNZ v. Wellington City

 Forced to vacate its Wellington head office after the 2016 Kaikoura earthquake, BNZ claims $101 million damages from Wellington City alleging council negligence when issuing a compliance certificate.  First round, in the High Court, saw Wellington City drag engineering consultants Beca Carter into the litigation as a third party, potentially liable.  Beca Carter challenges new rules governing time limits on negligence claims against third parties which can see claims surfacing decades after the event.

The massive number of ‘leaky building’ claims filed against local councils in the last two decades has seen council insurers in court arguing the boundaries for potential shared liability between councils, builders, sub-contractors, suppliers, engineers and architects.  Commonly, it is local councils sued as primary defendant; they have the ‘deepest pockets’ and are best placed to pay damages.  Councils, in turn, take parallel legal action against those in the construction industry allegedly to blame, forcing them into the litigation as third parties being called to contribute.  Complications subsequently led to law changes setting out time limits within which claims could be filed in court.

Construction law has a ten-year ‘longstop’ rule, blocking claims more than a decade after damage leading to a claim.  Beca Carter says any claims demanding contributions from third parties also fall within this ten-year rule, with the ten years calculated on the same time line as that applying to the primary defendant.  Not so, ruled Justice Clark.  The Limitation Act sets a different start date and a different time period for claims against third parties; claims against third parties are barred two years after liability of the primary defendant is quantified by ‘agreement or court judgment.’  With the slow pace of complex cases, this can have the effect of leaving third parties on the hook to pay damages decades after damage first arose.

Completed in late 2010, Bank of New Zealand’s Wellington head office on Waterloo Quay was designed to the Bank’s specific requirements. It is now being demolished; damaged beyond economic repair by the 2016 Kaikoura earthquake.  BNZ alleges Wellington City was negligent in granting a building consent and also negligent in its inspection and granting of a code compliance certificate.  Beca Carter drew up the engineering design and monitored construction carried out by Fletcher Construction.

Beca Carter failed in its attempts to have Wellington City’s third party claim thrown out.  Wellington City has two years from the time BNZ’s claim is finalised to file a third party claim against Beca Carter.  Its Beca Carter third party claim was filed well before this time; it is yet to join battle against BNZ.

Further court hearings are necessary to establish if either of Wellington City or Beca Carter were negligent.

BNZ Branch Properties Ltd v. Wellington City – High Court (12.05.21)

21.079

Fraud: R.v. Bracken

Gisborne farmer John Richard Bracken was sentenced to eight years six months imprisonment for a $17.3 million GST fraud, the biggest tax fraud ever uncovered by Inland Revenue.

An employee of Bracken’s business, Bracken Enterprises Ltd, blew the whistle, alerting authorities to the fraud created by a paper trail documenting fictitious transactions.

The High Court was told Bracken operated a sheep and dry stock farm at Matawai, near Gisborne.  He also ran an export business, with timber, milk, honey and bottled water sent to customers in the Pacific Islands.  The fact zero GST is charged on exports was the central feature of the fraud.  Over a four year period, Bracken concocted invoices for fictitious purchases of goods totalling $133 million, claiming the GST component of these non-existent purchases as a GST credit.  This fraud generated fraudulent GST refunds totalling $17.3 million.  Police have commenced action under the Criminal Proceeds (Recovery) Act to seize Bracken’s assets.

The fraud was masked by Bracken’s use of circular payments through Bracken Enterprises’ bank account.  He withdrew sums from the account, either in cash or by bank cheque, to create the illusion of a payment to suppliers, and then almost immediately re-deposited money back into the account.  Fictitious supply invoices were forged to match the line item on bank statements for amounts withdrawn.  These false invoices were forged in the names of real businesses, many of which did in fact supply goods to Bracken.  A fictitious export sale of the fictitiously purchased goods was then established by creating a forged export contract.  In this way, Bracken generated a GST credit for goods never purchased and then disposed of the non-existent goods without having to account for GST on the sale through the pretence of having exported these non-existent goods.  Exports are zero-rated for GST.

Evidence was given that Bracken has prior convictions for accident compensation fraud and for breaches of the Resource Management Act.

R. v. Bracken – High Court (11.05.21)

21.078 

Right-of-way: Austin v. Rentrezi 2 Ltd

Developers Pragma Homes and Rentrezi were ordered to pay $20,000 damages for nuisance and trespass after disrupting use of a residential right-of-way when constructing new houses on Hillary Street in Chedworth, Hamilton.

Norman and Margaret Austin challenged use of a shared right-of-way following the 2018 subdivision and development of neighbouring land.  From the time of their Hillary Street purchase thirty-two years previously, the Austins had enjoyed exclusive use of the existing right-of-way.  It was only after other sections down the right-of-way were later subdivided and built on did the relatively narrow access way with its dog-leg corner come to be used by multiple owners now living in six different properties.

The Austins fought plans for subdivision from the off. They objected, without success, to Hamilton City Council giving consent to redevelopment of the neighbouring land. In court, they argued, again without success, that neighbours in the newly subdivided properties had no right to use the right-of-way for access.  They then argued neighbours use of the right-of way was excessive, amounting to a legal nuisance; claiming damages totalling $150,000.  Justice Wylie ruled neighbours conduct fell within the bounds of normal use.  The Austins’ opposition to neighbours legal use of the right-of-way and to the existence and occupation of the new residential units had become unreasonable, he said.

Pragma Designer Homes Ltd and Rentrezi 2 Ltd developed the neighbouring properties.  The two companies are associated; they share a common parent and a common director. Justice Wylie ruled their misuse of the right-of-way during construction amounted to both trespass and nuisance. There was evidence of construction vehicles parked on the right-of-way for extended periods, debris including concrete slurry left on the right-of-way and damage to the road surface itself.  A telephone line, a gas line and a water line, all providing utility services to the Austins’ property, were at various times accidentally cut.  The court was told issues were raised with both Pragma and Rentrezi at the time.  Both the trespass and nuisance during construction were prolonged and went beyond what the Austins could reasonably have been expected to tolerate, Justice Wylie said.  Pragma and Rentrezi were held jointly liable to pay damages of $20,000.

Austin v. Rentrezi 2 Ltd & Pragma Designer Homes Ltd - High Court (10.05.21)

21.077 

Shadow Director: NZ Labour Enterprise v. Sembhi

While not appointed as a director, Dap Sembhi was ordered to pay $312,250 damages as a ‘shadow’ director responsible for NZ Labour Enterprises Ltd losses when trading insolvent.

Established in 2013, Labour Enterprises operated out of Papakura, south Auckland, supplying labour on short term contracts.  Listed as director was Amandeep Sembhi, Dap’s spouse. Dap Sembhi was never appointed as a director.

In 2019, Inland Revenue forced Labour Enterprises into liquidation on unpaid tax debts totalling some $390,000; primarily unpaid GST and PAYE.  PwC were appointed liquidators.

The High Court was told Dap Sembhi dealt with the liquidators, telling them he was in charge of company operations.  His wife was just the ‘written director,’ he said. Mr Sembhi operated the company’s bank account, organised labour contracts and liaised with Inland Revenue, Immigration and Social Development.  

Justice Campbell ruled Mr Sembhi was liable as if he were a director of the company.  Any person acting in the position of director is liable as a director, even if not appointed as such.

Mr Sembhi as a shadow director and Mrs Sembhi as appointed director were held jointly liable for company losses totalling $312,250. This was the net deterioration in the company’s position between the date the company should have stopped trading (March 2015) when it had a net deficiency of some $84,000 and the date it did stop (May 2019).  They were in breach of directors’ duties by allowing their company to continue trading whilst insolvent.

In addition, Mrs Sembhi was held personally liable to repay $686,500 to the company; funds borrowed from the company, including cash withdrawals and money spent on personal and household expenses.

The Sembhis did not appear in court to challenge the liquidators’ claim.

NZ Labour Enterprises Ltd v. Sembhi – High Court (5.05.21)

21.076

Film Studio: Studio NZ v. Wallace

Plans by Studio New Zealand Ltd to build a film studio on industrial land at a south Auckland site in Takanini hangs on arguments with the Wallace family that it has an enforceable $53.5 million contract to buy the site.

Studio New Zealand Ltd, managed by Andrew Coldicutt, has $40 million funding from government for construction of the film complex as a ‘shovel ready’ project.  Wallace family interests deny there is any contract to sell their Porchester Road site. The land is owned jointly by two Wallace family trusts.  The property was used historically for stables and as a horse training track.

The High Court was told negotiations for Studio New Zealand to buy or lease the site started back in 2016.  The possibility of a joint venture with the Wallace family was mooted.  Proposals firmed up in 2020 with an interchange of emails: Wallace family offered to sell at $53.5 million; Studio countered seeking a three-year option to buy at that price.  Wallace family refused to allow an option, indicating the original offer to sell at $53.5 million was still on the table.  What is in dispute is a Studio New Zealand email response agreeing to buy at $53.5 million. There is more to the deal than just price, Wallace family says.  A simple email will not suffice; a detailed agreement for sale and purchase needs to be agreed.  Wallace family interests refused to sign a Studio New Zealand agreement for sale and purchase sent after its email agreeing to buy.

Associate judge Andrew upheld Studio New Zealand’s right to lodge a caveat against title to Porchester Road.  He said all legally essential terms for a contract had been agreed by email: the property and the price.  It is for a full court hearing to determine what other terms might apply to their contract.

Wallace family expressed concern that Studio New Zealand is a shell company with no assets of substance and no income.

Studio New Zealand Ltd v. Wallace – High Court (3.05.21)

21.075