Ticket Refunds: re STA Travel (NZ) Ltd

Youth travel specialist STA Travel (NZ) Ltd collapsed into liquidation in September 2020 after its Swiss holding company shut up shop in the face of covid-19 international travel restrictions. Ticket refunds received by STA Travel do not belong to the company but are held in trust for individual passengers, the High Court ruled.

STA Travel liquidators are holding about $428,800 refunded by airlines compensating passengers for cancelled flights. Liquidators expect more cash to dribble in over time.  Further expected refunds will be delayed where airlines like Virgin Australia are themselves insolvent.

Liquidators sought High Court directions on the status of refunds.  Justice Robinson ruled the refunds are held in trust by STA Travel.  Passengers’ travel contracts were with individual airlines. As a travel agency, STA acted as a conduit processing the paperwork.  Similarly, in receiving refunds STA was acting only as a conduit, Justice Robinson said.

Liquidators told the court they can identify which customers are entitled to a specific refund from the $428,800 currently held. There are 1560 STA Travel customers who have made claims for refunds totalling $5.55 million.  Before liquidation, STA Travel management used some refunds then received to pay company debts.  

The court was told about $19,100 of the refunds STA liquidators currently hold relate to customers who had already been compensated through a credit card ‘charge-back.’  It is the credit card company which is out of pocket.  Customers are not to be compensated twice over, Justice Robinson ruled. This money belongs to the appropriate credit card company.

STA Travel (NZ) Ltd was not a member of Travel Agent’s Association of New Zealand which provides financial compensation for customers where a member agency fails.

Re STA Travel (NZ) Ltd – High Court (30.05.22 & 14.06.22)

22.095

Construction: Titterton v. Dynasty Capital

Dynasty Capital could not use a ‘sunset clause’ to back out of its Kaiapoi fixed price house build when it deliberately stopped work attempting to force purchaser Andrea Titterton into paying an extra $45,000.  

Ms Titterton signed up in 2020 for a new house to be constructed in Rahme Crescent, Kaiapoi; one of adjoining house builds sold off the plans as fixed price land and building packages.  The High Court was told developer Dynasty Capital Ltd subsequently sought increased payments from three purchasers; one agreed to paying an extra $40,000; a second withdrew and the deposit was refunded; Ms Titterton questioned why she had to pay an extra $45,000.  Her request for details of cost increases justifying extra payment in a fixed price contract were ignored.  Work stopped on the build for Ms Titterton, whilst the other two jobs were completed on time.

In March 2022, Dynasty cancelled Ms Titterton’s contract.  It pointed to a ‘sunset clause’ in the building contract allowing cancellation if a code compliance certificate was not obtained by end of February 2022.

In the High Court, Associate judge Lester ruled Dynasty had no grounds for cancellation.  The build contract required Dynasty to complete the build with reasonable diligence.  There was evidence Dynasty told contractors on Ms Titterton’s build to stop work while variation costs were reviewed.  Dynasty said it stopped work because Ms Titterton asked in a telephone conversation that work stop while cost variations were sorted out.  Judge Lester ruled the effect of the conversation was that Ms Titterton was neither agreeing to the variation nor cancelling her contract. She simply wished to take legal advice. Her lawyer subsequently wrote to Dynasty Capital seeking to enforce the contract.

Companies Office records name Na Zhang of Halswell as sole director of Dynasty Capital and Auckland-based Stephen MacEachen as sole shareholder.

Titterton v. Dynasty Capital Ltd – High Court (27.05.22)

22.094

Fraud: R. v. Huirua

Ten per cent of the $32 million received by Taranaki iwi Ngaa Rauru Kiitahi in 2003 as its Treaty settlement was lost in a fraud perpetrated by iwi member Te Whitinga Mark Huirua resulting in a jail term of two years eleven months.

Huirua was appointed to the iwi’s investment arm because of his professed experience in banking and investment.  The High Court was told he inveigled fellow investment board members into allowing him to make ‘direct investments.’  This involved transferring iwi funds totalling $3.1 million into two separate companies having Huirua as sole director and shareholder. Of this money: $2.1 million was lost trading; $500,000 taken for personal expenditure.  Over a seventeen month period up to October 2019, Huirua created fictitious entities and manufactured fake correspondence and email traffic to conceal these losses.  The fraud was revealed when auditors could find no evidence of claimed investments.

Huirua was convicted of forgery and carrying on business fraudulently.  It is not a crime to make poor investment decisions, Justice Gendall said.  But it is a crime to dishonestly conceal losses.

Members of Raura Kiitahi told the court of their anger and shame following Huirua’s dishonesty.  Their financial loss was compounded by the fact these iwi funds were compensation for historic Treaty of Waitangi breaches.

Huirua was described as having a high sense of entitlement exhibiting impulsiveness and poor problem-solving skills.  He blamed investment losses on bad luck.

R. v. Huirua – High Court (27.05.22)

22.093

Insolvent Estate: MY Templar Ltd v. Parsons

In 2020, Jihong Lu died in Taiwan. In Auckland he had a reputation for throwing money around like confetti; staging a dismally unsuccessful musical at Sky City casino and extravagantly refurbishing the 22.7 metre MV Templaravailable for charter.  His New Zealand estate is insolvent.  Who owns MV Templar was disputed.

In his will signed just prior to death, Mr Lu described MV Templar as being worth three million dollars.  Lu family members claim the vessel was never owned by Mr Lu.  He purchased it with family money and was never the owner, they said.

The High Court was told Lu family holds considerable assets through a group of companies known generally as the Templar Group. Jihong Lu had management control of Templar Group with general licence to use Templar money as he saw fit to advance family financial interests.  Transactions were poorly documented.  Money was drawn down from various Templar companies as and when needed.

Administrator of Jihong Lu’s estate alleged MV Templar was a personal asset of Mr Lu which had been subsequently sold to a company in the Templar Group but never paid for.  $2.97 million remained unpaid, he said.

In the High Court, Associate judge Andrew ruled the legal and commercial documentation set out a clear trail: Mr Lu purchased MV Templar in his own name in two tranches between 2016 and 2017; spent his own money on fitting out the vessel for luxury charters; then in 2018 transferred the vessel to a newly formed Templar subsidiary called MY Templar Ltd but was never paid.  Result: MY Templar Ltd owed Mr Lu’s estate $2.97 million.

The High Court was told the vessel was sold by agreement prior to trial for $800,000, with sale proceeds held in trust pending the outcome.  MY Templar Ltd is now in liquidation, insolvent.  Evidence was given that Templar Group has separately filed a claim against Jihong Lu’s estate for $5.6 million, money allegedly lent to Mr Lu.

MY Templar Ltd v. Parsons – High Court (26.05.22)

22.092 

Bride Price: Almarzooqi v. Salih

A 500,000 dirhams deferred bride price agreed as part of an Islamic wedding in UAE was enforced in the New Zealand courts as a contractual promise.

In December 2013, Rafif Salih married Rahla Almarzooqi in the United Arab Emirates.  He was then working in New Zealand as a dentist; she was living in Australia on a UAE government scholarship.  As is common with Islamic marriages, a bride price or nikah was agreed with Mr Salih making an immediate payment of 30,000 dirhams (about $13,000) and agreeing to payment of a further 500,000 dirhams (about $215,000) on his death or the event of an irreconcilable divorce.   

The High Court was told they then lived in New Zealand, separating after six months.  In 2016, Ms Almarzooqi obtained a divorce from the Personal Status Court of Dubai.  Mr Salih refused to pay the agreed 500,000 dirhams.  New Zealand courts had no grounds to enforce the UAE nikah, he said.

Islamic marriage customs are not unique to UAE and Sharia law, Justice Simon France said.  Had they instead married in New Zealand, agreement to nikah can operate within a New Zealand legal context. Whether UAE law or New Zealand law applied, it was a case of determining terms of the marriage contract and establishing whether the contract had been broken, Justice France said.   

Their marriage contract was governed by UAE law, Justice France ruled.  Terms of the contract required Mr Salih pay 500,000 dirhams on their divorce.

Almarzooqi v. Salih – High Court (25.05.22)

22.091

Customs Fraud: Zhu v. Customs

Over four million dollars in cash was uncovered including $3.2 million stuffed into rubbish sacks at a storage unit during an Auckland Customs raid breaking open a smuggling ring importing cigarettes from China concealed inside furniture shipments.  Tax revenue evaded was $18.7 million.

It was a family affair: husband Wei Yi Hu was sentenced to five years three months imprisonment for customs fraud and wife Hua Yi Zhu three years; her China-based brother, who organised shipments, remained safely outside the jurisdiction of New Zealand courts.    

Zhu unsuccessfully appealed her sentence of three year’s imprisonment.  She was a minor player in the scheme, she said.  Further, there were cultural issues in play, she said.  In Chinese culture, wives show deference to their spouses and do their bidding.

The sentence was not manifestly excessive, Justice Davison ruled.  Zhu played an active, central and significant role over an extended period of time between 2015 and 2018, he said.  While her husband was described as the mastermind behind operations, there was evidence Zhu dealt directly with cigarette suppliers in China, liaised with her brother over shipment details and initiated payments to China.

Zhu v. Customs – High Court (20.05.22)

22.090

Loan: Merchant Finance v. Xu & Litt

Claiming $548,000 was still owed after a mortgagee sale, Merchant Finance was instead forced to pay Cheryl Xu and Karl Litt $145,800 following its failure to provide proper credit contract disclosure.  

Ms Xu and Mr Litt launched into the Auckland restaurant business in late 2017, repurposing a small convenience store in front of their 1930s villa on Remuera Road into a café.  A $1.98 million Merchant Finance Ltd loan was used to both refinance existing short-term borrowing and also to expand with new restaurants in St Heliers and Onehunga.

The High Court was told Merchant Finance sold the Remuera Road property for $1.79 million in a June 2019 mortgagee sale.  Mr Litt was bankrupted in September 2020. Further legal fallout followed with Merchant Finance suing for money allegedly still due after the forced sale. Sloppy loan documentation resulted in Justice Fitzgerald ruling no interest was payable on the loan; Merchant Finance breached Credit Contracts and Consumer Finance Act requirements to make proper disclosure of contract terms.

Evidence was given of Merchant Finance’s failure in loan documentation to state its physical address and the date interest starting running. Total interest payable over term of the loan was miscalculated.  Disclosure of the default interest rate was obscured.  The default interest rate was described as 20 per cent, but off to one side of the loan document a typed notation stated ‘plus ordinary interest rate.’ What appeared to be a default interest rate of twenty per cent was in fact about forty per cent.

The Credit Contracts penalty for failing to make proper disclosure meant Merchant Finance could not recover any interest and had to refund all interest paid.

The base loan advanced by Merchant Finance was $1.65 million, which was less than the $1.79 million received following its mortgagee sale.  Its actual loan advance of $1.98 million included some $208,000 being twelve months interest treated as paid in advance and capitalised into the loan.

Merchant Finance Ltd v. Xu & Litt – High Court (21.12.21 & 19.05.22)

22.089

Asset Forfeiture: Commissioner of Police v. Standen

High-powered cars supposedly subject to proceeds of crime restraining orders are proving elusive as police attempt to track down what are allegedly gang-related seizures.

In April 2022, Daren Mark Standen met with Christchurch police to negotiate a Criminal Proceeds (Recovery) Act settlement following conviction for methamphetamine offences.  He agreed to forfeit some $226,000 cash seized by police in late 2020 as being proceeds of crime.  There were stumbling blocks over ownership of specific motor vehicles alleged to be tainted as purchased with proceeds of crime.  First: a 2008 Porsche Cayenne, owned by Standen.  This was taken from him he said, by gang members he was unwilling or unable to name.  A court order was issued for seizure of the Porsche.  The High Court was told it had quickly passed through hands of three different people, with the person currently in possession claiming to have paid $20,000 to buy it.  Second: a 2003 Audi Quattro, registered in Standen’s name.  This vehicle was also stolen from Standen in a gang-related robbery, police said. The High Court ordered forfeiture and sale of the Audi.

Within gang culture, disputed debts are commonly settled by force with the seizure of assets such as cars; a process colloquially described as ‘taxing.’  As a general rule, ownership of stolen cars remains with the original owner.  Any person subsequently in possession cannot claim ownership, even when they did not know it was stolen and paid market price.

Commissioner of Police v. Standen – High Court (26.01.22 & 17.05.22)

22.088

Fair Trading: Corporate Cabs v. Kumar

Corporate Cabs throwing  the book at a former driver as a warning shot for other drivers was of limited success when the High Court ruled there was no Fair Trading Act breach by drivers setting up a rival business under a different name.  

Prem Kumar’s driver contract with Corporate Cabs Ltd was terminated in late 2017, after some eighteen months working for the company.  Drivers working with Corporate Cabs are categorised as owner/operators.  They are required to purchase their vehicle from a Corporate Cabs nominated supplier and comply with Corporate’s rules for fit-out and signage.

The High Court was told Mr Kumar’s contract was terminated for breaching Corporate Cab rules.  He then adapted signage on his car describing his new business as ‘Business Cab’ but used Corporate Cabs’ font and dark-blue background for his new logo. Corporate Cabs sued alleging breach of his owner/operator contract, breach of the Fair Trading Act and breach of the Trade Marks Act.  Mr Kumar did not appear in court.  There were suggestions he had moved to India.

Corporate Cabs said an example had to be made of Mr Kumar; drivers might otherwise assume they could breach Corporate Cabs rules with impunity.  Evidence was given that Mr Kumar changed the branding of his new business after Corporate Cabs objected; adding a silver fern to the name Business Cab and changing the background colour to black.

Justice Harvey ruled Mr Kumar was not in breach of the Fair Trading Act.  There was no evidence of customers being confused between the two businesses. Corporate Cabs is primarily a taxi-booking service.  Mr Kumar’s new business operated from kerbside hires.  The amended branding was not misleading or deceptive, Justice Harvey ruled.

An injunction was granted prohibiting Mr Kumar in the future from using any branding on his taxi which is similar to Corporate Cabs branding.

Corporate Cabs Ltd v. Kumar – High Court (17.05.22)

22.087

Asset Forfeiture: Commissioner of Police v. Lin & Du

Smuggling cigarettes from China through their Auckland company Enternal Trading Ltd resulted in proceeds of crime orders totalling $900,000 imposed on director Bo Lin and sales manager Jialiang Du. Customs duty evaded by smuggling was estimated at $1.2 million.

In July 2019, Customs intercepted a container at Auckland Port with some 480,000 Chinese cigarettes hidden inside boxes of food imported by Enternal Trading.  A further 603,000 cigarettes were found at a storage unit linked to Mr Du.  A WeChat message on Mr Lin’s phone sent after the Customs interception asked his China suppliers why cigarettes were loaded into his container. Customs found all prior WeChat messages had been deleted.  It also found a handwritten note at Mr Lin’s home detailing these stratagems as ploys to deflect Customs enquiries.

Proceeds of crime restraining orders were placed over property owned by Mr Lin in Auckland suburb New Windsor and Mr Du at Whenuapai. Both were convicted of Customs fraud; Lin sentenced to nine months home detention, Du two months.

The High Court approved a negotiated settlement with profit forfeiture orders of $900,000 imposed under the Criminal Proceeds (Recovery) Act; $600,000 payable by Mr Lin, $300,000 by Mr Du.  Orders were made for sale of the restrained properties.  The court was told these profit forfeitures took into account the fact Enternal Trading had separately paid sums due to both Customs and Inland Revenue.

Commissioner of Police v. Lin & Du – High Court (16.05.22)

22.086

Estate: Ridley v. Mulholland

Described as holding other beneficiaries to ransom, Gregory Mulholland was removed as administrator of his late mother’s estate and ordered to vacate her Auckland home where he had been living rent free.  

Jocelyn Mulholland died in 2020 leaving her net estate to her three children.  She owned a property at Rathmar Drive, Manurewa.  Son Gregory lived with her for the six years prior to her death.  He then stayed on at Rathmar Drive, rent free refusing to leave.  The High Court was told a Heartland Bank reverse mortgage had been taken out over Rathmar Drive years earlier, with interest currently at 5.95 per cent compounding monthly being added to the balance owing.  Terms of the reverse mortgage require repayment on Mrs Mulholland’s death.

Gregory and sister Catherine were appointed estate administrators.  Gregory refused to budge from the property, saying he wanted to buy it.  Delays were caused by Catherine’s failure to itemise chattels taken from the property, he claims.

Gregory’s claims about chattels were of no moment, Justice Gordon ruled.  There was evidence that Gregory helped box up their mother’s personal effects and knew which items had gone into storage and which had been distributed between the children.

Gregory was ordered to leave Rathmar Drive within two months.  He had no legal right to stay in occupation.  He was removed as administrator of the estate.  Failing to progress sale of Rathmar Drive was a breach of his obligations as administrator, Justice Gordon ruled. Evidence was given that Rathmar has a current online valuation of $935,000, with Heartland Bank owed some $74,000.

Ridley v. Mulholland – High Court (12.05.22)

22.085

Due Diligence: Melco Properties v. Hall

Black Diamond Technologies allege vendor of a property in Lower Hutt deliberately went bush to prevent completion of due diligence causing its $1.5 million purchase to fall over, all because the vendor had a better offer.  Vendors cannot use their own default as grounds to escape a contract, the Supreme Court ruled.  

In December 2019, Black Diamond agreed to buy a neighbouring property in Parliament Street from Anthony John Hall.  Black Diamond had until 9 January 2020 to complete due diligence.  The intervening Christmas/New Year break caused complications.  At Mr Hall’s direction, his lawyer did not respond to requests for a due diligence extension.  The contract came to an end when Black Diamond did not either complete its due diligence before the deadline or waive the requirement for due diligence, the High Court ruled.  Black Diamond appealed.

Evidence was given during the High Court trial of Mr Hall cancelling at the last minute Black Diamond’s access for a proposed engineering inspection scheduled for 8 January.  He would be tramping in the Tararua Ranges he said, out of phone contact.  Telephone records established that Mr Hall was in contact with a second buyer prior to this cancellation.  This buyer offered a better price.

Black Diamond registered a caveat over title to Parliament Street, blocking any sale to the second buyer.  This caveat remains.  Black Diamond is entitled to return to the High Court and argue the original $1.5 million contract still stands, the Supreme Court said.  As a general rule, vendors cannot through their own behaviour prevent purchasers from carrying out their part of the contract, the court ruled.

Mr Hall complains that if the original $1.5 million contract is enforced, Black Diamond would have had two years without payment before getting Parliament Street at a price below its current market value.

The court was told the second buyer was offering to pay an extra $100,000.

Melco Property Holdings (NZ) Ltd v. Hall – Supreme Court (12.05.22)

22.084 

Asset Forfeiture: Commissioner of Police v. Knights

An Auckland light industrial unit converted without resource consent into residential accommodation for immigrant workers and WINZ beneficiaries has been targeted for confiscation on grounds receiving rental income amounted to a ‘significant criminal activity.’  

The High Court was told a warehouse on Maich Road in a Manurewa light industrial zone was used to house both foreign workers and WINZ beneficiaries from 2015 after being converted into 23 separate bedrooms with kitchen and bathroom facilities attached.  Residents were charged $200 per week for accommodation.  No building consents were obtained for the alterations. A land use resource consent lodged with Auckland City in 2017 to change zoning to residential was withdrawn after Council inspectors indicated consent would be refused.

Police took action, alleging collection of rentals amounted to a significant criminal activity.  Three of the participants: Jenni Diana Farmer, William Robert Farmer and Mark Vincent Hubble negotiated a Criminal Proceeds (Recovery) Act settlement. Paul Andrew Knights challenged allegations he was involved in any criminal activity.  While a company he owns received about $343,000 in rentals for an eighteen month period starting late 2017, he was unaware of zoning and Building Act issues, he said.

Justice Lang ruled that Mr Knights was wilfully blind to the issues; he had received multiple emails from Mr Farmer outlining Council objections.  A restraining order was placed over Mr Knight’s interest in the converted warehouse, pending prosecutions for alleged breaches of the Resource Management Act and the Building Act.  Mr Knights says criminal proceeds legislation is being used improperly.  It was never intended to be used as grounds to seize assets for breaches of public welfare regulations, he says.

Commissioner of Police v. Knights – High Court (9.05.22)

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