Class Action: Strathboss Kiwifruit v. Seeka

Kiwifruit growers class action against government claiming losses of $400 million after PSA bacteria ravaged orchards resulted in a payout of 6.3 cents in the dollar following a government out of court settlement at $40 million and payment to litigation funders of $14.7 million for their costs and fees.

In late 2010, PSA spread from Te Puke orchards resulting in many orchards having to rip out vines and replant.  Growers sued government, alleging the bacteria was introduced through pollen imported from China and negligently cleared for domestic use by Primary Industries.  A total of 214 growers banded together in a class action, seeking compensation.

The High Court held government liable; a ruling reversed in the Court of Appeal.  With a further appeal to the Supreme Court in the offing, government settled out of court at $40 million.  Government now sits in the box seat.  It has a Court of Appeal ruling in its favour to wave at future litigants seeking compensation for failures at the border, having paid a price of $40 million to avoid the possibility of this ruling being reversed in the Supreme Court.

Terms of the PSA class action required High Court approval before distribution of any successful damages claim to growers.  Individual grower’s positions varied depending upon severity of the PSA outbreak, type of kiwifruit grown, remedial action taken and any insurance recoveries received.

The High Court approved a distribution schedule that first saw initial claimants getting back $1.32 for each dollar paid for their initial class action registration fee (first growers to join paid registration back in 2015) with the balance divided on a ‘broad brush’ approach based on number of hectares temporarily lost to production with claimants separated into two ‘loss groups’ dependent upon the kiwifruit variety grown by each particular grower.  The average payment made to claimant growers amounts to about $10,000 per hectare.

Strathboss Kiwifruit Ltd v. Seeka Ltd – High Court (30.11.21)

22.100

Estate: re Thomas Gemmell

Patricia Gemmell was removed as administrator of her late husband’s estate after selling his farm at Raupunga between Napier and Wairoa to his nephew at less than market price leaving estate beneficiaries in the cold.  The High Court appointed a new administrator and ordered recovery of the land.

Thomas Gemmell died in 2008, leaving no will.  Statutory rules in the Administration Act saw his 79 hectare Raupunga farm and a home in Masterton divided between his widow Patricia and his four children, three of whom were children from a previous relationship.  The High Court appointed Patricia to act as estate administrator.  As such, she was registered on title to the properties.

Evidence was given that Patricia came to the view that since she was registered as the owner, the properties were hers.  Advice from lawyers that she held title as trustee were ignored.  Instead of having title later re-registered in names of estate beneficiaries she proceeded to transfer title over the Raupunga farm to her sister-in-law’s son: Padre Phillips.  The farm was valued at $325,000 two years after Thomas’ death.  The sale to Padre nearly a decade later was at a price of $150,000 with the only cash changing hands being a $15,000 deposit, money paid by Padre’s mother Bessie.  Padre said money he had spent managing the farm served as a credit for the balance of the purchase price.  The price paid was low because the farm was run down, he said.

Justice Isac expressed doubts about justifications provided for the deal.

Patricia was removed as administrator with one of Mr Gemmell’s sons appointed as replacement.  Title to the farm was transferred into his name as administrator.  Both Patricia and her sister-in-law Bessie were in breach of trust for selling the land at undervalue, Justice Isac ruled.  Padre was also liable, having arranged with mother Bessie for the deal to be done.

Patricia was penalised for her breach of trust as administrator with Justice Isac ruling she was not to share in the value of the Raupunga farm as a beneficiary; the value of the farm was to be split only between Thomas Gemmell’s four children as beneficiaries.

re Estate Thomas Gemmell – High Court (30.11.21)

22.009

Estate: re Estate Robyn Andrews

Robyn Andrews wrote into her will that loans made to each of her sons were to be taken into account before dividing her estate equally between the three of them.  On her death, son Stephen argued that his borrowings of $439,700 could be ignored; he had been bankrupted and these debts were no longer owing.

The High Court was told of their mother’s detailed estate planning, given her then serious concerns about Stephen’s financial circumstances.  His company NZNet Internet Services Ltd had gone into liquidation insolvent some six years before she signed her final will.  She had lent his company about $340,500 as a secured creditor.  She got back about $9000 following liquidation.

Robyn Andrews signed her final will in 2017.  The document stated loans made to each son were to be taken into account before making any distribution.  Her will listed how much each son owed at that date: Richard ($115,000); Evan ($8900) and Stephen ($439,700). The will specified Stephen’s share of the estate was not to be paid to him personally, but paid to a trust named the Andrews-Runnymede Trust which listed as beneficiaries Stephen and his children, but not his wife.

Unbeknown to his mother, Stephen was bankrupted seven days before she signed this will.  He was discharged from bankruptcy in March 2020, three months before her death. The effect of bankruptcy discharge is to write off all unsecured pre-bankruptcy debts; no legal action can be taken to enforce them.

Stephen challenged plans to include the $439,700 as a debt he owed his late mother’s estate before dividing the estate residue three ways.  Justice Gordon ruled use of words in the will such as ‘loans’ and ‘amount outstanding’ were to be read as a proxy for money provided to her sons during her life and not as debts legally due.  Further, lawyers’ file notes recorded that when giving instructions for her will, she made it clear that she wanted to treat her three sons equally, having regard to money they had already received.

The $439,700 lent to Stephen was to be taken into account, Justice Gordon ruled.  The size of Robyn Andrews’ estate was not disclosed.

re Estate Robyn Andrews – High Court (29.11.21)

22.008

Lease: Stylo Medical Services v. Hum Hospitality

Roseanne Armitage’s company Hum Hospitality Ltd persistently failed to pay rent on time for its lease of 123 Grafton Road in central Auckland.  The High Court ordered her arrest for contempt of court following a failure to vacate Grafton Road after the lease was cancelled.

Landlord, Stylo Medical Services Ltd has spent many hours in court trying to lever its tenant out of the property.  Hum Hospitality operated the site as a community drop-in centre with advertised plans to renovate the century-old villa. In November 2020, Hum Hospitality’s rent was over $150,000 in arrears.  Threatened with cancellation of the lease, Hum paid the arrears but then regularly failed to pay GST on subsequent rental payments.  In February 2021, the High Court ordered the lease cancelled.  Hum Hospitality had to shift out.  Ms Armitage unsuccessfully challenged cancellation in the Court of Appeal.  By August 2021, further rent arrears were in excess of $93,000.  Stylo Medical’s attempts to retake possession with police in attendance were called off in the face of a hostile response from demonstrators in support of Ms Armitage.    

In November 2021, the High Court issued a warrant for Ms Armitage’s arrest following her ‘wilful and inexcusable disregard’ of the order to vacate.  At the request of Stylo Medical, Justice Downs suspended operation of the arrest warrant until February 2022, giving her a final chance to leave.

Stylo Medical Services Ltd v. Hum Hospitality Ltd – High Court (26.11.21)

22.007

Open2View: On-Line Digital Solutions v. Riddick

Australian-owned business Open2View took its time challenging New Plymouth real estate photographer Deane Riddick’s actions in setting up in competition, causing Justice Isac to suggest there was some ulterior motive behind its deferred legal action when he refused an interim injunction to bring Riddick’s new business to a halt. 

In 2006, Mr Riddick bought into an Open2View franchise for the Taranaki.  Over subsequent years this extended to all of the lower North Island, excluding Wellington. After 14 years operation, Open2View’s New Zealand franchisor On-line Digital Solutions Ltd terminated Mr Riddick’s franchise rights on one month’s notice and sued, alleging he was in breach of a restraint of trade prohibiting him from setting up in competition.

The High Court was told there had been ongoing niggles between Open2View and Mr Riddick for a period of time.  Mr Riddick said attempts to sell off his franchise rights were being thwarted by Open2View.  Mr Riddick set up business on his own, initially continuing to use an Open2View Facebook page and mobile phone contact.  There was evidence that some New Plymouth real estate agents were sympathetic to Mr Riddick, expressing the view he was being ‘screwed over’ by Open2View.  Over thirty former Open2View clients transferred their business to Mr Riddick personally.  Lawyers fronted up in court.  

Open2View said the 2006 franchise agreement required renewal every five years.  Mr Riddick had never given notice of renewal.  After the first five year term expired, the franchise simply ran on as a monthly agreement and could be terminated on one month’s notice, it said.

Mr Riddick said Open2View had never required formal notice of renewal.  It was in breach of contract by firing him on one month’s notice and a consequence of this breach was that any restraint of trade did not apply.

Justice Isac said Mr Riddick has an arguable case that Open2View was in breach of contract by giving only one month’s notice. He questioned why Open2View took so long to take legal action, waiting for nine months after firing Mr Riddick before challenging his right to set up a rival business.  He was critical of it not disclosing evidence supporting Mr Riddick’s case.  He ruled Mr Riddick could continue operating his rival business pending a full trial into the dispute.

A restraint of trade clause in the Open2View franchise agreement supposedly prohibits Mr Riddick from ever working again anywhere in New Zealand in real estate photography.

On-Line Digital Solutions Ltd v. Riddick – High Court (26.11.21)

22.006

Class Action: Smith v. Claims Resolution Service

After another unhappy client bailed out of a proposed class action seeking compensation from Claims Resolution Service for allegedly doing a poor job in settling Christchurch earthquake insurance claims, Claims Resolution got a freezing order over both Karlie Smith’s home and the proceeds of sale to recover unpaid fees. 

Claims Resolution Service Ltd offered a ‘one-stop shop’ service for Christchurch homeowners disputing compensation offered for insured earthquake damage.  Customers allege that claims were settled at an undervalue and that Claims Resolution prejudiced customers with a sweetheart deal passing all legal work onto a single law firm.

Ms Smith was initially named as the nominal representative plaintiff in a class action against Claims Resolution.  She has since withdrawn.  Meanwhile, Claims Resolution is pressing for fees owed on the previously disputed work completed on her behalf.  Interest is running on unpaid invoices at two per cent per month. Claims Resolution sprung into action after receiving a series of emails in late 2021 from Ms Smith stating she was broke and had sold her house.  Within ten days, Claims Resolution had a High Court order imposing a freezing order over both her home and the proceeds of sale, protecting a sum of $200,000.  The amount actually owed for unpaid fees has yet to be settled.

Smith v. Claims Resolution Service Ltd – High Court (18.11.21)

22.005

Overseas Investment: Social Credit v. Land Information

Overseas investment in dairy factories does not amount to investment in ‘farm land’ triggering need for Overseas Investment Office approval, the Court of Appeal ruled quashing objections by the Social Credit political party to purchase of Westland Dairy by Chinese interests. 

Social Credit holds itself out as protector of small business interests.  It campaigns for local control of the New Zealand economy.  It challenged the 2019 purchase of Westland Dairy by Inner Mongolia Yili Industrial Group Ltd.  Westland Dairy was then in a dire financial position.  Its 430 suppliers, mostly on the West Coast, were being paid less for their raw milk than that offered by other processers such as Fonterrra.  A mass departure of suppliers from the dairy co-operative was in the offing.  Westland desperately needed further investment capital.  Further borrowing was not possible.  Departure of more suppliers would throw a greater debt burden on suppliers remaining, accelerating supplier departures.  

Inner Mongolia rode to the rescue offering $240 million to take control of Westland and a promise that it would for the next ten years match the raw milk price on offer from Fonterra.  Inner Mongolia had previously bought out Oceania Dairy in the South Island.

A 94 per cent majority of Westland milk suppliers approved the deal.  The $240 million purchase price was distributed to suppliers as shareholders in the Westland co-operative.

Social Credit challenged Overseas Investment Office approval given the purchase.  Westland’s processing facilities at Hokitika and Rolleston should have been categorised as ‘farm land,’ requiring a more thorough investigation, it claimed.  

‘Farm land’ comprises the site where primary products are harvested or extracted, the Court of Appeal ruled.  It does not include off-site processing facilities.

NZ Democratic Party for Social Credit v. Land Information – Court of Appeal (15.11.21)

22.004

Fraud: Wu v. ACC

Spending $234,700 defrauded from Accident Compensation to impress his new girlfriend did not lessen Cheng-Yin Wu’s culpability for fraud the High Court ruled, confirming twelve months home detention as necessary to underscore the seriousness of his offending.

Wu is a 26 year old acupuncturist.  He was convicted of fraud after submitting false electronic payment forms to ACC over an eighteen month period from 2017 claiming payment for services he did not provide.  When told he was under investigation, Wu wrote up false clinical notes to support the false claims made.  When this ruse fell apart, Wu confessed to the false billing and repaid in full the $234,738 falsely claimed.    

Wu appealed a sentence of twelve months home detention imposed after a District Court hearing.  The fact he committed the fraud to promote a lifestyle impressing his new girlfriend lessened the seriousness of the offence, he said.

This was not a case of a young person impulsively stealing something of little value to impress the object of his affection, Justice Downs said.  It was a long running fraud spread over eighteen months.

Wu v. Accident Compensation Corporation – High Court (12.11.21)

22.003 

Joint Venture: Dairy Solutions v. Pacific Dairy

Food Supplier Pacific Dairy walked away from its promise to finance completion of Dairy Solutionz’ yoghurt culturing plant near Hamilton with funding intended from the placement of long-term standing orders for product.  Pacific Dairy exploited Solutionz botched assignment of their joint venture agreement to have the High Court order Dairy Solutionz repay Pacific Dairy’s $US50,000 cash contribution made towards plant construction costs.

The High Court was told Dairy Solutionz (NZ) Ltd and Pacific Dairy Holdings Ltd agreed in 2017 to jointly fund commissioning of Dairy Solutionz’ Rukuhia yoghurt manufacturing plant.  Pacific Dairy’s cash contribution of some $US50,000 was an unsecured interest-free debt owed by Dairy Solutionz, payable in 2020.  It was intended this debt would be repaid in kind, rather than cash, with Pacific Dairy placing long-term purchase orders for manufactured product.  No long-term orders were placed.

Pacific Dairy refused to take Solutionz’ product after a disputed E.coli contamination scare in December 2017.  Pacific Dairy was in liquidation seven months later. Come 2020, Pacific Dairy liquidator sued, demanding Dairy Solutionz repay the $US50,000 debt.

Dairy Solutionz was ordered to pay following a fast-track High Court summary judgment application.  Dairy Solutionz could not argue Pacific Dairy in turn owed it some two million dollars for failing to purchase product.  Dairy Solutionz had previously assigned all rights under the joint commissioning agreement to a related company.  Dairy Solutionz no longer had the right to claim damages for non-performance; this right was now held by a related company.

Ironically, Dairy Solutionz assigned its rights after Pacific Dairy went into liquidation assuming incorrectly that this would also get rid of its obligation to pay the promised $US50,000.  However, this assignment had the effect of later destroying Solutionz’ rights to raise a counter-claim defence to Dairy Products’ demand for repayment.  The assignment worked to assign rights, but not liabilities.   

Dairy Solutionz was ordered to pay Dairy Products $69,700: the New Zealand dollar conversion of $US50,000.

Dairy Solutionz (NZ) Ltd v. Pacific Dairy Holdings Ltd – High Court (11.11.21)

22.002

Joint Venture: Rockwell One Ltd v. Astoria Development

Failing to complete agreed joint venture capital contributions for a Tauranga residential subdivision meant investor Jinho Kwon did not share in development profits or get his money back. 

Mr Kwon alleged joint venture partner Mingon Kang diverted elsewhere initial cash contributions of $250,000.

The High Court was told the two joined forces in 2018 to develop 7.5 hectares of land.  Their agreement envisaged formation of a special purpose company called Rockwell Two Ltd, with Mr Kang to transfer land to Rockwell and Mr Kwon to put in nearly $4.4 million in staged payments.  Mr Kwon pulled out after contributing only $250,000, alleging Rockwell Two was not seeing the benefit of money paid. He sued, demanding both return of his $250,000 and a share of development profits.  

Evidence was given that the land was held in the name of Mr Kang’s company Astoria Development Ltd at time of their 2018 agreement.  The project was already underway, with invoices due for payment.  Mr Kwon’s initial $250,000 payment was used to pay these Astoria invoices.  Mr Kang copied in Mr Kwon on the payments and provided copies of invoices.  Mr Kwon stopped making further instalment payments, complaining his money was being used for purposes other than their agreed joint venture.  On Mr Kang’s side, he did not progress transfer of the land to their joint venture company: Rockwell Two.

Associate judge Lester said there was nothing underhand in using the $250,000 to pay Astoria creditors.  These payments related to the development.  Mr Kwon had no grounds to demand repayment of his $250,000; it was used for the purpose intended.  And Mr Kwon cannot have it both ways, Judge Lester ruled, by both stopping capital contributions and claiming their joint venture agreement is at an end  while saying simultaneously it still stands and he is entitled to share in profits.

Mr Kwon was told his best remedy was to cancel his joint venture agreement under the Contract and Commercial Law Act and then seek compensation.

Rockwell One Ltd v. Astoria Development Ltd – High Court (11.11.21)

22.001

Director Disqualification: re Clarke

Automatically disqualified from acting as a company director after conviction for a $1.7 million customs fraud, Paul Clarke got High Court reinstatement to management of his Dunedin heavy machinery business because it operated as a ‘one man’ band and jobs of 33 employees and several sub-contractors were otherwise at risk. 

Companies Act rules automatically disqualify from management for five years any person convicted of fraud.  Paul Clarke was convicted in 2021 of customs fraud, undervaluing the invoice price of heavy machinery imported primarily from Japan. It was a long-running fraud involving forged documents for some 74 importations since 2013.  False invoices meant GST was underpaid by some $1.75 million.

Seeking a sentence indication before trial, Clarke was told he was facing a likely sentence of two years’ imprisonment and a $30,000 fine.  Coughing up GST underpaid plus penalties together with his promise to also immediately pay any fine coupled with a plea of guilty resulted in a reduced sentence: six months’ community detention and a $30,000 fine.  The trial judge said this would enable Clarke’s business to keep operating.  Jail or home detention would result in business operations closing down, with staff job losses.  Community detention imposes a night-time curfew, but otherwise allows people to continue working.

While the more lenient sentence was intended to allow Clarke to keep working, Companies Act rules automatically blocked involvement in management because of his fraud conviction.  These rules are intended to protect the public.  The High Court permitted his return to management, subject to tight restrictions.  For future heavy machinery importations, a strict paper trail was imposed.  Purchase details, customs entries and bank records for all importations must be centralised at the firm of chartered accountants completing GST returns for his business.  Clarke was warned any failure to comply with these requirements would result in an immediate ban from managing his business.

Customs recommended the High Court require a second director be appointed to the company, providing a check on Clarke’s activities. The court was told no-one approached was willing to take on the role.

re Clarke – High Court (9.11.21)

21.182

Loan: Waimauri Ltd .v Gordon

Behind a claim that nearly $600,000 is due on a $70,000 loan made in 2009 lies the tale of a 1949 Aston Martin DB1 recovered at some painful cost from underworld figures in Japan and now apparently in Australia.  Susan Gordon disputes the $600,000 claim being made against her late husband’s estate. 

The High Court was told that Tim Edney’s Waimauri Ltd made a short-term $70,000 advance to Colin Gordon in February 2009 with $93,000 repayable in three months.  Money was needed to repatriate the classic Aston Martin from Japan.  The vehicle had been sold to a Japanese buyer fifteen years previously.  Suspicions developed that the purchase was a con; the vehicle was stolen off the wharf on arrival in Japan and wound up in the hands of Japanese underworld.  It was a valuable prize.  Only fifteen of the model were produced.  Mr Gordon travelled to Japan.  He was badly beaten in the course of his investigations.  Japanese authorities eventually recovered the vehicle. Repatriation to New Zealand required payment upfront for storage costs in Japan and shipping costs.

Evidence was given that the repatriation loan was not repaid on the three months deadline. Waimauri made no formal demand for payment until nine years later.  With interest accruing, the amount outstanding then totalled $378,500.  Mr Gordon died the following year.  In 2021, two years after Mr Gordon died, Waimauri sued his estate claiming ongoing interest meant some $600,000 was now owed.

Associate judge Johnston dismissed Waimauri’s application for fast track summary judgment.  A full court hearing was required.  Mrs Gordon says failure over so many years to make demand or to take enforcement action meant that the amount claimed was ‘unjustly burdensome’ under the Credit Contracts and Consumer Finance Act.

There was evidence Mr Gordon sold the Aston Martin to an Australian buyer after repatriation from Japan.

Waimauri Ltd v. Gordon – High Court (3.11.21)

21.181

Negligence: BCH Investments v. Nguy

Auckland lawyer Jesse Nguy was ordered to pay $873,600 damages for negligence after failing to seek Overseas Investment Act clearance for a client’s $9.5 million Auckland purchase.

Owned by off-shore Chinese interests, BCH Investments Ltd committed in 2013 to the purchase of just on five hectares of subdividable land on Gills Road, Albany.  Initial plans were for BCH to buy in conjunction with interests associated with Paul Bublitz and Chris Cooke.  BCH contacted Mr Nguy.  Its client engagement letter saw Mr Nguy accept responsibility for all ‘incidental matters in respect of the development at Gills Road.’

The High Court was told Mr Bublitz reminded Mr Nguy overseas investment consent would be required.  Mr Nguy did suggest setting up a trust to disguise true ownership of the development, but nothing eventuated.  It is a breach of overseas investment rules to hide true ownership through trust structures.  The $9.5 million purchase eventually went through in the name of BCH Investments alone. Mr Nguy told the High Court that the owners of BCH had grown wary of both Mr Bublitz and Mr Cooke.  Mr Nguy did not take any steps to get investment approval.  There was no evidence that owners of BCH Investments were aware of a requirement to get investment consent.

Subsequently, BCH Investments paid over one hundred thousand dollars on legal fees having a succession of legal firms attempt to get retrospective overseas investment approval.  All to no avail.  BCH was prosecuted for its breach of the Overseas Investment Act.  A $300,000 penalty was imposed and BCH Investments ordered to sell the land.

Justice Venning ruled Mr Nguy was negligent in failing to seek investment approval.  $873,600 damages awarded included not only the $300,000 penalty imposed but also government prosecution costs BCH was ordered to pay plus all legal costs BCH incurred trying to get retrospective consent.        

BCH Investments Ltd v. Nguy – High Court (1.11.21)

21.180