Radiology: NZ Institute of Independent Radiologists v. ACC

Concerns about moral hazard and conflicts of interest in Accident Compensation Corporation payments for private sector CT scans and MRI scans were pushed aside by the High Court with blithe acceptance that the Corporation could handle such conflicts despite over five years of inaction.   

Independent radiologists are up in arms about corporate radiologists owned directly or indirectly by medical practitioners who then refer their patients to their own specialist radiology clinic, capturing some of the profits from this referred work.  They argue there is an ethical conflict of interest with a danger of these medical practitioners improperly over-referring patients (booking scans when there is no clinical requirement for one) and sub-optimal referrals (when a different provider would provide a better clinical service).

In 2021, a number of independent radiologists banded together challenging Accident Compensation Corporation payment for referrals to what they claim are radiologists not sufficiently independent. In their sights are Beyond Radiology, Radiology Group and Mercy Radiology all of which are owned to various degrees by doctors or their families.  There are forty radiology units in New Zealand providing high-tech CT and MRI imaging; split roughly 50/50 between the private sector and what were District Health Boards

Independent radiologists claim ACC is not complying with terms of its own Act; the requirement to act in a cost-effective manner. There is a risk of ACC being overcharged where there is commercial relationship between those providing referrals and those doing the work, they say.

The High Court was told that since 2016 the ACC standard-form service contract for radiologists has required service suppliers to disclose any conflict of interest and where a conflict exists that a written agreement with ACC is required setting out how this conflict is managed.  Evidence was given that ACC had taken no interest in enforcing these rules until early 2021 and then spent six months seeking to identify which radiology providers had links to those providing referrals.  Since then, it has identified three medical practitioners with unusual referral patterns.  Their names were supressed.

Justice Cooke ruled that ACC is able to manage conflicts of interest between referrers and providers and that the current management system does comply with ACC requirements to act in a cost-effective manner.

In other areas of the health sector, the rules are more precise.  The Medicines Act prohibits any person who issues prescriptions from owning a pharmacy. 

NZ Institute of Independent Radiologists Inc v. Accident Compensation Corporation – High Court (20.12.22)

23.015

Estate: Bennett v.O'Meara

Darryn Bennett took legal action forcing sister Kim O’Meara out of their late father’s Auckland property where she had been living rent free, refusing to shift.

The two are joint executors of their late father’s estate which includes a property in Regent Street, Papatoetoe.  Their father died in July 2020.  They share his estate equally.

The High Court was told Kim had been living at Regent Street since about 2000, paying rent.  After her father died, she stopped paying rent and refused to move, with his estate left to pay rates and insurance.  Negotiations for her departure to enable sale of Regent Street got nowhere.  Ms O’Meara said covid-19 lockdowns and personal issues prevented any move.

In July 2022, she was given formal notice to vacate.  This was ignored.

Months later, a court order to vacate the property within five working days was issued by Justice Gault.  Ms O’Meara was not entitled to stay, he said.  She had no rights under the Residential Tenancies Act; there was no tenancy agreement and any consent to occupy granted by her late father came to an end on his death.

Bennett v. O’Meara  - High Court (19.12.22)

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House Sitting: Washikita v. Smith

John Smith was ordered to leave a south Auckland home where he had been living rent free for thirty years with the High Court dismissing his claim to have a right of first refusal to buy the Conifer Grove property; a claim which Mr Smith justified by producing invoices which he said required the Japanese owners to pay him $31,000 for the privilege of selling their property to him.  

The High Court was told Mr Smith met the Washikitas during a trip to Japan in 1991.  One year later he sold to them a nearly finished home in Perotti Place, Conifer Grove, for $250,000 which he said at the time was a deal at ‘no profit’ to him.  They intended to use the property as a holiday home, but never lived there.  At time of sale, it was agreed Mr Smith could continue to live in the property, rent free, until asked to vacate.  He was to pay all outgoings and maintenance costs. By 2020, Mr Washikita was impaired by dementia.  His family was looking to sell.  They did not intend to come to New Zealand.  Plans to sell accelerated when Mr Smith stopped paying rates and insurance. Perotti Place was valued in February 2021 at $1.06 million.     

Evidence was given that plans for sale and requests Mr Smith leave the property then bogged down with Mr Smith claiming Mr Washikita had previously agreed that he had the right to buy, subject to ‘conditions.’ Mr Smith never specified what were these conditions but produced invoices for work done on the property, saying these costs had to be set off against the price of $1.06 million.  The invoices came under close scrutiny in the High Court.  There was evidence that invoices dating back to 1993 had been produced on an excel spreadsheet that was not commercially available until 2007 and that the supposed invoices were modified on the same spreadsheet in early 2021.  The total of these invoices had the effect of Mr Smith being owed $31,000 after resuming ownership of the house.  Included as an invoice was a cost of more than $150,000 for ‘property management.’

Associate judge Paulsen ruled there was no evidence to support Mr Smith’s claims to a right of first refusal and to reimbursement of expenses.

The court was told that when Mr Smith got into financial difficulty in 2003, he borrowed $110,000 from Mr Waskikita promising to repay him $120,000 the following month.  Some part-payments were made over subsequent years.  By 2021 Mr Smith was claiming the initial $110,000 was in fact reimbursement for expenses he had incurred.

The Wahikita’s were entitled to possession of their property, Judge Paulsen ruled.  Mr Smith’s licence to occupy had been terminated by notice in February 2022.

Washikita v. Smith – High Court (19.12.22)

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Memelink: Body Corporate 68792 v. Link Trust

Owners of commercial units at 408 Hutt Road/Wakefield Street in Wellington must be ruing the day they ever bought in; tied up in convoluted legal proceedings by now-bankrupt Harry Memelink and trusts associated with him which have refused to pay body corporate levies and have now been injuncted by court order to stop interfering in body corporate affairs.

With Memelink’s payment of body corporate levies in arrears since 2018, other unit holders have been forced to top up corporate funds.  Interests associated with Mr Memelink own seven of the thirteen units.  Mr Memelink alleges ‘fraud and misconduct’ by the body corporate in relation to setting levies and use of body corporate funds. In earlier court proceedings Mr Memelink was described as having a long history of claiming illegalities in respect of levies and using this as an excuse for not paying anything.  In October 2017, the High Court appointed an administrator to take control of the corporate’s dysfunctional management.

Mr Memelink was bankrupted in 2018.  The standard three year period for automatic discharge from bankruptcy did not start running until September 2022, the date when he filed a complete statement of assets and liabilities with Insolvency Service.  The Link Trust (No.1) through which he owns Hutt Road units was put into receivership by court order to enable sale of the units without interference by Mr Memelink. That is not proving particularly effective.

In December 2022, Mr Memelink lodged a caveat against title to the units, attempting to block any sale.  It took a High Court application by the receivers to have it removed.  Justice Cooke ordered Mr Memelink not to interfere with proposed sales.  The Body Corporate administrator found Mr Memelink had contacted the building’s insurers with further allegations of Body Corporate fraud and theft.  Insurance cover was cancelled.  Bodies Corporate must hold current insurance.  Proposed sale of Mr Memelink’s units would be difficult without current cover.  Evidence was given that the administrator had difficulty in getting new insurance cover written at a reasonable cost.  Justice Grice issued an injunction blocking Mr Memelink or any person associated with him from interfering with the Body Corporate’s insurance arrangements.

Body Corporate 68792 v. Link Trust (No.1) & Memelink – High Court (16.12.22)

23.012

Family Trust: Whale v. Silich

Seven years after they separated, Gary Whale is challenging decisions about family trust farming assets made by his former wife Tanya Silich asking the High Court to remove her as trustee.  Both were removed as trustees and independent trustees appointed with power to investigate trust operations over the previous seven years.   

The High Court was told the two separated in November 2015 after 26 years marriage.  Gary is a builder by trade.  He left wife Tanya in possession of their Waipu dairy farm owned by a family trust.  A farm advisor was employed to act as a go-between assisting with their joint management of the farm.  Evidence was given that over time the advisor either stopped passing on Mr Whale’s views or Ms Silich chose to ignore them.

Mr Whale alleges his former wife has subsequently operated their family trust for her own benefit, failing to account for trust profits and using trust money for her own benefit.  The two have not met in person since they separated in 2015.  Since that time, Ms Silich has sold the Waipu property and transferred operations to a dairy farm near Dargaville.

At the request of Mr Whale, Justice Brewer ordered her removal as trustee as being in the best interests of trust beneficiaries. Mr Whale was also removed as a trustee; the level of estrangement between the two was such that it would be difficult for Mr Whale to be even-handed between all trust beneficiaries, Justice Brewer said.  Named as beneficiaries are Mr Whale, Ms Silich and their two adult sons.  Two retired chartered accountants were appointed as replacement trustees.

Ms Silich did not appear in court to contest her removal as trustee.

Whale v. Silich – High Court (9.12.22)

23.010

Fuel Supply: Chatham Hardware v. Chatham Island Management

The Chatham Islands’ stark beauty is offset by increased costs of transporting essential goods to its small population living 900 kilometres offshore.  A challenge to fuel pricing failed in the High Court; fuel wholesaler Chatham Island Management Ltd was not obliged to price fuel at a level to protect local retail margins.     

Chatham Island Management is a trading subsidiary of the Chatham Island Enterprise Trust, a charitable trust set up in the early 1990s to assist Island residents.  Local concerns about fuel costs led the Trust to extend operations from the importation and wholesaling of diesel into retailing as well.  Diesel is a critical resource on the Islands, not only for transport but also power generation.   

Chatham Hardware Ltd, owned by Monique and Valentine Croon, also retails diesel with the Trust its sole supplier.  They alleged the Trust was exploiting its monopoly position, in breach of the Commerce Act.  In particular, they allege that when a 2016 supply agreement was signed there was a side deal requiring the Trust’s wholesale prices be set at a level allowing Chatham Hardware a nineteen per cent margin on a competitive retail price. The dispute headed for court after Chatham Hardware withheld payment of Trust wholesale diesel invoices totalling some $220,000.

Associate judge Johnston ruled there was no collateral side deal.  Chatham Hardware’s margin at time of the 2016 deal may have been nineteen per cent, but the 2016 contract was explicit; the Trust can vary prices at any time and is not obliged to first consult the Croons.  Judge Johnston also ruled there was no evidence of the Trust misusing its monopoly position.  Chatham Hardware was ordered to pay the withheld $220,000 or face liquidation.

Chatham Hardware Ltd v. Chatham Island Management Ltd – High Court (5.12.22)

23.011

Estate: Glass v. Glass

With family trusts holding assets in excess of twenty million dollars, daughter Lisa Knight claims she has been treated unjustly; promises that all children would receive at least one million dollars in their lifetime have not been honoured and her late mother’s estate has been impoverished by having all assets of any value switched into family trusts, she alleges.

Lisa took legal action in the High Court attempting to crack open the family trusts, hoping to have her late mother’s estate recover assets having them available for her claim under the Family Protection Act.

The High Court was told Lisa is one of three children born to Sally Elizabeth Glass, known as Libby.  Libby married Denver Glass in 1987.  Libby had three children from an earlier marriage; Denver had four children from his earlier marriage.  Libby and Denver had no children.  Libby died in February 2020, suffering from dementia.  Libby’s business interests centred on a fashion boutique called Posh of Holmwood based in the Christchurch suburb of Merivale; Denver developed a meat processing business called FreshPork.  Together, they purchased and renovated multiple properties in and around Christchurch.  These properties were each held in various family trusts.

Libby’s and Denver’s children were told not to expect any inheritance; each would receive one million dollars in their lifetime to help set them up in life.  Libby and Denver intended to give the rest on death to charities of their choice.

Evidence was given of tensions between Denver and his step-daughters Lisa and Nicole.  Denver was described as controlling.  Nicole received financial support totalling one million dollars to assist with her purchase of a property in Sydney.  Expecting to receive the funds as a gift, Nicole found the money was instead advanced as a loan with a mortgage registered against the Balmain property. This was to protect the home from matrimonial property claims, Denver said.  In 2018, he attempted to evict Nicole from the property.  Lisa told the High Court she had received some financial support but always on Denver’s terms.  She had been allowed rent-free occupation of a large Christchurch home in Kotare Street owned by one of the family trusts provided she met the costs of rates, insurance, repairs, and maintenance.  Denver has refused to honour promises made in Libby’s lifetime to transfer ownership of Kotare Street to her, Lisa says.  Lisa has received benefits to the value of $315,000, Justice Dunningham said, but has been left in her mid-fifties with no prospect of financial security or of owning her own home.

Justice Dunningham authorised legal action be taken in the name of Libby’s estate to recover, as relationship property, assets held by family trusts.  If successful, these assets become available for a claim by Lisa against her late mother’s estate.

Glass v. Glass – High Court (5.12.22) 

23.009