Estate: Estate William Frame v. Frame and W&G Trustee

 

While brother Allan was left with ownership of the Roxburgh central Otago family farm on death of his father, it required court action to pay estate bequests owed his four sisters.  Associate Judge Paulsen ruled Allan Frame had no grounds to delay payment of $1.1 million due his siblings.

After their parents’ deaths, Allan was left in control of the Burnbank Trust which owns the family farm on Langlea Road.

The High Court was told of a 2006 family arrangement which saw the family farm transferred to the Burnbank Trust for $2.1 million.  The farm was previously owned in partnership by Allan and his father William Frame.

As is common in these family transactions, no cash changed hands.  The Trust owed Allan $720,000; his father William $1.4 million.

At time of his death in 2023, William was owed $1.1 million by Burnbank Trust: an $800,000 balance still owing on sale of his share of the farm to the Trust; plus a credit balance of $371,000 owed by the Trust, part of ongoing financial transactions between the Trust and the Frame father and son farming business now leasing the property.

Terms of William’s will has the effect of bequeathing this $1.1 million to Allan’s four sisters with payment to be made six months after his death.

Executors of William’s estate recognised Allan might face commercial difficulties quickly raising $1.1 million to pay his sisters.  They were open to discussions on his plans to raise finance, or to sell part of the farm to get cash.

The court was told Allan instead stalled.

He wanted to wait until financial statements for farming operations were prepared at end of the financial year to establish how much the farming partnership might owe the Burnbank Trust.  This could reduce the amount of the $1.1 million debt, he claimed.

Judge Paulsen ruled against any delay.

The $1.1 million was due to William’s estate now.  No future set off could operate.

On William’s death, the Trust’s obligation to pay William’s estate was fixed at $1.1 million due.  William personally was no longer farming once dead.  For accounting purposes, the business relationship with the Trust immediately after his death is between the Trust and a continuing farming business including William’s estate as partner, not William personally.

The effect of this High Court ruling is that William’s executors can force sale of the family farm if Allan does not take immediate steps to find $1.1 million for payment to his sisters.

The court was told Allan has plans to subdivide and sell part of the farm.

Estate William Frame v. Allan Frame & W&G Trustee Ltd – High Court (27.09.24)

24.233

Reckless Trading: Boaden v. Mahoney

 

Owed unpaid rent and the cost of clearing debris from an Auckland site, commercial landlord Drew Boaden did not roll over when learning he would receive no cents in the dollar on liquidation of tenant, Civil Underground Ltd.  He sued Civil director Tim Mahoney, getting a court order that Mahoney personally pay him $89,400 because of Mahoney’s reckless behaviour in continuing Civil Underground’s business operations whilst it was insolvent and unable to pay its debts.

Setting up commercial operations under the Companies Act is oft touted as insulating owners from personal liability for unsecured business debts.  These debts are debts of the company; not debts of the directors or the shareholders.

But trading as a corporate is not a licence to cheat creditors.

If directors recklessly trade their company whilst it is insolvent, Companies Act allows courts to order directors tip funds into the liquidation as compensation for all creditors harmed.

When a liquidator sues, the liquidator is prime beneficiary.  Liquidation fees and costs are first claim on any insolvent company’s assets.  Creditors get only what is left over.

The Companies Act also allows individual unpaid creditors to take the same legal action as a liquidator, recovering what the company owes by suing directors personally.

The High Court was told Mr Boaden’s problems developed after he gave tenant Civil Underground notice in early 2020 to vacate a 5.5 hectare site in Glen Eden used as a storage yard for Mr Mahoney’s earthmoving equipment.  The yard had been sold.

Civil stopped paying rent and failed to clear all debris and rubbish stored on site.  Mr Mahoney subsequently put his company into liquidation.

Learning that unsecured creditors would get nothing on liquidation, Mr Boaden sued Mr Mahoney directly, alleging reckless trading in breach of the Act.

Justice Tahana ruled Civil Underground was insolvent from late 2018.  Unpaid debts were accumulating.  Mr Mahoney’s expectations of profitable work on the horizon for Civil Underground were unrealistic.

Lockdowns imposed during the covid-19 pandemic did not contribute to Civil Underground’s insolvency, Justice Tahana said.  Civil was insolvent long before.

As director, Mr Mahoney was ordered to pay Mr Boaden $89,400 for unpaid rent and rubbish disposal costs, company debts accruing after he failed to stop trading when it was clear that immediate liquidation was required.

Mr Mahoney was barred from defending Mr Boaden’s reckless trading claim.  This was a court-imposed penalty for Mr Mahoney’s earlier failure to hand over company records.

Mr Mahoney said these records had been lost, with his desktop computer and laptop stolen from his car and his mobile phone junked after it stopped operating.

Boaden v. Mahoney – High Court (26.09.24)

24.232

Harditex: Cridge v. Studorp Ltd

 

Sloppy workmanship led to water ingress and moisture damage for homes clad with manufacturer James Hardie’s product Harditex, the Court of Appeal confirmed.  No fault lay with the manufacturer.  This ended a marathon class action with James Hardie facing potential re-cladding costs for some 117,000 houses built prior to Harditex’ withdrawal from the market nearly twenty years ago.

Harditex was sold as external cladding.  Installation consisted of fibre cement sheets nailed directly to timber framing with only building wrap as a barrier between the two.    

The court was told of invasive testing carried out on eight Harditex-clad properties to determine the extent and causes of moisture damage.  These test properties were owned by class-action litigants suing James Hardie.

None of the eight test properties had cladding installed in full compliance with manufacturer’s instructions.  None had cladding properly jointed.  Window installations did not comply.  Many did not have an approved coating system applied.  Those that did, were left with the coating not properly or incompletely applied.

Home-owners’ complaints that Harditex was inherently defective and not suitable for exterior cladding were dismissed.   James Hardie was not negligent and was not in breach of the Fair Trading Act the court ruled.

The fault lay with contractors affixing the product.

lnstallation instructions were adequate. 

James Hardie is not a guarantor of building standards, the court said.  It could not be held responsible for poor on-the-job workmanship.

Cridge v. Studorp Ltd – Court of Appeal (26.09.24)

24.231

Health Data: HealthAlliance v. Hewlett Packard

 

On learning Health New Zealand wanted to store existing records using new software, US-based Capex Discovery refused assistance for data migration to a new platform, blocked access to stored data and sued for increased licence fees alleging nearly 190,000 health workers were accessing data while Health New Zealand was paying for only 5000 licences.

Capex offers secure storage for sensitive business records, promising fast search capabilities for authorised users.

The High Court was told Capex came to control digital storage of, and access to, New Zealand health data when Hewlett Packard spun off its global software business in 2017.

Justice Tahana ruled Health New Zealand’s contract remained with Hewlett Packard post-2017, with Capex providing storage on Hewlett Packard’s behalf.

It was an implied term of the Hewlett Packard contract that data could not be held to ransom; assistance had to be provided for data transfer to a new platform.

Capex’ claim that Health New Zealand owed USD 5.1 million for licences was dismissed.      

Evidence was given of a longstanding commercial relationship between Health New Zealand and Hewlett Packard for electronic storage, management, and access to, health sector data.

Regular software upgrades saw multiple iterations of this data being transferred by Hewlett Packard across to new platforms.

Health New Zealand’s current dispute with Capex followed Hewlett Packard’s decisions in 2017 to restructure and then sell off its data management business.

Capex agreed with Hewlett Packard to take over its Health New Zealand contract.  This involved storage of, and access to, staff emails.  Some emails included patient data.

Health New Zealand was sent several letters, asking for a signed acknowledgement that Capex was now the contracting party.

In legal jargon this was an attempted novation; have the Hewlett Packard/Health New Zealand contract replaced on the same terms by a Capex/Health New Zealand contract.

Health New Zealand never signed.  Its rights against Hewlett Packard remained.

The subsequent legal dispute was whether Capex could block data migration as leverage in its commercial dispute over licence fees.

The Hewlett Packard contract did not specifically spell out rights to data migration.

Justice Tahana ruled contract terms had to be interpreted in light of the long-standing relationship between Hewlett Packard and Health New Zealand.  Their past working relationship coupled with knowledge on both sides that only Hewlett Packard held keys to unlock encrypted data for migration created an implied term that data migration could not be blocked, she ruled.

The contract did allow Hewlett Packard to charge commercial rates for assistance with data migration, she said.

This ruling was not directed specifically against Capex.  Health New Zealand’s contract is with Hewlett Packard.  It is for Hewlett Packard to ensure Capex releases Health New Zealand’s data.

HealthAlliance NZ Ltd v. Hewlett-Packard New Zealand – High Court (20.09.24)

24.230

Construction: Beca Carter v. Wellington City

 

Building Act’s ten year ‘longstop’ limitation does not apply to contribution claims where one defendant found liable for construction defects later casts around looking for someone else to also pay up.  What has been a hot topic in the building industry went down to the wire, with a 3-2 split in the Supreme Court panel of judges; the majority deciding Building Act rules do not undercut the long-established and bespoke right of defendants to claim financial contributions from others.

The practical effect is to force architects, engineers, builders, subcontractors and others in the construction industry to extend run-off insurance cover for longer periods and to maintain a comprehensive archive of critical documentation for previous work.

The litigation centred on Bank of New Zealand’s $101 million claim against Wellington City for alleged negligence in its issue of a compliance certificate for a building subsequently damaged in the 2016 Kaikoura earthquake.

When sued, Wellington City immediately filed contribution claims against consultants Beca Carter and Professor John Mander claiming that if Wellington City were liable, they were also to blame having prepared and reviewed engineering design for the building.

Beca Carter argued this contribution claim was out of time; filed more than ten years after the design work was submitted.

The Building Act puts a ten year time limit on construction claims.  Claimants do not even get into court to argue legal liability if the supposed wrongdoing occurred more than ten years previously.

By contrast, contribution claims between defendants are governed by a 1936 Law Reform Act.  A two year time limit applies.  But this time limit runs from the date any defendant claiming a contribution has been found liable and a court has ruled on the damages payable.

The Supreme Court ruled Beca Carter could be dragged into the BNZ case as a potential contributor to any damages awarded against Wellington City.

Wellington City has a two year period to claim against Beca Carter should it be found liable in BNZ’s separate Building Act claim.  In fact, Wellington City filed its claim for contribution against Beca Carter even before any court hearing potentially finding it liable to BNZ.

In contrast, a minority of judges in the Supreme Court agreed with Beca Carter that the Building Act ten year long-stop rule provides an industry-specific code, overriding any further Law Reform right for a defendant to later claim contributions outside the ten year period.

The majority ruling prevails.

Beca Carter Hollings & Ferner Ltd v. Wellington City – Supreme Court (18.09.24)

24.228

Investment: Birnie v. Outward Ltd

 

In the world of investment banking, it is no more than small change to put $325,000 into a blockchain start-up.  Misrepresentations about prospects for start-up Outward Ltd, which never got off the ground as planned, saw investment banker Bill Birnie and colleague Charles Pearce go full guns blazing to recover their losses.  

The two exposed a series of blatant mistruths by Warkworth-based Rob Rogers raising start-up funds for Outward.

Prospects and possibilities were presented as done deals.

Mr Rogers’ company Jervois Strategy Ltd assisted Outward in a 2018 fundraising round.  Mr Rogers was sued personally after complaints about his marketing spiel.  Justice McHerron described Messrs Birnie and Pearce as being apparently beguiled by Mr Rogers ability to spin straw into gold.

The High Court was told of multiple emails sent by Mr Rogers both talking up benefits of blockchain technology to reduce costs of financing international trade and emphasising the foothold Outward was securing in this new world.

A statement that Outward had been ‘accepted into’ Blockhaus was deceptive and misleading, Justice McHerron ruled.  It suggested Outward was a serious investment opportunity with access to an extensive trading platform.

Swiss-based Blockhaus is a blockchain-based financial investment platform.  The court record shows Outward had gone no further than having preliminary discussions with a privately-owned company based in Auckland trading under the name Blockhaus NZ Ltd.  There was never any concluded legal agreement between Outward and Blockhaus NZ, the court was told.  Outward had never been ‘accepted’ by Blockhaus.

A statement that Outward’s blockchain-based software was currently being implemented as part of a pilot project with Maersk was incorrect and made recklessly, Justice McHerron said.

The court was told that even after receiving clear advice there was no Maersk project involving Outward, Mr Rogers persisted in talking up the existence of Outward’s supposed involvement in a multi-million dollar project.

His statement that a consortium of offshore investors was about to put up to USD 30 million into Outward, with due diligence currently underway, was also misleading.

The court was told there had been preliminary discussions with this consortium, through an intermediary, but no progress was made and there was never any due diligence undertaken.     

Having ruled that these misrepresentations were in breach of the Fair Trading Act, Justice McHerron said Messrs Birnie and Pearce had no legal claim against Mr Rogers personally.

Mr Rogers’ work raising capital for Outward was done for his company Jervois Strategy, as part of its contract with Outward.  Commissions were invoiced by Jervois and paid to Jervois.

The two investors should have sued Jervois Strategy instead, Justice McHerron said.

Separately, Justice McHerron ruled any claim against Outward Ltd itself was barred by a clause in the investors’ contract exempting Outward from liability for ‘any loss or damage’ resulting from their investment.

As a general rule, the Fair Trading Act prohibits use of exemption clauses to avoid fair trading liability; to protect consumers who face ‘take it or leave it’ standard-form contracts when dealing with corporates.

But where both sides to a commercial dispute are ‘in trade,’ Fair Trading Act exemption clauses are enforced if fair and reasonable.

Justice McHerron ruled it was fair and reasonable to exempt Outward from liability in this case.  Both Mr Birnie and Mr Pearce come from investment banking backgrounds.  As wholesale investors they knew the risks of investing in start-up businesses.  They could have been more diligent in their research before investing.  The risk lay with them.

Despite having struck out on these Fair Trading Act claims, the two were awarded damages against Mr Rogers personally and Playmaker Labs Ltd, a company related to Outward.

In 2022, with litigation looming: Mr Rogers promised to pay $100,000 and Playmaker $200,000; to settle the dispute.  Playmaker paid only $10,000 before a court hearing was set down to force the issue.

Justice McHerron ruled the settlement agreement enforceable.

Both Outward and Playmaker are controlled by Peter Dowell, formerly with ANZ Bank, now a Wellington investment banker.

Birnie v. Outward Ltd – High Court (16.09.24)

24.227

Bankrupt: re Harry Shand Crawford

 

Christchurch property developer Harry Shand Crawford was bankrupted on a $942,000 guarantee over top of protestations that he had been a victim of circumstances and that unpaid creditor Blackwater Properties was being vindictive, out to ‘teach him a lesson.’

This debt followed a speculative punt by his company, then known as Crawford Group Ltd, buying four adjoining properties in Christchurch suburb Phillipstown for proposed redevelopment.  His company defaulted.  The guarantee was called up.

The High Court was told Blackwater had some difficulty in tracking down Mr Crawford to serve notice of its bankruptcy application.

At a subsequent bankruptcy hearing, Associate Judge Lester refused Mr Crawford’s request to be excused bankruptcy on Insolvency Act ‘just and equitable’ grounds.

Mr Crawford is hopelessly insolvent, he said.  Mr Crawford claims to own only some furniture and have less than one thousand dollars in his bank account.

Mr Crawford’s commercial behaviour as a property developer warrants bankruptcy and with it further investigation by Insolvency Service, Judge Lester said.

The court was told Mr Crawford took steps to strip assets out of Crawford Group after it defaulted on the Phillipstown purchases, knowing it was going to be sued.

Mr Crawford was commercially irresponsible, Judge Lester said.

Mr Crawford’s allegations that Blackwater’s director was known for ‘aggressive bankruptcy tactics’ that had resulted in ‘business associates nearly being murdered’ were dismissed as factually incorrect.

re Bankruptcy of Harry Shand Crawford – High Court (13.09.24)

24.226

Legal Costs: Red Stag Timber v. Juken NZ

 

A long-running court battle over market share for treated timber framing saw losing litigant Red Stag Timber out of pocket for not only its lawyers’ fees but ordered to compensate competitor Juken for $1.3 million of its costs.

Rotorua-based Red Stag and its New Zealand owners challenged laminated timber framing produced by Japanese-owned Juken New Zealand Ltd as not complying with building standards.

The High Court ruled Juken was compliant; Red Stag was demanding Juken satisfy higher standards than those applying to its own traditional whole sawn framing timber.

High Court rules require Red Stag as the unsuccessful party to compensate Juken for its costs.

Compensation for legal fees is calculated on a set scale. Actual legal fees always exceed the scheduled hourly rate.

Red Stag was ordered to pay a $430,400 contribution towards Juken’s legal costs.  The court was told Juken incurred extra costs dealing with changes belatedly made by Red Stag to the ambit of its claim.

Compensation for expert witness costs are recoverable in full, to the extent they are reasonable.

Juken was awarded some $890,000.  This was less than the one million dollars in actual expert witness costs Juken incurred.

Much of the court’s time was taken up with experts disputing both interpretation of building standards governing framing timber and the economic effect of Juken entering the market with its laminated product.

Justice Venning ruled this expert testimony was relevant and necessary.  For some witness costs, the hours spent on preparation were pruned back as excessive.

The highest hourly billing rate was from an Australian consultant charging Juken AUD 800 per hour.

Red Stag Timber Ltd v. Juken New Zealand Ltd – High Court (12.04.24)

24.225

Sofitel Auckland: Een v.Body Corporate 384911

 

At the third time of asking, aggrieved apartment owners at Viaduct Harbour on Auckland’s waterfront battling Pandey Group’s part-use of the building as a Sofitel Hotel have seen court-appointed administrators installed to review the body corporate’s financial position.

Apartment owners, many of them investors from Singapore and Malaysia, have faced off against Pandey Group for over a decade in multiple disputes over body corporate management of their complex on Viaduct Harbour Avenue.

They allege hotel costs are being improperly loaded into body corporate levies and that common areas supposedly available for use by all apartment owners have been wrongly usurped for hotel use only.

Aggrieved apartment owners hold a minority stake in the building’s body corporate.

Frustration at what they allege is Pandey Group’s strong-arm tactics to force them to integrate their apartments into Pandey’s Sofitel operations, they responded in 2023 by not putting up a candidate for appointment to the building’s body corporate committee.

They then refused to allow body corporate functions be delegated to the committee.  This forced the Pandy-controlled committee to put all but minor administrative decisions to each and every apartment owner for their approval.

The High Court was told one consequence has been that the building’s long term maintenance fund has been run down; only $38,000 sits in a fund account which should hold some $915,000.

This deficiency arose, in part, because Viaduct ground rentals had been paid out of the maintenance fund and because some apartment owners had not paid body corporate levies, the court was told.

The Pandey-controlled body corporate has not chased defaulters for their unpaid levies.

Evidence was given that apartment owners allied to Pandey Group had levies totalling $604,000 unpaid; other apartment owners, $644,000.

The current body corporate committee has been suspended by the High Court.

Using powers in the Unit Titles Act, Justice O’Gorman appointed two partners from Deloitte as administrators, to take control of the body corporate’s bank accounts with power to exercise all powers held by the body corporate.  They were given six months to report back on the body corporate’s financial position and its compliance with the Act.

The body corporate pays the cost of this investigation.

Een v. Body Corporate 384911 – High Court (6.09.24)

24.224

Fair Trading: OHL Ltd v. Premier Property

 

Mark Hotchin’s OHL Ltd was awarded $400,000 damages on purchase of an Auckland commercial building after real estate agents acting for vendor Premier Property Developments made a series of misleading statements about the basement tenant’s rent.

Initially led to believe the tenant was paying an agreed rental, OHL was later told a rental deferment was in place, only to learn after buying that the tenant was in fact paying no rent at all.

The Court of Appeal was told Premier Property’s director Manilal Hari listed for sale unit A at a commercial building in Auckland’s central business district with Colliers International appointed in 2017 as agent for the sale.  OHL Ltd was identified as a likely buyer.  It was in the process of buying neighbouring Unit B.

Colliers provided an information memorandum for potential buyers, describing unit A as being ‘fully leased,’ with three commercial tenants occupying a floor area of just over one thousand square metres.

The Court of Appeal ruled Premier Property breached the Fair Trading Act when its agent Colliers misled OHL about rentals paid by basement level tenant, Buza Ltd.  And Premier Properties was also in breach of the Fair Trading Act by failing to inform OHL directly that Buza was paying no rent at all.

Only after agreeing to buy at $3.5 million in October 2018, did OHL become aware that Buza was not paying rent; Buza was arguing with landlord Premier Properties about the state of plumbing, electrical wiring and air conditioning in the basement area.

The Court of Appeal said a buyer in position of OHL would have paid only $3.1 million if it knew there was no rental income being received from the basement tenancy.  It was entitled to $400,000 damages; the capitalised value of this lost revenue.

OHL did not have to take up Premier Properties later offer to guarantee payment of the basement rental for the balance of Buza’s tenancy, the court ruled.  This guarantee was not unconditional.  And OHL was justified in being wary of any new promises by Premier Property after its earlier misrepresentations about Buza’s rentals, it said.

OHL Ltd v. Premier Property Developments Ltd – Court of Appeal (5.09.24)

24.222

Lease: Glenthorne Station v. Canterbury University

 

South Island high country farmers holding land on perpetual lease from Canterbury University are closely following banker John Shrimpton’s battle over rentals due for Lake Coleridge’s Glenthorne Station.

On his calculation, Canterbury University is claiming rents nearly four hundred per cent above what is due.  He currently lives in Vietnam.

Legal dispute centres on a 2009 eleven-year rent renewal, still unresolved.  This assessment involves valuation of nine thousand hectares of Glenthorne Station leased from Canterbury University, some 36 per cent of the station’s total land area.

Glenthorne Station says rental assessments are governed by the Crown Pastoral Act; Canterbury University says the Public Bodies Leases Act applies.  Differing rules in the two acts sees a four-fold difference in annual rent.  

Glenthorne Station says high country farming is marginal.  The higher rental makes farming at Glenthorne uneconomic, it says.

Rules in the perpetual lease saw their dispute go to arbitration.  Arbitrators decided the Public Bodies Leases Act applies; the higher rent was payable.

Arbitration rulings cannot be appealed, as a general rule.  The ruling is final.

In the High Court, Justice Radich allowed Glenthorne Station to file an appeal.  The arbitrators themselves acknowledged a court ruling is needed to decide which Act applies.

This appeal has yet to be heard.

Canterbury University came to own large swathes of South Island high country in colonial times.  In 1873, the then Canterbury Provincial Government allocated land on trust with rentals used to fund ‘superior education’ in the province.

Provincial governments were abolished three years later, replaced by the present nationwide parliament.

Glenthorne Station says terms of this colonial trust mean the Crown Pastoral Act is the current legislation governing rental assessments for high country perpetual leases.  If correct, a lower rental is payable.

Glenthorne Station Ltd v. University of Canterbury – High Court (5.09.24)

24.223

Reckless Trading: NZ LJ Food Express v. Zeng

 

Xian Peng was ruled personally liable for $342,600 of his Taupo restaurant’s debts after continuing to trade for four years with his business insolvent; liable as director for Companies Act reckless trading.

The High Court was told Mr Zeng set up business in 2017, trading as No. 1 China Restaurant.

It was an ‘asset-free’ business; the landlord provided both premises and equipment.

Within a year, it was clear his restaurant was in difficulty.  It was not generating enough income to pay its bills, specifically its tax liabilities.   Despite this, Mr Zeng continued operating his restaurant business at a loss for a further four years.  Unpaid taxes increased.

In 2022, Inland Revenue put his company into liquidation.

Mr Zeng told liquidators his restaurant had been severely affected by covid-19 lockdowns.

In the High Court, Justice Walker ruled Mr Zeng had traded recklessly.

The Companies Act holds directors liable for company debts should they continue trading when there is a ‘substantial risk’ of loss to creditors.

When aware their company is insolvent, directors are entitled to a reasonable time to take stock of the situation and get professional advice, Justice Walker said.  But they cannot continue trading without a carefully thought-out strategy having a good prospect of success, she said.  Directors should not be using creditors’ money, gambling that business will improve.

Liquidators told the court Mr Zeng kept no accounting records.  There was no evidence Mr Zeng sought advice on how to improve profitability.  He did not put in extra cash when his company got into difficulty.  He did not discuss with Inland Revenue a possible repayment schedule to clear his company’s tax debs.

It was clear to Mr Zeng by September 2018 that his company was insolvent, Justice Walker said.  He made no attempt in the following few months to work through a potential rescue strategy.

Mr Zeng was held personally liable for his company’s net financial deterioration from December 2018 to date of liquidation; about $342,600.

New Zealand LJ Food Express Taupo Ltd v. Zeng – High Court (4.09.24)

24.221

Investment: Wang v. Yuan

 

Wenjing Yuan was ordered to repay the balance of a $370,000 loan; money intended as a colleague’s equity investment in a Canterbury petrol station, diverted instead to buy a nail salon.

Having minimal business experience, Kaitan Wang handed Ms Yuan the money without any written agreement.  He sold his family home to free up the cash, leading ultimately to his wife and daughter returning to China because they could not afford rental costs while Mr Wang struggled to recover his money.

He met Ms Yuan through a mutual friend.  This led initially to a job at her then husband’s fish market.  Mr Wang was intending to buy a business; improving his prospects of getting residency.

Mr Wang told the High Court that Ms Yuan offered him a minority stake in a petrol station she intended to buy at Ohoka, near Christchurch.  He was never shown any agreement for its purchase.

After selling his family home to raise cash for his share of the petrol station, Mr Wang was told there were delays awaiting an environmental inspection at the site.  It was suggested he might help Ms Yuan in her purchase of a nail salon.  He lent her money, as a temporary bridging loan.  Again, there was no written agreement.

The petrol station purchase never went ahead.

Ms Yuan told the High Court Mr Wang had agreed to switch his investment into a nail salon.

Justice Cull ruled there had never been any such agreement.

Ms Yuan was personally liable to repay $350,000 as ‘money had and received.’  There had been a total failure of consideration.  Mr Wang’s money was never used for its agreed purpose.

In court, Mr Wang conceded he would accept $20,000 paid earlier as being part-repayment of his $370,000.  He claimed it was in fact a refund of $20,000 cash he had paid Ms Yuan’s spouse for a ‘work visa’ before employment in the fish market.  At time of this payment, Mr Wang had been living in New Zealand for some eight years.

Ms Yuan said these cash ‘work visa’ payments are non-refundable.

Wang v. Yuan – High Court (4.09.24)

24.219

Fisheries: Te Ohu Kai Moana v. Attorney-General

 

While the argument is about fish, a High Court hearing saw a delicate dance between Maori, government and the judiciary seeking to remedy three decades of quota losses by Maori fishing interests; losses only highlighted when the system for recording quota holdings was revised.

Last century, New Zealand was a world leader in establishing private property rights in commercial fishing.  Previously, commercial fishing within New Zealand’s economic zone, as in the rest of the world, was a free-for-all.  Anyone could fish anywhere.

This amounts to what economists call ‘the tragedy of the commons.’  If everyone has rights to an asset, no-one has an interest in maintaining and controlling that asset.  For commercial fishers, there was no incentive to conserve stocks; better to get in first and grab what is available, before someone else does.     

Four decades ago, a fishing quota management system was established in New Zealand, creating a licence to fish for specified quantities of fish species; the ITQ system was born, the creation of Individual Transferable Quotas, which could be sold, leased and mortgaged.

Maori received substantial quota, in recognition of their historical customary fishing rights acknowledged and protected by the Treaty of Waitangi.  Te Oho Kai Moana Trust acts as an umbrella organisation, holding these fishing assets in trust for individual iwi.

The High Court was told an early re-assessment of sustainable catch sizes led to a reduction in allowable catches and a political decision to compensate ITQ holders for their reduced revenue.

Government faced an un-budgeted fiscal cost.  A compromise was reached; payment in kind or cash.  ITQ holders could take cash now, or be compensated later with the issue of ‘free’ quota when fish stocks improved and further quota issued.

In industry jargon, those commercial fishers deciding to later receive free quota were described as holding ‘section 28N rights;’ named after the section in a 1986 amendment to the Fisheries Act creating these deferred rights.  

A 2001 change saw ITQs transmogrified into annual catch entitlements, known as ACEs.  Commercial fishers with an existing right to fish in a specific fishing zone were given a share allocation for the ACE applying to that zone; what were loosely described as ‘proportionate ITQs.’

Kai Moana says it was only greater transparency arising from the new ACE system that highlighted how section 28N rights holders had for years been robbed of their continuing entitlement to compensatory free quota.

Kai Moana suggested Fisheries in the past had been less than open in its disclosures about catch allocation.

Kai Moana asked the High Court to issue a declaration that the loss of quota, which should have gone to section 28N rights holders, is a breach of the 1992 agreed Treaty of Waitangi Fisheries Settlement which defined the Maori share of total commercial fishing catches.

Legal argument centred on Kai Moana’s attempts to stop the Minister for Oceans and Fisheries setting a new total allowable catch for SNA8: a snapper fishing zone covering the west coast of the North Island.  Kai Moana is a section 28N rights holder for this zone.

Kai Moana’s entitlement to compensatory quota had to be sorted first, it said.

Judges are loathe to tell politicians what to do; part of the separation of powers between parliament and the courts.  The constitutional convention is for the courts to declare that politicians in a particular case have not complied with the law.  It is for politicians to then decide: comply; or change the law.

In the High Court, Justice Boldt only went so far as stating Kai Moana has a very strong case that its progressive proportionate loss of quota rights as a section 28N rights holder could be in breach of the 1992 Fisheries Settlement.

He warned government that delaying resolution will only compound the damage.

Te Ohu Kai Moana Trustee Ltd v. Attorney-General – High Court (4.09.24)

24.220

Insurance: Moorhouse Commercial Park v. Vero

 

Owners of Christchurch earthquake-damaged commercial buildings in dispute with Vero Insurance are left with a Court of Appeal ruling having the effect of requiring them to deconstruct part of each building in order to prove Vero should pay for a rebuild.

Moorhouse Commercial Park Ltd, controlled by engineer Peter Dennis, owns several adjoining commercial buildings in central Christchurch.  It cannot agree with Vero Insurance over the scope and extent of repairs needed following earthquakes in 2010 and 2011.

Moorhouse Commercial says the buildings need to be demolished and rebuilt.  Vero says epoxy resin injected into cracks within the buildings is sufficient.

The buildings are currently tenanted by commercial clients; two gyms, offices and retail outlets.

Moorhouse Commercial says epoxy repair is insufficient; the buildings are at risk of collapsing in another major earthquake.

In engineering terms, the dispute is over the buildings’ post-earthquake ‘stiffness;’ the ‘bonding’ between concrete and reinforcing steel rods.

The buildings were constructed between 1954 and 1997, using smooth sided steel rods.  Structural engineers have since learnt that the bond between smooth reinforcing steel rods and concrete poured around them could lessen or slip following earthquakes.  Industry preference now is for ribbed reinforcing steel, providing better bonding; more grip, and a more robust structure.

Moorhouse Commercial says extensive exterior cracking post-earthquake is clear evidence of potential structural failure, requiring Vero to pay for a rebuild.

Vero’s engineering experts said epoxy resin repairs already undertaken are sufficient and that Moorhouse Commercial is overstating the seismic risk.

The Court of Appeal ruled it is for Moorhouse Commercial to prove Vero is in breach of its insurance contract.  To force a rebuild, Moorhouse has to prove the earthquakes caused damage to the buildings’ structural integrity.   

It is possible that bond loss occurred, the Court said.  But Moorhouse Commercial has to prove it.

Moorhouse Commercial Park Ltd v. Vero Insurance – Court of Appeal (3.09.24)

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