Mortgagee Sale: Price v. Killarney Capital

 

The High Court refused developer Murray Price’s request for a one month halt to mortgagee sales on a Wellington subdivision and Auckland properties including his Takapuna home.  Over $18 million is owed with interest running at $350,000 per month, at a time when his daughter’s company was rewarded handsomely with consultancy fees.

Killarney Capital Ltd and its Hawkes Bay investors have lost patience.  The High Court was told interests associated with Mr Price have proved uncooperative, failing to meet repayment deadlines and actively obstructing sales by Killarney as mortgagee.  

Parklane Infrastruct Ltd is controlled by Mr Price.  It is carrying out the Terraces residential subdivision at Wellington’s Crofton Downs.  The company first faced a cashflow crisis and the prospect of a mortgagee sale back in 2016.  Killarney Capital injected new funding.  Since then, Parklane has been back frequently with its begging bowl, seeking further finance from Killarney, including cash for personal spending by the Prices and to buy properties in Auckland.

Killarney cried enough, calling in all loans with final date for payment in February 2023.  Unpaid when this deadline passed, it called in its mortgages instructing real estate agents to progress sales of unsold lots at Crofton Downs plus three Auckland properties: in Takapuna, Grey Lynn and Parnell.

The court was told marketing was hampered by a refusal to provide tenancy details for Auckland properties which were rented and also by persons unknown tearing down advertising hoardings at Crofton Downs promoting the mortgagee sale.

By September 2023, real estate agents appointed by Killarney had sold all but two of the remaining lots at Crofton Downs; 39 lots.  The collective price achieved for these 39 lots was better than prices tendered to buy the entire project.

Mr Price asked the High Court to impose a one month’s delay on further sales.  Titles for Crofton Downs should be issued within a month; these sales would then be unconditional and the expected shortfall claimed by Killarney could be assessed, he said.

Separately, Mr Price alleges Killarney is in breach of the Property Law Act by not getting the best price possible when selling sections at Crofton Downs.  If proved, this reduces the amount due to Killarney.

Justice Churchman ruled sale prices on offer four years ago are irrelevant to an assessment of current prices.  The market has turned down.  He was critical of Mr Price’s use of sale prices on conditional contracts which fell through as being evidence of the current market.  He was dismissive of prices set in pre-sale contracts inked with a company controlled by Mr Price’s son-in-law, contracts that were an attempt to satisfy financiers’ requirements for a set level of pre-sales before funds for further development were released.

The court was told it is estimated there will be some four to five million dollars still owing after contracts for Crofton Downs sections currently sold by Killarney are settled.

Justice Churchman ruled there was no strong evidence that Killarney’s marketing was insufficient to recover the best price possible.  It was not necessary for Killarney to first get registered valuations for Crofton Downs sections before selling, he said.  Real estate agent estimates were sufficient.  Mr Price’s application for a one month delay in progressing sales was refused.

A forced sale of the Auckland properties can proceed.  Mr Price’s complaint that this could see him turfed out of his Takapuna home was countered by evidence that he has an interest in a block of Hamilton apartments and owns a property at the Coromandel seaside resort of Pauanui.

Killarney pointed out that Mr Price’s Parklane Infrastruct paid in the previous nine months nearly $400,000 in consultancy fees to a company controlled by his daughter.

Parkland Infrastruct Ltd is now in liquidation. Unsecured creditors are owed some four million dollars.    

Price v. Killarney Capital Ltd – High Court (29.09.23)

23.173

Directors' Duties: Ji v. Ding

 

Renee Ji paid $2.3 million upfront prior to settlement of a $2.9 million Auckland purchase only to later find her money had disappeared and the property sold elsewhere under pressure of a forced mortgagee sale.  The High Court ordered Zhaohai Ding, sole director of vendor Annecy Holding Ltd, to reimburse her.    

Wenjun Ji, also known as Renee, signed up in April 2022 to buy a Dominion Road property in Mt Eden owned by Annecy Holding Ltd for $2.9 million.  Settlement was due in six months.  She paid Annecy a $1.3 million deposit, followed up some four weeks later with a further one million dollar payment described as an instalment on the purchase price.

On settlement date, Annecy’s lawyers said the vendor could not complete the sale; it did not have the funds to pay off a mortgage registered against title to Dominion Road.  By settlement date, Ms Ji had only a further $600,000 to pay.

The High Court was told Annecy Holding is a property investment company having previously owned twelve properties.  Dominion Road was the last remaining property in its portfolio, purchased four months before being onsold to Ms Ji.

With the sale cancelled and Annecy in liquidation insolvent, Ms Ji sued Mr Ding personally seeking to recover her lost $2.3 million.

As a general rule, directors are not personally liable for company debts; it is a company debt and the company is liable.  Directors do become personally liable if they commit to contracts knowing their company will be unable to perform; a breach of Companies Act director duties.

Associate judge Brittain ruled Mr Ding had no reasonable grounds to believe clear title to Dominion Road could be given to Ms Ji at the time she made advance payments totalling $2.3 million.

Mr Ding was ruled personally liable to make good her loss.  He did not attend court to defend the claim.

Ji v. Ding – High Court (29.09.23)

23.172

Family Tust: McLaughlin v. McLauglin

 

Mark became a doctor.  Andrew a vet.  John a registered valuer.  It cost John McLaughlin $1.1 million in legal fees successfully defending his two brothers’ High Court claims that he had improperly benefitted from work done subdividing their parents’ land in Marsden Valley near Nelson, land held in a family trust.

On appeal, there was argument over who should pay these legal fees and whether John was entitled to payment for project management in realising their father’s dream to subdivide land purchased some fifty years ago.

In 2004, their parents transferred some one hundred hectares of rural land to a McLaughlin family trust.

The court was told John became deeply involved with his parents’ plans to subdivide Marsden Park.  He has property valuation qualifications and business experience in property management and construction.

At time of their father’s death in 2007, resource consent for stage one of a planned subdivision had been lodged.  Consent was granted six months later.  John took the initiative, personally guaranteeing Trust borrowings of $3.7 million needed to get earthworks underway.  He oversaw progress.

His two brothers subsequently challenged payments made for project management.  They said the entire scheme appeared to have operated for the benefit of John alone; Trust beneficiaries would have done better if the consented land were sold and proceeds invested, they said.

Evidence was given of an agreement with trustees that John would get paid $120,000 for the first year of Marsden project management, with payment in subsequent years subject to review.  John was also a trustee.  It was intended this management contract would be signed with a company he controlled.  Initially, no contract was signed; to avoid accrued management fees showing up as a liability in the Trust’s financial statements.  In its early years, Marsden Park was generating no income to pay him.  Accrued management fees had reached some $800,000 before there was sufficient cashflow from sales to make any payment.  It was 2016 and some eight years after work started before trustees signed John’s management contract and arrears were paid.

Two years previously, in 2014, a cash payout was made to all the McLaughlin brothers as beneficiaries; each receiving $550,000.

Mark and Andrew challenged John’s management fee.  A further brother, Brett, allied himself with his two brothers.

The Court of Appeal said there was ample evidence supporting the level of remuneration paid John’s management company.  One remuneration expert said it would be difficult to find someone with John’s skill level to do the job for the salary paid.

A challenge to John being paid for project management whilst also a trustee was dismissed.  As a general rule, a trustee cannot receive payment for work done managing trust assets.  Wording of the McLaughlin trust deed was wide enough to allow payments to a trustee acting as project manager.

Trust deed wording also allowed John as trustee to recover from trust assets the $1.1 million cost of defending legal action taken against him.  The amount payable by the trust is to be reduced by court ordered legal costs Mark and Andrew as unsuccessful litigants must pay John.

The Court of Appeal ordered they pay thirty per cent above the standard rate, to mark what the trial judge called their ‘heated and hostile’ approach to litigation against their brother.

The court was told residential sections developed to date at Marsden Park were expected to sell for a total of six to seven million dollars.

McLaughlin v. McLaughlin – Court of Appeal (29.09.23)

23.171

Tax: Kaur v. Taxation Review Authority

 

Inland Revenue’s declared plan to chase tax evasion by individuals related in any way to the Masala tax and immigration frauds is starting to bite.  Ravinder Kaur is challenging a claim she evaded tax totalling $220,200.

In 2017, an eight million dollar ‘proceeds of crime’ penalty was settled by companies operating the Masala restaurant chain following investigations of tax fraud, immigration fraud and labour law fraud.  Inland Revenue says this settlement still allows it to pursue individual taxpayers for tax evasion.

The High Court was told Inland Revenue now alleges Ravinder Kaur evaded tax over a five year period, not declaring as income money from a Masala liquor store used to pay down mortgages on south Auckland properties.  Inland Revenue claims tax totalling $220,200 plus penalties of $165,100. 

She challenged Inland Revenue’s tax assessment, stating the money received was held on trust and was not her personal income.   She further challenges Inland Revenue’s right to go beyond the prior ‘proceeds of crime’ settlement.  To further pursue individual taxpayers amounts to double taxation, she claims.      

Her tax challenge came to a shuddering halt when Taxation Review Authority ruled Inland Revenue had won by default, closing the case.

Ms Kaur learnt her lawyer had failed to file documents when under an ‘unless order;’ a court order that unless pre-trial documents, already late, are not filed by a set date then the defendant taxpayer does not get a day in court and Inland Revenue’s assessment stands.

‘Unless orders’ are justified as a necessary evil to deal with defendants who treat courts with contempt and refuse to engage in the legal process.

Ms Kaur’s lawyer said he had simply made a mistake.  The necessary documents had been emailed to Inland Revenue in time, but the email mistakenly was not copied to the Review Authority at the same time.  Inland Revenue said this oversight was not the only problem; the documentation was not properly ordered, left to Inland Revenue to sort out.

Justice McQueen ruled Ms Kaur’s right to challenge Inland Revenue’s tax assessment should not be prejudiced by her lawyer’s incompetence. Her Taxation Review Authority application was re-opened for a full hearing on a date yet to be set.

Kaur v. Taxation Review Authority – High Court (29.09.23)

23.170

Nuisance: Zheng v. Lyndon

 

Figuratively, a row of poplar trees on the common boundary of two properties in Auckland’s rural suburb Dairy Flat stood in the dock: the Zheng family saying tree roots damaged their commercial tomato crop; neighbours the Lyndons claiming damages for trespass alleging the poplars were pruned in excess of permission given.  Result: the Lyndons were ordered to pay $45,200 damages for the Zhengs’ loss of profits; a calculation made difficult by allegations the Zhengs were hiding income from Inland Revenue.

Litigation kicked off back in 2016, after negotiations over their dispute reached an impasse.  The High Court was told the Zhengs had grown tomatoes under cover in a greenhouse on Postman Road since the 1990s.  The Lyndons purchased next door in 2010.  Poplars had been planted down their two hundred metre boundary line by the previous owner before the Lyndons purchase.

Discussions between neighbours over shading affecting plant growth resulted in an informal agreement by the Lyndons that the Zhengs could coppice the poplars.  A misunderstanding as to the preferred height subsequently led to a dispute over how low the trees could be cut.  The trees were taken out in late 2020.

The Zhengs sued for loss of profits; the Langdons sued for trespass.

What was initially a dispute about trees shading a greenhouse developed into a claim in the tort of nuisance with complaints roots from the poplars had grown in under the greenhouse, competing with tomato plants bedded into soil above weedmats.  Evidence was given that poplar roots can spread up to fifty metres.

Justice Gault ruled the Lyndons were liable in nuisance, having to pay damages for tomato production lost after they were made aware in 2016 of root encroachment.

Assessment of damages was complicated by the Zhengs’ limited accounting records.  It was alleged the Zhengs’ were hiding revenue received from cash sales.  There was disputed evidence as to what level of production would have been achieved if there had been no root intrusion.

Justice Gault ruled the Zhengs were partly to blame for their continuing production losses; they emphasised shading from the poplars being the only issue without initially telling the Lyndons that they were having to regularly weed poplar roots out of their greenhouse.

Loss of profits were reduced by one-third as a result, with the Langdons ordered to pay $45,278 assessed as the Zhengs’ loss of profits for four growing seasons subsequent to 2016.  Initially, the Zhengs had claimed loss of profits totalling $1.1 million assessed from date of the Lyndons Postman Road purchase.

The Langdons were awarded no damages for trespass.  The trees cut back further without permission had been coppiced by agreement some two years previously.  They were already damaged beyond recovery and were of little commercial value when trimmed further unlawfully.

Zheng Family Trust v. Lyndon – High Court (27.09.23)

23.169

Asset Forfeiture: Commissioner of Police v. McEnirney

 

With her spouse jailed following drug convictions and their jointly owned Tauranga home confiscated as ‘proceeds of crime,’ Lisa McEnirney will receive on hardship grounds only 8.33 per cent of the final sale price, a proportion equal to her original cash contribution to the family’s 2016 purchase.  The balance of the net equity realised on sale goes to government as a penalty under the Criminal Proceeds (Recovery) Act; their home is ‘tainted property,’ after proceeds of drug sales were used to pay down their mortgage. 

Thomas McEnirney pleaded guilty to charges of dealing in MDMA (better known as ecstasy) and prescription drugs (primarily anabolic steroids); sentenced in 2021 to two years and three months imprisonment.

Their Tauranga family home in Greerton Road was forfeited to government.  It will be sold, unless the McEnirneys can raise funds to buy it back.

Spouse Lisa applied to the High Court, asking her half-share of the equity be released.  She claimed to be unaware of her husband’s illegal dealing, beyond what she described as knowledge of him occasionally providing steroids to friends at a gym.

Justice Isac ruled her protestations of ignorance lacked credibility.  Illegal drugs were stored in a spare room at their home.  There was regular courier traffic to and from the house she must have been aware of.  These deliveries were part of dealings transacted over the dark web.

The couple took several overseas holidays at a time when Mr McEnirney had no regular income.  Police investigations identified over $800,000 from unknown sources was paid into his Kiwibank account.  Over half of this money was transferred into their joint ASB account.

Ms McEnirney, at the very least, must have suspected her spouse was profiting from significant criminal activity and turned a blind eye to it, Justice Isac said.  She had benefitted directly, through a reduction in their joint mortgage debt.

Justice Isac ruled her share of the family home was also forfeit.  An allowance for the inflation-proofed value of her original cash contribution when purchasing was granted on hardship grounds, potentially providing some assistance towards new accommodation for the family.  The McEnirneys have two young children.

Commissioner of Police v. McEnirney – High Court (27.09.23)

23.168

Land Sale: Stratton Properties v. Construction Properties

 

With prices softening, a land-banking company controlled by Waikato GJ Gardiner franchise owner Jeffrey de Leeuw was ordered to pay for its agreed purchase of five residential lots in a Cambridge subdivision over top of his complaints that the advertised subdivision was being cheapened by now allowing nearby construction of small duplex-style houses.

The High Court was told Construction Properties Ltd signed up in 2022 to purchase five lots at Abergeldie Way in a Stratton Properties Ltd subdivision at Cambridge.  Construction Properties holds the bare land in readiness for onsale as GJ Gardiner ‘house and land’ deals.

Mr de Leeuw’s urgency in getting hold of the land and putting his company in prime position to make further purchases was evidenced by him waiving any due diligence and with it the right to exit if he did not like how Stratton might choose to develop later stages of the subdivision.

One day before settlement date in May 2023, Construction Properties cancelled.  Stratton had misrepresented the development, Mr de Leeuw said.  Now allowing compact housing development had cheapened the subdivision, no longer upholding the quality assured at time of purchase, he claimed.       

Associate judge Brittain ruled contract clauses allowing Stratton to make later changes to the subdivision consent were binding on Construction Properties.  Any Stratton representations at time of sale about how or when further stages of its Cambridge subdivision might be developed were of no relevance.

Construction Properties was ordered to make good its promise to buy.

The court was told Stratton has Mr de Leeuw on the hook as guarantor for the purchase price if Construction Properties backs out.

Stratton Properties Ltd v. Construction Properties Ltd – High Court (25.09.23)

23.167

Franchise: Colville v. Colville

 

His mother gave evidence against him.  His former wife gave evidence against him.  West Coast builder Adam Colville was ordered to pay $126,000 for setting up in competition against his former family company in breach of a restraint of trade.  His new business partner Peter Bright was similarly ordered to pay $126,000 for intentionally assisting in his breach of contract.

The High Court was told Adam with his brother had for a number of years owned and operated a GJ Gardiner Homes franchise on the West Coast.  Domestic violence within his marriage caused a bust-up with extended family; Adam was paid $1.06 million to give up his share of the families’ GJ Gardiner franchise.  In addition, Adam was paid $1.7 million by his brother buying out his half share in a separate landholding company.

As part of the deal in 2020, Adam agreed not to directly or indirectly compete against GJ Gardiner’s West Coast building operations for a period ending February 2023.  The fine print did allow him during this period to work as a builder’s labourer.

Evidence was given that from early 2021 Adam became involved with Peter Bright in establishing a Stonewood Homes franchise on the Coast.  Involvement went beyond being a ‘hammer hand.’

He transferred $200,000 to Mr Bright around the time this new West Coast Stonewood franchise was set up.  Adam said this was a personal loan.  There was no written detail; it was a ‘handshake’ deal.

While not named in franchise documentation, there was evidence of Adam becoming deeply involved in management.  He attended at Stonewood’s Auckland head office and was included in its management training scheme.  He helped manage a new build in Hokitika.  He negotiated terms of trade with suppliers.  He was to later say that in his public activities he was just ‘big-noting’ to annoy his brother.  These public activities were unwise but of no commercial significance, he said.

When his mother pointed at that he was still bound by an agreement not to compete with GJ Gardiner, he told her ‘he didn’t give a fuck about [his brother].’  His former wife gave evidence of seeing him wearing Stonewood branded clothing.

Adam’s denial that he had ever been at Stonewood’s head office was tempered by evidence of a Snapchat message he had sent including a photo of head office with his narration ‘my new family.’

With legal proceedings against him underway, Adam said he was unable to produce a number of potentially relevant business emails because his phone was lost on a fishing trip.  His personal gmail account was deleted around this time. 

Justice Mander ruled the cumulative evidence was that of a scheme concocted by Adam and Peter Bright to set up and develop a new building franchise in breach of Adam’s restraint of trade.  Adam was liable for breach of contract; Peter Bright liable in tort for wilfully inducing Adam’s breach of contract.

Each was ordered to pay $126,000.

Evidence was given that GJ Gardiner’s market share of West Coast new builds dropped by some fifteen per cent following Stonewood’s entry.

Total damages of $325,000 represented partial recovery of goodwill included in the $1.06 million buyout paid Adam on his departure from GJ Gardiner.  Payment for goodwill represented anticipated future profits expected to be generated by GJ Gardiner’s ongoing business operations; profits now reduced at his brother’s cost, following Adam’s involvement with Stonewood during the restraint period.

Colville v. Colville – High Court (22.09.23)

23.166

Fraud: R. v. Harris & Mulholland

 

Serious Fraud Office favourite Crimes Act charge of ‘theft by person in a special relationship’ turned to custard in failed prosecutions against management of insurer CBL Insurance: Peter Harris and Carden Mulholland.  They stole nothing.  Reserve Bank directives were of no legal effect.  And supposed misrepresentation of CBL funds held at the National Bank of Samoa was not proved; Bank paperwork supported CBL’s claim that 12.5 million euros lodged with the Bank was the unencumbered property of CBL Insurance.  

CBL Insurance Ltd had little attachment to New Zealand, other than a stock exchange listing.  Barely one per cent of its business underwrote local risks.  The company is currently in liquidation.  Insolvency specialists McGrathNicol are winding down operations.  Out of court settlements have been negotiated with CBL’s former directors and professional advisers for amounts yet to be disclosed.

Separately, Serious Fraud Office prosecuted former CBL Insurance chief executive officer Peter Harris and former chief financial officer Carden Mulholland on a raft of dishonesty charges.  They were found not guilty on all charges after a three-month High Court trial.

Primary charges alleged theft by authorising company payments allegedly in breach of Reserve Bank directives.

Reserve Bank regulates the insurance industry.  In what is described as a ‘light-handed’ regime, it has power to investigate insurers in financial difficulty, indirectly taking control by mandating steps to be taken by management of troubled insurers.  This can include an order shutting down operations.        

The High Court was told Reserve Bank was alerted to potential solvency issues at CBL in 2016 with a query from sister regulator in Gibraltar seeking information.  CBL at that time was reinsuring some eighty per cent of a Gibraltar-based insurer’s business: Elite Insurance.  CBL’s solvency was critical to the solvency of Elite.  Reserve Bank inquiries led to a series of communications with CBL, resulting in CBL having to ‘consult’ with the Bank before committing to substantial transactions.

Justice Robinson ruled deals in excess of specified limits were not illegal.  Requiring ‘consultation’ was not a ‘directive’ where failure to comply could lead to criminal prosecution.

Wording in other Reserve Bank communications with CBL similarly were not enforceable as ‘directives;’ they were predicated on further enquiries being carried out, or applied only to future business, not continuation of transactions CBL had previously entered into.      

Messrs Carden and Mulholland also faced charges that they had misrepresented the status of a 12.5 million euro deposit in CBL’s name held with the National Bank of Samoa.

Insurers cashflow solvency is measured by the liquidity of assets which can be realised promptly to meet claims.  Cash on hand is the most liquid; loans to company directors are considered the least liquid.

In its financial statements, CBL represented the 12.5 million euro deposit in Samoa as an on-call term deposit.  It held a letter from the Bank to this effect.  Prosecutors said that was not the commercial reality; the term deposit was held as security to ensure repayment of off-shore borrowings and was not immediately available as cash.

Justice Robinson ruled CBL management was entitled to assume the Bank’s letter represented the true position.  Management was not dishonest in treating the on-call deposit as ‘cash or cash-equivalent’ when determining CBL’s solvency.

When interim liquidators took control of CBL, the bank in Samoa refused to release these funds saying the deposit had been set-off against inter-related offshore borrowing.  Not only were there no funds available, the Bank said it would be proving in CBL’s liquidation for legal fees and penalty interest.   

R. v. Harris & Mulholland – High Court (21.09.23)

23.163

Fraud: Anderson v. Police

 

Melanie Tyrelle Anderson sold the family car and borrowed from relatives to repay in full some $62,000 stolen from two Invercargill businesses, earning on appeal to the High Court a twenty per cent reduction in her home detention sentence.

While working as an accounts clerk at Gracetek Communications and Eden Haulage, Anderson took wages in excess of what she was entitled and also created fictitious invoices to transfer money into her own bank account; stealing some $25,500 from one company, $36,800 from the other.

She pleaded guilty to theft, but only after initially denying any money was taken.  Nearly $14,000 was spent by the two businesses in forensic accounting fees identifying extent of the frauds.

Anderson said her sentence of nine months home detention was excessive.  Before sentencing she had repaid all the money stolen and also compensated her former employers for their forensic accounting costs.

The High Court was told money for reparations came from sale of her family’s vehicles plus loans provided by two family members.  She was paying these loans off at $500 per week, working at the local freezing works.

Justice Dunningham ruled insufficient credit had been given for the full reparations paid.  The sentence of home detention was reduced to seven months.

Offenders on home detention are permitted to continue in paid employment, under Probation Service oversight.

Anderson v. Police – High Court (21.09.23)

23.165

Director: Mediaflow Ltd v. Marin

 

As software developer for Queenstown tourism digital recording system Mediaflow, Lucas Marin held keys to the kingdom, blocking access after a dispute with fellow investors David Akal and Nahuel Lukomski.  They allege Marin is now bleeding the company dry; awarding himself an excessive salary and claiming ownership of Mediaflow’s intellectual property.    

The High Court was told all three hold equal shareholdings in Mediaflow Ltd, a company established in 2020 to provide digital photo and recording systems for central Otago tourism operators.  Akal and Lukomski were responsible for customer service; Marin developed the backend software.

A little under eighteen months after setting up business, directors fell out.  Mr Marin cut off Mr Akal’s access, preventing customer updates.  Both Mr Akal and Mr Lukomski subsequently resigned as directors.  They were denied online access to Mediaflow records, including email and bank accounts.

As sole director, Mr Marin then awarded himself an annual salary of $500,000.  The court was told Mediaflow revenue for the previous twelve months had been some $340,000.    

Only after two hastily arranged shareholder meetings did Akal and Lukomski regain a measure of control; voting themselves back into office as directors and having Mr Marin agree to reduce his annual salary to $180,000.  They took to the High Court to have this pruned back further, saying Mr Marin’s salary was excessive, threatening company solvency.

Justice Dunningham said she first had to hear Mr Marin’s side of the story.

It is alleged Mr Marin acted in breach of the Companies Act; failing to give reasons and to sign the necessary certificate stating salary payments were ‘fair to the company’ for what in effect was a transfer of all company assets to himself.

Mediaflow Ltd v. Marin – High Court (21.09.23)

23.164

Estate: re Estate Donald Gifford

 

Rebecca Lane claims to be the natural child of Donald Algernon Gifford who in 2022 died at Auckland.  She was gifted $5000 in his will.  His estate is described as insolvent.  She failed in attempts to have the Public Trust appointed as replacement executor and with it a requirement to challenge property transfers benefitting Mr Gifford’s long-term de facto partner.  It was intended money dragged back into Mr Gifford’s estate would provide assets to satisfy her intended Family Protection Act claim.

Ms Lane has a history of Family Protection Act claims.  She made a successful claim against her mother’s estate, netting her over three million dollars. 

Mr Gifford previously had a relationship with Ms Lane’s mother.  He referred to Rebecca in his will as his daughter.  Her birth certificate records someone else as her father.  No paternity tests were ever undertaken.

At the time of his death, Mr Gifford had been in a nearly thirty-year relationship with Anne Goldson.  They lived separately.  She made arrangements for Mr Gifford’s care when symptoms of Alzheimer’s disease became worse.

After learning of his Alzheimer’s diagnosis, Mr Gifford transferred his home in St Mary’s Bay, held in the name of a family trust, into Ms Goldson’s name.  This property is valued at about four million dollars.  She arranged and paid for his care in a dementia unit until his death.

Ms Lane challenged probate of Mr Gifford’s will remaining with Ms Goldson.  The Public Trust should be appointed as a neutral trustee, she said.  Ms Lane said she intends to bring a Family Protection Act claim against Mr Gifford’s estate.  This would initially involve a challenge to Ms Goldson’s receipt of Trust assets. If successful, these assets would be transferred to the estate.

Intended litigation would also involve Ms Goldson’s rights to a relationship property claim, with not only the St Mary’s Bay property in the mix but also Ms Goldson’s personal business interests.  

The High Court was told Mr Gifford had been appalled by Rebecca Lane’s past conduct in bringing a Family Protection claim against her mother’s estate.  As a consequence, the two became estranged.   This litigation dragged on for around four years.  Evidence was given that she received a payout in excess of three million dollars.

Justice Downs ruled it was not appropriate to re-open management of Mr Gifford’s estate.  The estate has no money.  There was no certainty Public Trust would get court approval to advance the relationship property claim needed to generate funds necessary to enable a Family Protection Act claim by Ms Lane.

re Estate of Donald Gifford – High Court (20.09.23)

23.162

Family Trust: Pomeroy Family Trust v. Belasco

 

Selective enforcement of a $402,000 New Zealand family trust loan is being used by estranged spouse Robyn Belasco as leverage to force him into submission over their UK relationship property dispute, husband Gari alleged in the High Court.

NZ-based Pomeroy Family Trust lent the Belascos $402,000 in 2018; money used to buy their UK family home.  Robyn Belasco’s mother is one of two trustees.

This loan to Mr & Mrs Belasco is repayable on demand, with a proviso that demand would not be made prior to the death of Mrs Belasco, or separation.  Some three and a half years later, the two separated. 

While the loan was described as interest-free, interest at eight per cent runs from fourteen days after demand is made for repayment until payment is made.  As sole adult beneficiary of the Pomeroy Family Trust, Ms Belasco gains the benefit of interest accruing on delayed repayment. Mr Belasco is not a beneficiary.

In the High Court, Mr Belasco complained that he is being held to ransom.  Repayment of the loan requires sale of their UK home.  His estranged spouse is being obstructive, by refusing to reduce the sale price and then taking the property off the market, he claims.  Ms Belasco currently lives there, with their infant son.

In New Zealand, the family Trust sued both Mr and Ms Belasco getting judgment for the $402,000 debt plus interest running from January 2023.  Mr Belasco admitted the debt was due, but challenged trustees’ demand that he pay the Trust’s legal costs.

Mr Belasco alleges the debt recovery action taken in New Zealand is intended to benefit his estranged spouse’s negotiating position in their UK relationship property dispute.  Court action was taken for an improper purpose, he alleged.

Both her and her mother’s family trust are manipulating the situation to unfairly disadvantage him, by selectively enforcing their joint debt and its accruing interest against him personally and by burdening him with extra legal costs, he said

Associate judge Taylor said the family trust had a more cost-effective way to recover payment than by suing Mr Belasco personally.  It could have secured its debt over the Belascos' UK home.

Interest for late payment continues to accrue to the ultimate benefit of Mrs Belasco while she impedes sale of the one asset available to enable repayment.

Judge Taylor required the Trust pay its own New Zealand legal costs; Mr Belasco is not required to contribute.

Pomeroy Family Trust v. Belasco – High Court (20.09.23)

23.161

Relationship Property: Mills v. Dalzell

 

What was presented as a tidy ‘one in-one out’ relationship property settlement bogged down with allegations of fraud and a dispute over operation of an ASB joint bank account all complicated by emission trading scheme rights attached to a central North Island plantation. 

Lynette Mills and Graham Mills separated in 2010.  Lynette and Carl Peterson became an item in 2014.  The following year, all three decided the best way to tidy up their financial affairs was to have Mr Peterson acquire Mr Mills relationship property, with Mr Peterson to take over responsibility for Mr Mills relationship debts.

The first complication was an ASB joint account and mortgage held in the names of both Lynette and Graham Mills.  Graham continued operating the account.  ASB did not agree to a straight swap of signatories to the bank account and bank loans.  Lynette and Graham subsequently gave conflicting instructions to ASB over an overdraft facility attached to the account.

Legal action threatened against both ASB and Graham Mills led to an out of court settlement in late 2021.

Lynette Mills and Carl Peterson claim this settlement did not call a halt to their further legal action against Graham Mills.  The High Court ruled otherwise.

They allege Graham is guilty of ‘name fraud’ and is liable in the tort of deceit.  Lynette and Graham were not married; Graham adopted Lynette’s surname of Mills, becoming known as Graham Mills.  It was alleged this was part of a deceitful plan to hide from the Bank the fact he had been bankrupted earlier under a different name.

The High Court ruled there was no ‘unlawful purpose’ in Mr Mills changing his name; there was no intention to defraud.  And even if the change of name were for a fraudulent purpose, Lynette Mills and Carl Peterson suffered no loss as a result.

In the Court of Appeal, Lynette and Carl were told to make progress on their appeal over a claimed right to sue Graham Mills.  Their appeal appears to lack merit, the court said.  They have not paid costs levied on prior unsuccessful court applications.  They dispute a court ruling requiring payment into court as security for Mr Mills legal costs should their appeal fail.

They claim funds are short.  Sale of a forested block would help, but disputed ownership of emission trading scheme rights claimed in part by Graham are proving a handicap, they say.  Evidence was given valuing these rights at slightly over $300,000.  He says this dispute does not block a sale, it only goes to price on selling.

Mills v. Dalzell – High Court (23.09.22) and Court of Appeal (21.03.23 & 20.09.23)

23.160

Joint Venture: Wang v. Future Urban Ltd

 

A throwaway line in evidence, part of a dispute over an Auckland land deal that went wrong, resulted in Justice Downs ordering a copy of his High Court judgment be sent to Inland Revenue, potentially adding to a tax investigation into dealings by investor Lai Wei.

Yue Wang was in court suing over losses claimed to have resulted from a failed deal to purchase land in a new subdivision on Scott Road at Hobsonville in west Auckland.  Mr Wang said in evidence that his past business dealings with Mr Wei were complicated by the fact that Mr Wei was at the time under investigation by Inland Revenue and wanted to hide his involvement.  A money-go-round involved payments being routed through a bank account in the name of Mr Wei’s mother.

The two were in court because a joint venture arrangement to develop three sites off Scott Road had collapsed.  The original intent was to build homes on each site, then sell them all.  Mr Wang subsequently decided to develop one of the lots as a home for himself and family.  This required a tripartite agreement between Mr Wang, their joint venture company and the Scott Road subdivider to have Mr Wang replaced as the named purchaser of his desired lot.  The subdivider never signed off.  The deal collapsed.

Their joint venture company was ordered to pay damages for breach of the Fair Trading Act.  It falsely represented the transfer to Mr Wang was valid and enforceable when it wasn’t.

Damages for wasted costs of $29,686 were awarded; Mr Wang’s cost of commissioning plans and getting building consent.

A further claim for $245,000 as the opportunity lost from enjoying an increase in the property’s market value was dismissed.  There was no proved link between the misrepresentation and any potential loss of profit.

Wang v. Future Urban Ltd – High Court (20.09.23)

23.159