Accident Compensation: Simpson v. ACC

 

Having no declared income and having not filed any tax returns for the previous four years, Albert Simpson failed in a claim for earnings related accident compensation based on his tourism business.

In February 2020, Accident Compensation accepted his claim for personal injury by accident.  He was off work with infection to a wound after cardiac surgery.  He was subsequently refused earnings related compensation.

The High Court was told he is owner operator of Discovery River Cruises Ltd.  Its website advertises luxury houseboat cruises on the Waikato River.  It has not been a profitable business.  In the previous four years annual losses had exceeded between $50,000 and over $100,000.  Mr Simpson was not paid a salary.  His only income was a pension.

To determine earnings-related compensation for shareholder-employees, the Accident Compensation Act looks at earnings received immediately before an accident.  Mr Simpson had no earnings.  He said another part of the legislation was relevant to shareholder-employees; allowing Accident Compensation to pay weekly compensation based on what would be ‘reasonable remuneration’ for services.  Mr Simpson valued his work for Discovery River Cruises at $80,000 per annum.

Justice Campbell ruled the ‘reasonable remuneration’ formula applied only when income declared for tax did not properly represent services actually provided.  In this case, Mr Simpson never declared any income.  In the absence of a tax filing, the ‘reasonable remuneration’ rule could not apply.

Simpson v. Accident Compensation Corporation – High Court (30.06.23)

23.107

Fraud Prosecution: Morrison & Blackwood v. FMA

 

With criminal prosecutions unsuccessful following New Zealand’s longest running fraud trial, Richard Blackwood and Lance Morrison sued for Bill of Rights damages.  Damages awarded of $10,000 for Morrison and $15,000 for Blackwood will not cover legal fees for their day in court.  Each had previously incurred over $200,000 in legal costs defending FMA prosecutions involving allegations Viaduct Capital and Mutual Finance had rorted government guarantees on offer after the 2008 global financial crisis at a $3.38 million cost to taxpayers.    

Charged alongside Blackwood and Morrison were Paul Bublitz, Bruce McKay, Nick Wevers and Peter Chevin.  These prosecutions were not Financial Markets Authority’s finest hour.  Nine months into the trial, proceedings came to screeching halt; aborted by the trial judge when FMA ‘fessed up to holding nearly 15,000 documents which it had inadvertently failed to disclose as part of pre-trial Criminal Disclosure Act procedures.  The defendants were hopelessly prejudiced, the trial judge ruled.  They did not have the chance to properly prepare their defence and were at a disadvantage in cross-examining witnesses when prosecutors were sitting on undisclosed information.

It was a further year before a second trial started.  This was four years after charges were first filed.

Charges against Mr Morrison were withdrawn at the second trial, on grounds of his presumed lesser culpability, his age and poor health.  His legal fees to that date were some $213,000.  He was awarded $85,000 contribution towards these costs.

Mr Blackwood was convicted after the second trial, sentenced to nine months home detention.  This conviction was subsequently overturned by the Court of Appeal.  His legal fees across two trials came to $284,500.  A $100,000 contribution was awarded towards his costs.

Both then sued, claiming damages: for the failure to make proper initial disclosure under the Criminal Disclosure Act; and for a claim under the Bill or Rights Act that they did not get a fair trial.

They gave evidence of the reputational damage suffered to their personal and professional standing once charges were laid.  Mr Morrison told of being forced at one stage to live in a tent, surrounded by his personal belongings and boxes of documents while having to prepare for court with no power and no reliable internet.  Mr Blackwood told of residing at one stage during the first trial in a friend’s caravan, using a bathroom in a converted garage.

Justice McQueen ruled against their claim for general damages under the Criminal Disclosure Act.  But they were entitled to damages under the Bill of Rights Act, she ruled.  Exceptional circumstances in the aborted first trial was for both of them a breach of the right to a fair trial; the long delay before the second trial was for Mr Blackwood a breach of his right to trial without undue delay.

FMA said its delay in disclosing documents was inadvertent.  A right to damages does not require proof documents were deliberately withheld, Justice McQueen ruled.

Morrison & Blackwood v. Financial Markets Authority – High Court (30.06.23)

23.106

Defamation: Syed v. Malik

 

With their business relationship in tatters, Amir Malik took revenge online in what he called a ‘public awareness’ campaign about the behaviour of former associate Zainulabidin Syed.  He was ordered to pay $225,000 damages for defamation.

The two met in 2005, later becoming jointly involved in property investment.  Mr Syed came with nearly thirty years experience in Australia as a property developer.  By 2009, Mr Malik and family were living rent free at a property in Auckland owned by Mr Syed with Mr Malik working as a project manager on Syed projects.  Six years later, their business relationship fell apart.

The High Court was told Mr Syed had become aware of Mr Malik profiting through use of a separate company, contracted to work on projects.  Their relationship deteriorated further when Mr Malik then claimed to be in partnership, demanding an equity interest in one of the Syed developments.

Mr Malik was evicted from his rent-free accommodation.  He launched what the High Court described as a smear campaign against Mr Syed.

Evidence was given of group emails, Facebook posts and Urdu-voiced video clips which variously described Mr Syed as being involved in fraud, perjury, money-laundering and tax evasion.  Mr Syed was accused of having misused funds provided for construction of a mosque.  Mr Syed said this led to him being spurned by members of the Muslim community in Australia and contributed towards failure of his building company, Halal Homes.

Mr Malik justified his campaign as a public service, warning others who might have dealings with Mr Syed.  He provided no evidence to support his allegations.        

In August 2018, Justice Churchman ruled twenty separate published items were defamatory.  Mr Syed was told to reformulate his claim for $10.9 million damages, primarily losses claimed from the failure of Halal Homes.

Following a subsequent damages hearing, Justice Isac ordered payment of $225,000 damages as compensation for Mr Syed.  Mr Malik’s defamatory comments were described as an attack on every aspect of Mr Syed’s life: his family, faith and business. Mr Malik’s wife Trinity Wilson was held jointly liable on $150,000 of this $225,000.  She had assisted in promulgating the defamatory comments, Justice Isac ruled.

Mr Syed received adverse media publicity in 2018 with allegations he was exploiting government funding as an emergency housing provider.

Syed v. Malik – High Court (30.06.23)

23.105

Relationship Property: Maule v. Cooper

 

Court orders were needed to enforce a relationship property agreement between Len Cooper and Tracey Maule following their 2018 divorce.  Len sought unsuccessfully to reopen their property agreement as unfair because of a subsequent $280,000 court judgment holding him liable for reckless trading.  

In 2020, the Supreme Court ruled Auckland builder Len Cooper was liable to pay damages for reckless trading with action taken following liquidation of his company Debut Homes Ltd.  In 2018, he had agreed a relationship property agreement with to a 50/50 split of personal and business assets having his half share then valued at $692,000.

Their relationship agreement has not been fully implemented while Len argues it should be set aside on grounds of serious injustice.  The Supreme Court damages ruling should also be taken into account, he claims.  Justice Peters ruled Len’s personal liability for $280,000 court-ordered damages was insufficient grounds to re-open the prior relationship agreement.  Presuming the damages claim is a relationship debt, she said, court proceedings were underway at time of agreement negotiations and Len accepted liability for any outcome in the Debut Homes litigation.

Justice Peters ordered both to perform their prior relationship property agreement.  This included an agreed cash adjustment by Len following the $1.64 million sale of their former family home on Mahoney Drive in Auckland suburb Albany.  He was also ordered to take legal steps to remove Tracey’s liability: on a mortgage over a Bush Road property, on her personal guarantees on supply contracts for Len’s business Jumbo Bins, and on a Jumbo Bins’ credit card used to pay business expenses.

In turn, Tracey was ordered to facilitate transfers of ownership for both Bush Road and Jumbo Bins from family trusts into Len’s name.

Maule v. Cooper – High Court (29.06.23)

23.103

Estate: Burgess v. Burgess

 

A risible bequest to a son amounting to 0.2 per cent of a farmer’s $2.4 million estate led to a Family Protection Act claim by Lindsay Burgess against his late father’s estate.  His estate payout was increased from $5000 to $400,000.

Te Aroha farmer David Burgess died in 2019.  Other than a $5000 bequest to each of his children, all his estate was transferred to a family trust.  His son Lindsay is not a beneficiary of this trust.  The primary beneficiaries are Lindsay’s brother Kevin together with Lindsay’s stepmother Noi and her child Guy.

Negotiations with trustees came to nothing.  Lindsay was asking for $500,000; the trustees were willing to pay about $300,000, with payment made by transferring to him a Wairongomai Road estate property.

Lindsay sued under the Family Protection Act.  This Act allows reallocation of distributions under a will or intestacy following failure to provide ‘proper maintenance and support;’ wording given a liberal interpretation by judges over time, awarding compensation where there has been breach of a moral duty to acknowledge a family relationship.

The High Court was told Lindsay during his working life returned to the family farm repeatedly for extended periods of time to help out at times of family emergencies, primarily when his mother was terminally ill and later when his father became unable to work the farm.  Immediately after his father’s death, he continued to oversee farm operations.  Part of the time, Lindsay earned income sharemilking on the property but his work extended beyond that contractually required from a sharemilker.  He was paid a minimal wage for extra work done; payment sometimes being payment in kind with gifts of motor vehicles.

Lindsay said this work prevented him from getting ahead, building up assets with better pay from alternative employment.  Evidence was given that currently his only income is a social welfare benefit, the result of a ‘bungled’ hip operation.

Justice Harvey ruled Lindsay was entitled to a greater contribution from his late father’s estate, awarding $400,000 and specifying this is to be paid in cash, not kind.

Estate trustees argued no further payment was appropriate, given that Lindsay’s father specifically stated in his will that Lindsay was to receive less because ‘adequate provision’ had been made for Lindsay during his lifetime and because he had received a ‘substantial’ provision from his mother’s estate.

There was evidence that Lindsay’s inheritance from his mother had been reduced after a family dispute over terms of her will which was settled with an out-of-court family agreement.  The court was told part of Lindsay’s inheritance from his mother was paid to his then wife when their marriage ended.

Burgess v. Burgess – High Court (29.06.23)

23.104

Money Laundering: FMA v. Tiger Brokers

 

With ultimate ownership residing in the Cayman Islands and customer data stored on servers in China, Tiger Brokers (NZ) Ltd was fined $900,000 for failing to comply with money-laundering legislation.

Tiger provides sharebroking services through its online trading platform Tiger Trade.  A formal warning from Financial Markets Authority in March 2020 for non-compliance with Anti Money Laundering and Countering Financing of Terrorism Act requirements was followed by a sample audit of customer accounts.

The High Court was told 33 customer accounts were audited as a check on customer due diligence.  This was a very small sample, given that High Court evidence showed Tiger then had some 126,000 customers.  There was insufficient information about client identity on 21 of the 33 accounts audited.  In all but one of those 21 accounts, the unusual nature of transactions merited enhanced customer identification.  In one case, the customer file was tagged with a requirement to seek approval from senior management before processing any transaction; there was a failure to do so.  Tiger said the sample selected was not representative.

Tiger Brokers was further found to have failed to report, or was late in reporting, suspicious transactions on nineteen transactions in customer accounts audited.  Suspicious activity reports are collated by the police financial intelligence unit.

Tiger Brokers further failed to keep proper accounting records.  Customer information was stored off-shore and not in English.

Justice Gault approved a negotiated settlement between Financial Management Authority and Tiger Brokers requiring Tiger pay a $900,000 civil penalty.

Despite its failures to comply with the Act, there was no evidence that Tiger Brokers had in fact assisted substantive money laundering or financing of terrorism, Justice Gault said.

Financial Markets Authority v. Tiger Brokers (NZ) Ltd – High Court (28.06.23)

23.102

Property Share: Ogilvie v. Li

 

Paul Ogilvie and Vickie Li lived together for over fourteen years in an Auckland property owned by her parents, raising two children.  On separation, his claim to a share of the house failed; it was not relationship property and there was never any enforceable promise he would share in its value.

The two met in 2003.  One year later, Ms Li was living in a property on Coronation Road in Auckland suburb Hillcrest purchased by her parents for $323,000.  Her parents live in Hong Kong.  Their daughter paid rent and managed the property on their behalf, taking in several flatmates who also paid rent.  Ms Li ensured mortgage payments were kept up to date, organised routine maintenance and occasionally remitted funds back to her parents.

The High Court was told Mr Ogilvie moved into Coronation Road some two years after he started dating Ms Li.  Her parents required that Mr Ogilvie also pay rent.  He was an apprentice builder; she a physiotherapy student.  Ms Li managed finances for both their household and the Coronation Road property.

Evidence was given of increasing tension as their relationship deteriorated.  In good times Ms Li would say they were lucky to have their own house in Auckland; in bad times she would emphasise it was her parents’ house and if Mr Ogilvie left he would get nothing.  He took to covertly recording their arguments.

They separated in 2019.  Ms Li remained in Coronation Road.  Mr Ogilvie had fulltime care of their children, with Ms Li paying child support.  He was left with no assets of substance.

Mr Ogilvie claimed his former wife had promised he would share in the value of the property.  This was enforceable, he said, because she had full authority to act on her parents’ behalf.  They had signed powers of attorney so that Ms Li could deal with Coronation Road in their absence.

Justice Walker ruled Mr Ogilvie was aware of the limited authority Ms Li had been given; she contacted her parents to discuss any major issues that came up.  Any comments by Ms Li that the two might one day be gifted ownership gave no rights to ownership, Justice Walker ruled.

Mr Ogilvie further claimed repairs and renovations he carried out on the property created rights to share in its value.  This work was largely what might be expected of someone paying less than market rental while living in a property owned by family, Justice Walker said.  It was insufficient to justify a claim to an interest in the property itself.

Ogilvie v. Li – High Court (28.06.23)

23.101

Asset Forfeiture: Commissioner of Police v. Franklin

 

Misuse of Drugs Act charges against Wayne Brendon Franklin were dismissed but he agreed to hand over $404,700 as proceeds of crime.  In addition, agreement terms left open the possibility of a tax investigation into suspected tax evasion.  

After a May 2020 police raid at a Kumara property on the West Coast, Mr Franklin was charged with drug offences.  Methamphetamine together with $12,050 was seized at the property.  After a court ruling that evidence was obtained unlawfully, police offered no evidence at the subsequent trial.  Charges were dismissed.

Some eighteen months later, the High Court approved a negotiated settlement under the Criminal Proceeds (Recovery) Act.  This followed a court ruling that evidence inadmissible in the criminal case could be used in proceeds of crime recoveries.  Mr Franklin agreed to forfeit the $12,050 cash seized and further agreed to pay $392,700 as profits from criminal activity.

Mr Franklin owns property on Portage Road in Auckland suburb New Lynn.  There is a proceeds of crime restraining order on the property, blocking any sale.  Mr Franklin was given three months to finance the $392,700 profit forfeiture order by borrowing against Portage Road, failing that the property is to be sold.

Terms of the agreed settlement specifically stated it is not binding on Inland Revenue.

Commissioner of Police v. Franklin – High Court (27.06.23)

23.100

Defamation: AlKazaz v. Deloitte

 

Previously let go by Deloitte as part of restructuring in 2013, Ahmed AlKazaz sued for defamation a decade later alleging he had been defamed by Deloitte when turned down for further employment in 2018.  His claim was outside the two year time limit for defamation claims and did not specify how he had been defamed, the High Court ruled.   

Mr AlKazaz previously worked for Deloitte subsidiary DeloitteAsparona Ltd in what was described as a training role.  Five years after departure, a recruitment agency sent his CV to Deloitte in response to an advertised vacancy for a technical consultant role.  When Deloitte responded that it ‘declined to proceed,’ the recruitment agency sought feedback.  Deloitte responded with a comment that information on Mr AlKazaz’s CV was inaccurate and added a link to a media article in which Mr AlKazaz had sued another employer for unjustified dismissal.

The High Court was told that Mr AlKazaz’s application for work as a technical consultant had been viewed with amusement by Deloitte staff who had worked with him previously, taking the view he did not have the skills claimed.

The Defamation Act generally requires claims to be filed within two years.  Those claiming to be defamed are expected to take steps promptly to protect their reputation.  Mr AlKazaz’s claim was filed too late, Associate judge Gardiner ruled.  The fact Mr AlKazaz has English as a second language, was doing his own legal work and was unaware until recently that New Zealand law allowed actions for defamation were not an excuse, she ruled.

Mr AlKazaz’s claim also failed because he did not specify what comments were defamatory and how they were considered defamatory.       

In earlier separate legal proceedings, Mr AlKazaz sued in the Employment Court claiming Deloitte breached terms agreed on his 2013 departure.  The Employment Court acknowledged that disparaging and derogatory comments were made about Mr AlKazaz when he subsequently applied for a new job.  These comments did breach the 2013 agreement.  No remedy was available because the comments were not made by staff of the DeloitteAsparona subsidiary, his former employer.

AlKazaz v. Deloitte Ltd – High Court (26.06.23)

23.099

Family Trust: Awhi Trust v. Henry

 

Trying to lever sister Liane out of a Northland house owned by a family trust, the High Court put eviction on hold awaiting evidence whether fellow sister Lena Henry and other trustees knew Liane had contributed financially on the understanding that the house was to remain a place for her to live.  

A confused tale of extended family dealings was put before the High Court in an application to evict Liane Henry from a property at Cooke Street in Whangarei.  In 2015, Liane signed up to buy Cooke Street for $220,000.  The purchase was funded by her mother.  Whilst Liane signed the agreement to purchase, title came to be registered in the name of her mother and husband.  There was confused evidence before the High Court as to what happened subsequently. Liane thought she was the owner and weekly payments made to her mother were interest on a loan of the purchase price; her mother said weekly payments were rent.  There was no tenancy agreement.  Despite her mother saying payments were rent, there was evidence of persistent requests by her for repayment of the ‘loan’ so she and her husband could buy a property for themselves.  To add to the confusion, Liane denied ever being asked to repay a loan.

Unbeknown to Liane, there was movement behind the scenes in 2020.  Title to Cooke Street was transferred to a family trust controlled by Liane’s sister Lena.  The transfer price was recorded as $440,000.  A bank loan secured over Cooke Street was used by the family trust to buy a Maungatapere property with their mother and her husband given rights to live there.  Six months later, Liane became aware that Cooke Street was now owned by a family trust.  In the interim, she had kept up the regular weekly payments to her mother.

The family trust took legal action to evict Liane from Cooke Street, using the High Court fast track summary judgment procedure saying Liane had no defence to its claim for possession.

Associate judge Gardiner said it is undisputed that Cooke Street was originally purchased for Liane to live in.  Liane arranged for substantial renovations and contributed to the cost.  A full court hearing is needed to determine whether trustees of the family trust as current registered owners of Cooke Street were aware of Liane’s rights of occupation at time of the 2020 ownership change, Judge Gardiner ruled.  Proof of their knowledge could lead to a damages claim against the trustees.

Awhi Trust v. Henry – High Court (26.06.23)

23.098

Hagaman: Miramar Consolidated v. USC Investments

 

A dispute over transfer of shares in unlisted property company USC Investments Ltd is the very tip of an iceberg; the frigid relationship between Lani Hagaman widow of the late Earl Hagaman and Keith Hagaman, Earl’s son from an earlier relationship.  Lani was penalised with increased court costs over delays in finalising Keith’s restructuring of his USC shareholding.

The High Court was told there is a hostile relationship between widow Lani and stepson Keith over resolution of Earl Hagaman’s estate.  Earl died in 2017, aged 91.

USC Investments Ltd is a property investment company set up by Keith and his father in 2004, with Keith coming to have a fifty per cent shareholding through a company called Miramar Consolidated Ltd.  Keith lives in California.  Miramar is ultimately controlled though a Cook island discretionary trust.

On Earl’s death, Lani came to control the other fifty per cent of USC Investments.  She proved to be obstructive when in 2020 Keith sought to rationalise his USC shareholding.

As required by USC’s constitution, Keith gave notice to Lani as fellow shareholder that he was looking to sell, offering his fifty per cent stake at $850,000.  She quibbled over the validity of the notice.  A new notice was issued.  USC’s constitution allowed three months for her to buy or to find a buyer of her choice at that price.  Otherwise Keith was free to sell elsewhere.  After waiting three months, she said she didn’t want to buy.  Keith nominated himself as buyer of his Miramar shareholding, at a price of $2.5 million.  USC’s registration of the share transfer was put on hold, with an explanation demanded of the price.  It was insinuated that Keith may be party to some deal in breach of money-laundering legislation.  Keith explained the $2.5 million share price was a ‘wash-up’ figure making allowance for debts owed him by Miramar.  Still registration of the share transfer was delayed; supposedly because of what was an innocuous Bank of New Zealand request to USC about the status of Keith’s Cook Island discretionary trust.

Out of frustration, Keith took steps to have USC wound up on Companies Act grounds that Lani as director was acting oppressively towards Miramar as shareholder.  She indicated this High Court action would be defended, before capitulating and allowing Miramar’s fifty per cent shareholding to be transferred to Keith personally.

Associate judge Paulsen ordered Lani and USC Investments pay an increased contribution towards Miramar’s legal costs on its application to windup USC.

Miramar Consolidated Ltd v. USC Investments Ltd – High Court (20.6.23)

23.097

 

Post judgment note: In August 2023, Keith’s fifty per cent shareholding in USC Investments was transferred to Lani Hagaman and he resigned as USC director.

Employee Advocate: Halse v. Rangiura Trust

 

Touting his expertise as New Zealand’s leading anti-workplace bullying expert/advocate, employee advocate Allan Halse was described in the Employment Court as himself using intimidation and coercion when acting on behalf of clients.  His High Court claims of deceit and fraud against Waikato rest home operator Rangiura Trust Board and its legal advisers was struck out as having no merit and being an abuse of process.

Mr Halse worked as a lay advocate, appearing regularly on behalf of employees in Employment Relations Act mediations with employers.  His allegations of deceit and fraud followed a March 2018 mediation which resulted in compensation for a Rangiura employee.  The mediation settlement signed by Rangiura and its employee included a ‘non-disparagement’ clause; both sides agreed not to make disparaging or negative comments about the other.  Mr Halse also signed.

Seven weeks later, Mr Halse was seeking to act for another Rangiura employee in another employment dispute.  Rangiura was not keen to engage with Mr Halse.  It wanted an independent investigator.  The High Court was told Mr Halse made numerous disparaging comments about the independent investigator, refused to allow his client to participate in this investigation and threatened to publicly malign Rangiura if it did not capitulate to his demands.  He followed up with unflattering and abusive social media posts.

Mr Halse refused to take down the posts in the face of advice from Rangiura and its legal advisers that these posts breached the March 2018 mediation with its ‘non-disparagement’ clause that he had signed.  Instead, he sued; alleging, amongst other things, that their actions were part of a conspiracy concealing an alleged internal fraud at Rangiura and were part of a scheme to close down his business.

Justice Moore struck out his claims.  They were too vague to enable a court hearing to take place, he ruled.  The claims were also an abuse of process, seeking to re-litigate claims previously bought unsuccessfully in the Employment Court, he further ruled.       

Mr Halse is sole director and shareholder of CultureSafe NZ Ltd.  The company is in liquidation following a failure to pay some $67,000 in penalties imposed by the Employment Court.  Liquidators’ first report notes some of CultureSafe’s office equipment appears to have been sold to Mr Halse and staff at an undervalue prior to liquidation.  This included a mobile phone sold at $50 and a laptop at $100.

Halse v. Rangiura Trust Board – High Court (19.06.23)

23.096

Family Trust: Ryan v. Lobb

 

Legal strategies intended to prevent his former wife forcing sale of the family home failed with the High Court ordering Stuart Lobb vacate their Auckland Remuera property prior to sale.

A bitter relationship property dispute between Stuart Robb and Verena Ryan has resulted in multiple court hearings over the last three years.  He remains with their daughter in a family trust-owned Orakei Road property; she lives in rented accommodation with their son.  Mr Robb has resisted all attempts by his former wife to force a sale of Orakei Road to recover her half share.  Auckland chartered accountant Digby Noyce as court-appointed receiver was given High Court authority in 2020 to proceed with a sale.  He has been hampered by Mr Robb’s legal manoeuvers.    

At time of their separation in 2016, a $1.4 million Westpac mortgage was secured over Orakei Road.  In 2020, Westpac was repaid with funds Mr Robb sourced from his father.  Rather than have the Westpac mortgage discharged from title to Orakei Road, Mr Lobb and his allies instead took ownership of the Westpac mortgage and with it all the rights held by Westpac.  The High Court was told Mr Robb and close family then supposedly used these rights to take control of Orakei Road as mortgagee in possession.  This would have the effect of frustrating any sale.  As receiver, Mr Noyce got the High Court to intervene.

Mr Noyce was then left with problem of giving clear title to Orakei Road on a sale when registered against the title was a Westpac mortgage no longer controlled by Westpac but in the hands of Mr Lobb and his allies opposed to any sale.

In the High Court, Justice Edwards ruled that there is no longer any money owing under the Westpac mortgage and that the funds borrowed to repay Westpac are not secured by that mortgage.  The Westpac mortgage is to be removed from the title, she ruled.

Mr Lobb said that on a sale he will be unable to find suitable alternative accommodation given his constrained financial circumstances.  Mr Lobb has had years to adjust to the idea of leaving the family home and prepare for that eventuality, Justice Edwards said.  Ms Ryan has been waiting a similar period for a sale to get sufficient funds to both pay her legal bills and find better accommodation, she pointed out.

Ryan v. Lobb – High Court (19.06.23)

23.095

Building: Stott v. Uplifting Homes

 

A house relocated from Auckland to Bay of Plenty intended as a Katikati family’s dream home was in the end written off and demolished with the High Court ordering repayment of $94,900 relocation costs.

Gavin Stott and Megan Savageau were living in a garage and sleepout on their rural Katikati property when in 2019 they signed up to buy a one hundred year old Auckland bungalow for relocation from Remuera in Auckland.  At a price of $158,000, Hamilton-based Uplifting Homes Ltd agreed to truck the building south and establish it on permanent piles complying with local council building requirements.

There were complications.  The bungalow as sold was in fact a second storey structure on top of a first floor masonry building.  When severed, the ‘floor’ of the bungalow amounted to the ceiling of the original first floor.  The building was cut in two for transportation. At Katikati, local council required extra strengthening to comply with the high-wind zone requirements for local builds.

The High Court was told the house sat on temporary piles for nearly nine months before located on to new foundations.  The house suffered water damage.  Delays were caused in part by covid-19 pandemic lockdowns.  The Stott family expressed concerns about quality of workmanship by Uplifting’s contractors reinstating the building on its new piles.  Negotiations hardened.  The Stotts refused to pay the balance of the contract price.

Eventually, Mr Stott and Ms Savageau decided to leave Katikati, shifting to Nelson.  Their Katikati property sold for $1.25 million with the relocated house demolished as a condition of the sale.  They cancelled their contract with Uplifting Homes, suing for $800,000 claimed as ‘wasted expenditure.’  Justice Jagose said some of this claim was unrealistic; claiming for costs of a finished fitout which were not part of the relocation contract.   But Uplifiting Homes was liable for breaches of both the Building Act and the Consumer Guarantees Act, he ruled.  The relocation and reinstatement was not carried out in a competent manner, in compliance with the building consent or within a reasonable time.  Damages of $94,900 were assessed as fifty per cent of the contract price plus costs of preparing the Katikati site for connection of services.  A claim for costs of demolition was dismissed.

Stott v. Uplifting Homes Ltd – High Court (19.06.23)

23.094

Lease: Centro Pilgrim v. Mathew Barr Motor Group

 

Anger over what Christchurch commercial landlord Centro Pilgrim saw as attempts by tenant Nissan dealership Mathew Barr Motor Group to sabotage sale of its Sydenham units led to litigation over disputed lease payments.  Tit for tat litigation saw Centro liable for unpaid rent rebates.

The High Court was told Motor Group leased units at Pilgrim Place in Sydenham from Centro Pilgrim Ltd.  It was agreed annual lease payments would initially be $240,000, with subsequent inflation adjustments.  The deal was structured with Motor Group’s monthly rentals stated as totalling $316,950 per year, leavened by Centro making a return payment each month leaving Motor Group with a net annual payment of $240,000.  This rebate was labelled a ‘capital repayment,’ initially treated as tax free for Motor Group.

Later told these rebates were taxable in hands of Motor Group, the rebate formula was changed to ensure Motor Group’s effective annual lease cost stayed at $240,000 as agreed.  This change had the effect of increasing the amount rebated to Motor Group each month, at Centro’s cost.

The new payment/rebate formula operated for some years without interruption before differences over Centro’s proposed sale of Pilgrim Place came to a head.  Motor Group said the lease gave it first right of refusal on any sale.  It sent a copy of the rebate agreement to Centro’s real estate agents.  Potential buyers would discount the price offered on learning that the lease headline rent rate supposedly paid by Motor Group as sitting tenant was not the effective rent rate.

Annoyed that Motor Group was disrupting sale plans, Centro immediately claimed some $128,000 from Motor Group, claiming there had never been any valid agreement to alter the rent rebate formula and that Motor Group had been overpaid.  Centro stopped paying further monthly rebate invoices.

Associate judge Paulsen ruled there had been a valid variation.  Centro, in part, alleged the disputed variation was a stitch up negotiated by a former Centro director to Motor Group’s advantage.  Centro was liable for the actions of its former director, Judge Paulsen said.

Centro was ordered to resume payment of the varied rebate and to make good all arrears.  Failing that, Motor Group can put Centro into liquidation, Judge Paulsen said.  At time of the court hearing, Centro rent rebate payments to Motor Group were in arrears by some $56,000.

Centro Pilgrim Ltd v. Mathew Barr Motor Group Ltd – High Court (19.06.23)

23.093

Liquidation: Delorme SE24 Ltd v. Spot X Ltd

 

Auckland property developer Cheng Tih Lee, otherwise known as Brandon Lee, saw the High Court whip away control of his company Spot X Ltd following allegations he was actively hiding from insolvency practitioners seeking to track down $300,000.  At the same time Mr Lee was allegedly trying to spirit assets away from their grasp.

Mr Lee is in the sights of liquidators seeking to track down assets of a company called Delorme SE24 Ltd.  Delorme is insolvent.  They identified $300,000 cash from Delorme had found its way to another company called Spot X Ltd.  Mr Lee controls both companies.

Delorme liquidators had trouble contacting Mr Lee.  He no longer lived at the address noted on Companies Office records.  He was subsequently served by text and email with formal notice to attend the liquidators’ office and to answer questions about Delorme’s assets.  He didn’t show up.

Liquidators then took steps to force Spot X Ltd into liquidation in order to recover what was presumed to be a $300,000 intercompany loan.  Through intermediaries, Mr Lee let the liquidators know that Spot X’s listed registered address was no longer being monitored, offering no alternative as to where legal documents could be drawn to his attention.    

To their consternation, Delorme liquidators then discovered Mr Lee was rearranging shareholdings in his various related companies which would have the effect of shifting assets away from Spot X.  They asked the High Court immediately put Spot X into interim liquidation; a formal liquidation application would take some time.

Associate judge Sussock appointed Insolvency Service as interim liquidators with power to take control of Spot X assets.  Company assets are in jeopardy, she ruled.

Delorme SE24 Ltd v. Spot X Ltd – High Court (15.06.23)

23.091

Dotcom: R. v. Ortmann & van der Kolk

 

Having struck a plea bargain with US authorities, Kim Dotcom’s lieutenants Mathias Ortmann and Bram van der Kolk were jailed in New Zealand on a raft of charges for conspiracy to commit copyright fraud.  Evidence at sentencing highlighted how Dotcom’s Megaupload set out to defraud not only film and video copyright holders but also Megaupload’s own customers.

Megaupload was launched in 2005, ostensibly to provide locked cloud storage facilities.  By late 2010 it had fifty million daily users accessing pirated movies and videos.  At that time, it commanded four per cent of global internet traffic.  Over a decade, it was estimated to have garnered revenues of US$175 million from both user subscriptions and advertising inserted in and around pirated product.  Kim Dotcom is alleged to have snaffled most of this income for himself; a total of some US$100 million.  Ortmann, as chief technical officer, admitted to getting approximately US$19 million; talented coder and lead programmer van der Kolk, US$3 million.

After nearly a decade of legal manoeuvring to avoid extradition to the United States on charges of copyright fraud, Ortmann and van der Kolk struck a deal with US authorities.  They would not stand trial in the US.  They would plead guilty in the New Zealand courts, serve whatever sentence a New Zealand court imposed, surrender any remaining cash received from Megaupload and assist US authorities in their prosecution of Kim Dotcom.

Evidence was given of Megaupload’s attempts to mask the extent of copyright infringement; what Ortmann described as an ‘innocent front end’ with ‘private back-end access.’  Each movie or video uploaded to the site was identified with its discrete URL.  Copyright holders issuing takedown notices did so by reference to the specific URL.  Megaupload dutifully complied with a takedown request for that URL, leaving in place multiple copies of the same product sitting behind a different URL.  For copyright holders, it became a fruitless game of whack-a-mole.

Megaupload customers were rewarded for uploading frequently viewed product with payment in either cash or subscription privileges.  This encouraged further copyright infringement and increased the number of paying users.  At least three million dollars were paid out in cash rewards.  A policy decision was made to reduce the cost of paying cash rewards by denying payment on grounds that product uploaded was in breach of copyright, with Megaupload cynically still hosting and distributing this same material.

The High Court was told ninety per cent of Megaupload’s registered users had never uploaded a file; they paid for access to view and download content.

Pleading guilty to participating in an organised criminal group, deception and dishonesty: Ortmann was sentenced to two years and seven months imprisonment; van der Kolk two years and six month’s imprisonment.  After Megaupload was shut down, the two established their own cloud storage service: Mega, offering end-to-end encryption for customers.

R.v Ortmann & van der Kolk – High Court (15.06.23)

23.092