Import Duties: Customs v. Country Road

 

Import duties plus GST totalling $2.5 million were at stake in Country Road’s tariff dispute with Customs.  Justice Becroft was true to his word when saying ‘I have reflected on the question for some time:’ there was a ten month hiatus between the High Court hearing and his ruling in favour of Customs.

A profit sharing deal between Country Road Australia and its New Zealand operations dressed up as payment for shop layout and marketing advice saw this profit share levied for customs duty since the profit share was a condition of selling branded Country Road product in New Zealand.    

Customs and Excise Act sees tariffs levied at the border on imported goods calculated on the amount payable ‘as a condition of the sale of goods’ to the New Zealand importer.

In dispute before the High Court was importation of Country Road product from Australia for a three year period ending 2018.

A ‘management services’ agreement governing Country Road’s trans-Tasman operations required New Zealand to return seventy-five per cent of profits to Australia, with no payment necessary if profits did not reach a specified threshold.

Customs said this profit return was a ‘condition’ attached to Country Road product crossing the border and was subject to import duty.  It was irrelevant that the dollar amount was not identified until product was subsequently sold in the New Zealand market.

Country Road said the later payments sharing profits were compensation for time and expertise provided by head office in Australia to ensure a uniform retail and marketing strategy across its New Zealand stores.  Country Road Australia was simply sharing in the profit it helped create, it said.

Justice Becroft ruled there was no clear separation between product importation and profit share.  Stock could not be imported free of the obligation to pass back a profit share on sale.  Since the profit share was a ‘condition’ of Country Road New Zealand’s importation, import duties also applied to the later payments.

The court was told Country Road has already paid the disputed $2.5 million, with these funds held in Custom’s trust account pending a High Court ruling.

Customs Service v. Country Road Clothing (NZ) Ltd – High Court (25.06.24)

24.162

Tax: Commissioner of Police v. Le

 

The taxman waits for no-one, creating some tension between Inland Revenue collecting taxes for that big bucket which is consolidated revenue available for government general expenditure when Police might be chasing the same assets for a separate proceeds of crime fund controlled by the Justice Department.

Protesting that she is innocent of any part in a commercial cannabis cultivation business, Nhu Quynh Thi Le gained High Court approval for release of frozen funds to pay a tax bill following sale of her Auckland investment property.

The High Court was told Ms Le purchased in 2018 a house at Goodwood Heights near Totara Park in South Auckland.  An August 2020 police bust found all rooms in the house, bar one, kitted out for commercial cannabis cultivation.  Ms Le denies all knowledge.  The house was rented out.  The tenant was responsible, she says.

Ms Le sold the house at auction three months later.  Police had the $347,000 net proceeds of sale frozen, alleging the property was ‘tainted’ under proceeds of crime legislation.     

Meanwhile, Inland Revenue assessed Ms Le liable to pay tax of some $49,500 on the $165,000 capital gain made during her two year’s ownership.

Evidence was given that Ms Le paid part of this tax bill from her own resources, but required $35,200 from her frozen funds to pay the balance.

Confirming an agreed Criminal Proceeds (Recovery) Act settlement between Ms Le and Police, Justice Johnstone approved release of $35,200 in payment of Ms Le’s tax bill plus a little over $14,000 to be returned to Ms Le personally.  The balance is forfeit.

Police alone do not get to use all the millions collectively forfeited to the proceeds of crime fund; other beneficiaries have included Justice, Health, Social Development, Customs and Oranga Tamariki.  Ministries seeking to dip into the pot must establish funds received will reduce social costs of crime.

Commissioner of Police v. Le – High Court (24.06.24)

24.161

Lease: Portofino Wellington v. Stride Property

 

Conflating separate but parallel negotiations over a covid-19 rent rebate and terms for a new lease, Wellington restauranteur Mario Dimitrijoski failed in his claim to have a new twelve year lease from Stride Property for site of his Portofino restaurant.

Mr Dimitrijoski is from Macedonia.  His Portofino restaurant in Wellington’s central business district prides itself on its Italian menu.

The High Court was told he and landlord Stride Property Ltd dispute whether a new lease exists.  He claims to have a lease running through to 2034.  He points to an October 2020 email setting out terms for a replacement lease sent by Stride’s then commercial asset manager.

Associate judge Lester ruled there had never been any concluded agreement.  Terms offered were subject to further negotiation and approval.  Mr Dimitrijoski did not follow up on these points, Judge Lester said.  Subsequent discussions centred on clarification of rent rebates to accommodate losses suffered during government-mandated covid-19 lockdowns.

Judge Lester dismissed Mr Dimitrijoski’s complaint that he was misled by Stride Property, in breach of the Fair Trading Act, by its failure to warn him that loose ends had not been tied up such that there was no new lease in place.

These were commercial negotiations.  Stride Property was under no obligation to prompt Mr Dimitrijoski, Judge Lester ruled.

In any event, Stride Property had sent a follow-up email, ten months after negotiations commenced in October 2020, reminding Mr Dimitrijoski of the need to not only pay current rent arrears then totalling $91,000 but also address ‘further lease negotiations for a longer extended term.’

Portofino Wellington Waterfront Ltd v. Stride Property Ltd – High Court (21.06.24)

24.160

Estate: Swanwick v. Bostock

 

Litigation over testamentary promise claims against a deceased estate have strict time limits; fail to file within twelve months, then any claim will likely be timed out.  Tim Swanwick’s claim to a family farm came fifteen years after his father’s death, but immediately after his mother’s subsequent death.

The Swanwick family farm at Maraetotara near Havelock North in Hawkes Bay was owned jointly by Tim’s parents.  His father’s death in 2008 resulted in a new farming partnership established between his father’s estate and his mother.  She died in 2021.  A family dispute followed.

Tim’s siblings are three sisters.  Their parents’ wills have all four children named as final beneficiaries of the farm, each with a one quarter interest.

Tim claims his father promised that the farm would be his on the death of both parents, provided he worked on and developed the property.

Law Reform (Testamentary Promises) Act allows ‘contract-like’ claims to be made against an estate where work has been done in return for promises that bequests will follow on death.

Whether any such promises were made to Tim are yet to be proved.

The first step has been procedural argument over whether he is out of time for a claim against his late father’s estate.  There is no such dispute over his parallel testamentary promise claim against his late mother’s half share of the farm.

The general rule is that testamentary promise claims must be filed within twelve months of probate being issued.  There is an exception.  With court approval, a late claim can be made provided there has not been a ‘final distribution’ of estate assets.

Tim argued his late father’s estate was never finally distributed prior to his mother’s death.  It was operating the farm in partnership with his mother.

The Court of Appeal ruled his father’s estate had been ‘distributed’ in that terms of his will had been put into effect.  His will required that income from his half share of the farm go to his widow whilst she was alive.

Once a trust was initiated to create this life interest, assets had been ‘distributed’ as required by his father’s will, the Court ruled.  Subsequent administrative requirements to have estate trustees correctly registered on title to the farm and to then later wind up the partnership on his mother’s death were not actions towards ‘final distribution;’ they were acts subsequent to distribution.

Tim cannot bring a testamentary promise claim against his late father’s estate, the Court ruled.

Swanwick v. Bostock – Court of Appeal (21.06.24)

24.159

Estate: re Estate Margaret Jones

 

On death of her mother, Nicky Jones found there was no will.  This looked to be the end of her hopes to receive a promised half share of her mother’s $1.6 million Auckland home at Mellons Bay.  The High Court enforced this earlier promise, ruling Nicky had given up prospects of a career and personal relationships to care for her elderly parents in response.   

Dying without a will had her mother die intestate.  This meant her assets were to be divided according to statutory rules in the Administration Act; divided three ways between Nicky and her siblings Mike and Katy.

The High Court was told their mother had stated many times before her death in 2018 that daughters Nicky and Katy were to have half the house each.  Mike had already received plenty of financial support for his various business ventures, she had said.

With no will, these intentions were not implemented.

Justice Brewer ruled their mother’s estate had to transfer half share of the house to Nicky, following her claim of equitable estoppel.

Her mother had represented to Nicky that half the house was hers.  Nicky had relied on this representation to her detriment by caring for her parents, instead of forging her own business career.  She used her own money to keep up mortgage payments and contributed towards costs of her mother’s full-time care at end of her life.

Her mother’s estate was estopped, or prevented, from going back on her promise.  It would be unconscionable to not honour the promise made, Justice Brewer ruled.

Sister Katy did not make any separate claim for the other half share.

With half share of the house going to Nicky, the other half share is still governed by Administration Act rules; to be divided three ways between each of the siblings.

The court was told there is still a mortgage over Mellons Bay, yet to be repaid.

re Estate Margaret Wilma Jones – High Court (21.06.24)

24.158

Investment: Wei & Ou v. Chin Yun Holdings

 

Involved in offshore real estate deals in both Dubai and Thailand, Chinese nationals Kai Wei and Guolong Ou claim investment funds totalling $14.3 million they sent to New Zealand have been misapplied with properties they claim ownership over winding up under control of Heping Yang who they allege strong-armed his way into control after his son Yuqi was charged with drug offences.

The High Court was told their 2020 plans to invest in New Zealand property faced a problem.  Mr Wei and Mr Ou held visitor visas only.  They could not invest.  A plan was concocted to have Mr Wei’s childhood friend, Xing Guo, assist.  Mr Guo held New Zealand residency.

Over a period of two years, a total of $14.3 million was remitted to Mr Guo in New Zealand for purchase of properties he recommended.

Title was taken in name of entities controlled by Mr Guo.  Purchases included: land and a hotel business on Marsden Road in Paihia; plus multiple residential properties across Auckland, ripe for development.

These properties eventually came under control of Mr Guo’s father-in-law: Heping Yang.

Evidence was given that when Mr Yang discovered his son Yuqi had borrowed money on security of his properties without authority, Mr Yang saw Mr Guo as responsible and demanded compensation from Mr Guo.  To make good on this demand, Mr Guo handed over ownership of both Marsden Road and sundry Auckland properties.

Mr Wei and Mr Ou lodged caveats to title of Marsden Road and the Auckland properties claiming ownership rights.  Mr Guo held title in trust for them, they argue.

The legal complication is that Mr Guo no longer holds title, Mr Yang’s companies do.

Rules governing ownership of land allow a third party to get clear title on purchase if they were unaware of any prior claims and were not party to ‘fraud.’  Fraud has a specialised definition in relation to land ownership.

Associate judge Gardiner ruled Mr Yang did have prior notice of Mr Wei’s and Mr Ou’s interests as beneficial owners of the Marsden Road hotel.

Correspondence in 2022 between Mr Guo and Mr Yang spelt out in detail the existing agreement having Mr Guo holding Marsden Road at Paihia in trust for Mr Wei and Mr Ou.

There was strong evidence that Mr Yang was aware of their rights to the land when he took ownership, Judge Gardiner said.  That caveat could stand.

This caveat blocks any sale of Marsden Road, pending a full court trial.

Caveats claiming rights over named Auckland properties now owned by Mr Yang’s companies were removed.

There was no clear documentary evidence linking Mr Wei’s and Mr Ou’s periodic New Zealand cash transfers to any specific Auckland property, Judge Gardiner ruled.  Any claim Mr Wei and Mr Ou may have regarding misappropriation of their funds by Mr Guo is a claim against Mr Guo personally.  They have no claim over the properties since sold.

The court was told Mr Guo is bankrupt.

Wei & Ou v. Chin Yun Holdings Ltd & Daqin Holding Ltd – High Court (20.06.24)

24.157

Lease: Hamilton Accommodation v. Yi Ming Investment

 

Lease of a Hamilton motel was cancelled by the High Court after tenant Hamilton Accommodation Ltd rebuilt the manager’s unit to create two separate units and refused to make good the alterations with director Patrick McGuire taunting the landlord, saying ‘I enjoy fighting landlords and we destroyed the last one we dealt with.’

Hamilton Accommodation took over lease of Te Rapa’s Ascot Motor Lodge in 2020.  Hamilton Accommodation is controlled by Mr McGuire and Kim Nguyen.

Landlord is a company controlled by Sarah Tu and James Tu.

The High Court was told landlord inspections of the property were compromised by covid-19 lockdown restrictions.

When Ms Tu did inspect the premises in late 2020, she found the manager’s unit had been subdivided into two separate units with installation of an internal wall, addition of a kitchenette and alterations to a bathroom.

Such alterations needed council building consent.  No consent had been obtained.

Mr McGuire told council staff he did not intend to remove the alterations.  It was the landlord’s problem, he said.  If the council were to prosecute, any prosecution had to be against the landlord as owner of the property.

Hamilton Accommodation refused to put the problem to arbitration, as required by terms of its lease.  Mr McGuire challenged Ms Tu to force an arbitration, pointing out that arbitrations can be expensive, saying: ‘We can afford these fees.  Can you?’

In the High Court, Justice Gordon ruled Hamilton Accommodation’s conduct amounted to serious and deliberate breaches of its lease.  The landlord was justified in cancelling the lease, which would otherwise have run for another six years to 2030.

Hamilton Accommodation’s Property Law Act application for relief against cancellation was dismissed.

Hamilton Accommodation Ltd v. Yi Ming Investment Ltd – High Court (19.06.24)

24.156

Bankruptcy: M v. H

 

Filing for bankruptcy to circumvent his estranged partner’s relationship property claim saw the Court of Appeal annul the bankruptcy as an improper use of insolvency rules.

The bankrupt, named as H, was desperately short of cash at time of bankruptcy with his wealth tied up in an Auckland property then occupied by his former partner, named as M, and their child. 

The court was told the two had been in a relationship for some 14 years.

When M and H separated in early 2020, the Family Court made an occupation order in favour of M, forcing H to leave their home, a property he inherited from his father, and to find alternative accommodation.  Before applying for bankruptcy, H was living for a time at the Salvation Army’s Epsom Lodge in Auckland. 

The two could not agree on terms for sale of the Auckland property or for division of the proceeds.  A draft agreement covering their separation and division of relationship property was never signed by H.

He disputed various offers made by M to buy out his share of the house, claiming the price offered was too low.

By mid-2021, H was threatening to put the property up for auction, while at the same time seeking a reconciliation.

Within weeks, he filed for bankruptcy.

Short of cash, he could not pay his current debts which proved to total just under $34,000.  This at a time when he owned property having a disputed value, but a value clearly in excess of $800,000.  Lack of liquidity is grounds for bankruptcy.

The immediate effect of this bankruptcy was that ownership of his Auckland property, occupied by his estranged partner, passed to Insolvency Service.

M’s financial interest in the property was at law then limited to the lesser of $103,000 or half the property’s net equity; described as a ‘protected interest’ in the Insolvency Act.  This amount has not been updated for twenty five years.  It is intended to provide a nest egg for the spouse of a bankrupted partner from sale of their home when owned solely by the now bankrupt partner.  This payment takes priority over claims by all unsecured creditors.

Insolvency Act rules trump Property (Relationship) Act rules.

M said insolvency rules were being used to defeat her claim to a 50/50 split from sale of the family home owned by H.

If the bankruptcy continued as normal, Insolvency Service would sell the house, pay M her $103,000 ‘protected sum,’ pay H’s sundry creditors and then hand over the balance to H.

The Court of Appeal ruled this was an instance of bankruptcy being used for an improper purpose.  It was a tactic to reduce the amount paid to M, leaving a substantial balance for H enabling him to buy a replacement property.

H’s bankruptcy was annulled.  At law, it is as if his bankruptcy never took place.

The court ruled H must pay Insolvency Service costs; $90,500 of which over half is its legal costs.

M v. H – Court of Appeal (19.06.24)

24.155

Lease: James Ward Trustee v. Sinclair

 

Cancelling apartment leases for non-payment of rent is not easy, as lessor of an apartment in central Auckland high-rise apartment Scene Three found.  The High Court gave lessee Warren Sinclair further time to pay overdue rent totalling more than $86,000 despite a history of repeated failure to pay rent on time with two previous instances of arrears paid more than one year late.

The High Court heard evidence of Mr Sinclair being a man commercially living on the edge.

He currently faces 68 criminal charges filed by Inland Revenue.

In 2023, he was ordered to pay $1.6 million damages as guarantor of company called Retyred (2020) Ltd found liable for breaching its lease of a seven hectare commercial site supposedly recycling tyres but instead used for storage of used tyres.

He regularly left rent unpaid for his Scene Three apartment, making a $67,000 payment in April 2021 making good on arrears of up to eighteen months and a further late payment of $56,800 in August 2022 for arrears of up to fifteen months.

Lessor James Ward Trustee Ltd told the High Court that not only have further Scene Three arrears now reached $86,100 but it faces a real risk of any payment, when received, being later clawed back should Mr Sinclair be bankrupted.

Ward Trustee wants to put as much time as possible between any recovery of rent arrears and Mr Sinclair’s possible bankruptcy.  Insolvency law sets out different rules for clawback of pre-bankruptcy payments depending upon how many months or years prior to bankruptcy a particular payment was received.

Ward Trustee made a High Court Property Law Act application for Mr Sinclair to be evicted from his Scene Three apartment, with his lease cancelled.

Courts generally are sympathetic to lessees late with rent; as long as all arrears are made good promptly.

Justice O’Gorman gave Mr Sinclair one last chance.

Payment of all arrears are required within four weeks.  Failing that, Ward Trustee can retake possession of the Scene Three apartment and cancel Mr Sinclair’s lease.

James Ward Trustee Co Ltd v. Sinclair – High Court (19.06.24)

24.154

Cartel: Commerce Commission v. Canterbury Industrial Scrubbing

 

It was a cosy business arrangement between two Christchurch families lasting nearly two decades, blown open as a cartel only after a spat between second generation children.  Canterbury Industrial Scrubbing Ltd was ordered to pay a $51,000 penalty for market collusion in breach of the Commerce Act.

The High Court was told that Industrial Scrubbing’s patriarch Paul Jamieson had informal discussions prior to 2003 with Owen Kinnane, who then controlled business rival Canterbury Industrial Sweeping Ltd, about how they would operate their respective businesses.

Between them, they held a large slice of the Christchurch market for industrial floor cleaning.  A 2007 deal saw Jamieson’s Industrial Scrubbing concentrating on its speciality service, referring dry sweeping work to Kinnane’s Industrial Sweeping.  Similarly, Industrial Sweeping referred any floor scrubbing work to Industrial Scrubbing.

This arrangement broke down after the two retired and their children graduated from employee to management.

Daniel Jamieson assumed control of Industrial Scrubbing; Sarah Kinnane, Industrial Sweeping, which she re-branded as CanSweep.

Industrial Scrubbing was the first to break ranks.  In early 2020, it purchased five industrial sweepers and began offering sweeping services.  This was because Industrial Sweeping’s service standards had slipped since Sarah Kinnane had taken over, Paul Jamieson said.

Emails flew between the two with Daniel Jamieson threatening to ‘actively’ target her customer base.

The High Court was told the two sides met in person early 2020.

Mr Jamieson followed up with an email summarising what he described as ‘outcomes we agreed on.’   The points highlighted included: agreeing on a list of customers described as ‘off limits,’ not to be poached; a general agreement to liaise over future work; and an agreement not to make negative comments to customers about the other’s business.

Ms Kinnane’s Industrial Sweeping did not respond, beyond sending Mr Jamieson Commerce Commission guidance notes on what amounts to cartel behaviour.

He then aggressively bid for Industrial Sweeping’s clients offering a twenty per cent fee discount, fixed for two years.

Daniel Jamieson later admitted to the Commerce Commission that both he and his company were party to market collusion in breach of the Commerce Act in respect of both the 2020 face-to-face meeting with Ms Kinnane and the earlier informal deal agreed between their fathers.

The High Court confirmed a negotiated fine of $51,000 payable by Canterbury Industrial Scrubbing; payment to be made by instalments over three years.

The High Court was told Industrial Scrubbing is not able to pay a greater fine.  Mr Jamieson was described as not being in a position to pay any fine at all.

Financial details for both Mr Jamieson and his company were suppressed.

Commerce Commission v. Canterbury Industrial Scrubbing Ltd – High Court (18.06.24)

24.153

Guarantee: Gumdigger Ltd v. Serepisos

 

Legal action against Wellington entrepreneur Terry Serepisos claiming he owes $2.4 million on a guarantee was deferred by the High Court.  Suggestion this legal action was pursued as leverage to force Serepisos into settling an unrelated legal dispute meant Associate judge Skelton refused to order payment under the High Court fast-track summary judgment procedure.

The High Court was told the guarantee arose in 2018 from a $115,000 loan contract between Mr Serepisos’ mother and financier Gumdigger Ltd.  Auckland-based George Hunter controls Gumdigger.  Mr Serepisos signed the loan contract on behalf of his mother under power of attorney, signing again in his personal capacity as guarantor.  She was bankrupted in 2020.

Terms of the guaranteed loan has daily interest capitalised into the loan at 0.165 per cent per day.  Five years on, the outstanding balance exceeds $2.4 million.

For reasons not explained in court, Gumdigger took no steps to enforce its guarantee following bankruptcy of Mr Serepisos’ mother.

Mr Serepisos alleges legal action to now enforce the guarantee only materialised after he filed legal action in a dispute against a company called Black Robin Equity Ltd, another Auckland-based financier.  Black Robin is controlled by Dave Wigmore.

Mr Serepisos claims Black Robin bought out the debt owed Gumdigger and is now using the assigned debt to sue him on its associated guarantee for the ‘improper motive’ of putting commercial pressure on him in the Black Robin dispute.

Mr Sereposis also claims Gumdigger held shared rights with another lender as a secured creditor over three Wellington properties owned by his mother, properties since sold.  There has been no explanation as to what Gumdigger may have received from these sales in reduction of the assigned debt, Mr Serepisos said.

Judge Skelton refused summary judgment on the guarantee.  A full court hearing is required to establish the facts and define the disputed issues, he ruled.

Gumdigger Ltd v. Serepisos – High Court (17.06.24)

24.152

Relationship Property: Elbers v. Hart

 

When her prior marriage ended, Denise Hart put assets from her relationship property settlement into a family trust.  These assets remained protected when her subsequent eighteen year relationship with Gavin Elbers came to an end.

The High Court was told the two began a de facto relationship in 2004, marrying in 2006.

From the beginning of their relationship, Denise set up several family trusts.  She is a discretionary beneficiary; her children final beneficiaries.  Husband Gavin is not named as a beneficiary.

Evidence was given that subsequently he did benefit indirectly.  Joint living expenses were paid out of trust funds.

Over the near two decades of their relationship, trusts established by Denise purchased three properties.  Funding came from trust resources plus bank loans.  No funding came from Denise personally.

She challenged caveats registered against title to these three properties by her estranged spouse when their relationship ended.  He claimed relationship property rights in the properties.

There was no evidence, nor even a suggestion, that any part of the purchase prices was sourced from funds or property that would otherwise form part of relationship property, Associate judge Brittain said.

The caveats lapsed.  Mr Elbers had no relationship property claim over assets owned and paid for by third parties, being Denise’s various family trusts.

Mr Elbers also claimed he was entitled to share in the properties’ increased value in return for work he had done.  He is a painter and decorator.

Judge Brittain said a ‘contracting out’ agreement he signed with Denise in 2005 provided that any contributions by Mr Elbers improving the value of her separate property would be compensated.  This agreement did not create a claim against the trust properties themselves; it merely gave the right to recover compensation from Denise personally.

The court was told their ‘contracting out’ agreement includes a mechanism for calculating any compensation, and a dispute resolution process if they cannot agree.

Elbers v. Hart – High Court (17.06.24)

24.151

Family Trust: Brown-Douglas v. Hansford

 

Having half share of the family home held by a family trust which had bought that half share with its own resources meant it was excluded as relationship property.

After a three year de facto relationship between Whitianga couple Renee Brown-Douglas and Avon Hansford ended in 2014 a detailed dispute followed over what were relationship assets, how they should be divided, and whether the Property (Relationships) Act even applied.

Both had been in previous relationships.

In 2021, the Family Court ruled that the Act applied.  The couple had been in a de facto relationship for nearly three and a half years.  Relationship property was to be divided as if married.

Their family home had been a property at Carina Way, in Whitianga.

It had been owned previously by Mr Hansford with his former spouse.  When a final wash-up of that relationship was concluded in 2012, ownership of Carina Way was reorganised: Mr Hansford owning a half share; the other half held by Ms Brown-Douglas’ family trust, the Albatross Trust.

Mr Hansford is not a beneficiary of Ms Brown-Douglas’ Albatross Trust.

In dispute was how to divide the $327,500 net proceeds from sale of Carina Way, a sale made four years after their relationship ended.

Mr Hansford’s half share of Carina Way was relationship property.

The Family Court ruled Mr Hansford was entitled to a half share of the Albatross Trust’s share of Carina Way.  By holding her share in the name of a family trust, Ms Brown-Douglas was making a ‘disposition’ that had the effect of defeating Mr Hansford’s relationship property claim to her half share, the trial judge ruled.

This was not correct, ruled the High Court on appeal.

Albatross Trust purchased the half share owned previously by Mr Hansford’s former spouse using its own assets, not relationship property assets, Justice Andrew said.  Albatross Trust’s half share of Carina Way was never relationship property.

Net proceeds from sale of Carina Way are to be divided half to Albatross Trust and one quarter each to Mr Hansford and Ms Brown-Douglas, he ruled.

Also in dispute was the status of Mr Hansford’s $325,000 charter yacht: Windborne.

It is not relationship property, Justice Andrew ruled.

Before, during and after his relationship with Ms Brown-Douglas, Mr Hansford used the yacht for his charter business.  It remained Mr Hansford’s separate property.  It had never been used wholly or principally for family.  It was not a family chattel.

Mr Hansford had previously agreed that Ms Brown-Douglas could assume full ownership of their business Blackbeard Smokehouse as compensation for help she had provided in sustaining his charter business.

Brown-Douglas v. Hansford – High Court (14.06.24)

24.150

Bankruptcy Debts: Jeffreys v. Pan

 

Bankruptcy on company failure may not clear personal liability for director's duties.  Auckland property developer Jason Pan remains liable on a court order he pay $196,800 for breaching directors’ duties because this court order imposing liability came after he was bankrupted.

As a general rule, bankruptcy provides a clean slate leaving unpaid creditors to prove against available pre-bankruptcy assets.  Bankrupts are able to start afresh, without the weight of past debts dragging them down.

In turn, full liability is imposed for post-bankruptcy debts.  Changxin Pan, also known as Jason Pan, faces post-bankruptcy personal liability for his reckless business activity prior to bankruptcy.

In May 2021, Mr Pan’s company Red Beach Construction Ltd went into liquidation unable to pay its tax debts.  Insolvency specialists from Grant Thornton were appointed liquidators.

Tracking through Red Beach payments, they found payments totalling $196,800 paid across to other businesses in which Mr Pan had an interest.  These were payments made at a time when Red Beach was insolvent.  Red Beach received no apparent benefit in return for the payments made.

In the High Court, Justice Andrew ruled Mr Pan was in breach of his duties as a Red Beach director; failing to act in the best interests of the company and carrying on business in a manner likely to create a loss to creditors.

Mr Pan was ordered to compensate Red Beach for the $196,800 given away.

This court order came eight days after Mr Pan was bankrupted.  As a post-bankruptcy debt, Mr Pan remains liable to pay the full amount.  It is open for liquidators Grant Thornton to later pursue Mr Pan for full payment once he is in a more solid financial position.

Mr Pan did not appear in court to defend the claim.

Grant Thornton are also liquidators of another Pan company: Gaode Holdings Ltd.  This company is also in liquidation, insolvent.

They identified that Mr Pan had used company cash for what appeared to be non-company business.  Gaode Holdings financial statements record Mr Pan as owing his company some $255,300.  Shareholder advances, payment made by a company on behalf of a shareholder, are unsecured loans to the shareholder, repayable on demand.  When Mr Pan ignored liquidators demand for repayment, they sued.

Justice Andrew ruled Mr Pan was personally liable to repay this $255,300.  Mr Pan did not defend the claim.

This is a pre-bankruptcy debt.  Gaode Holdings is left to prove in Mr Pan’s bankruptcy as an unsecured creditor.

Jeffreys v. Pan – High Court (13.06.24)

24.148

Trial Delay: Kipping v. Electrical Workers Registration Board

 

Removing heat pumps from two houses for non-payment led to Electricity Act convictions and fines for Christchurch pensioner John Brian Kipping.

Where ownership of any retrieved item has already passed to a new owner, ‘self-help’ remedies for non-payment can amount to theft.

Kipping was described as helping a friend when recovering the heat pumps.  His friend was annoyed at being left unpaid by a building contractor after it went into liquidation.

The High Court was told Kipping accessed two different Christchurch properties in 2019, in each case turning off the heat pump’s exterior isolator switch, stripping out wiring attached to the exterior unit and carting the unit away.

Kipping was not charged with theft, but was prosecuted by the Electrical Workers Registration Board for doing prescribed electrical work while not registered as an electrician.

The High Court was told Kipping had passed the necessary examination and practical requirements for registration back in 2006, but never registered.

When charged, Kipping said his removal of the heat pump units did not amount to ‘electrical work.’  After turning off the isolator switch, he inserted wire into the switch, making it difficult to turn back on.  There was no safety issue, he argued.

Wires formerly attached to the pump were left exposed.

The High Court confirmed a trial judge’s earlier ruling that the pumps removal amounted to ‘electrical work,’ and that the job was left unfinished.  The site had not been made safe.  Should the isolator switch be turned back on, the exposed wires would become live.

The heat pump had been wired in; it was not like a household appliance plugged into a power outlet.

The High Court confirmed Kipping’s conviction, but reduced the fine imposed by twenty-five per cent, down to $2250.

This reduction reflected inordinate delays in bringing the prosecution to trial, in breach of Bill of Rights entitlement to be tried without undue delay.  Kipping’s District Court trial took place four years after the Registration Board first received a complaint about his actions.

Kipping v. Electrical Workers Registration Board – High Court (13.06.24)

24.149

Charity: Toailoa v. Eliu

 

Assets of South Auckland’s Samoan Seventh Day Adventist Church are under control of BDO’s Andrew McKay after a High Court ruling there is a real risk of ongoing financial mismanagement with Pastor Willie Papu still in effective control of trust assets despite a Charities Board ruling disqualifying him from acting in any management role.

Pastor Papu’s daughter Elizabeth Papu was convicted in 2017 following theft of $1.6 million from Church funds; sentenced to two years nine months’ imprisonment.

The High Court was told a Charities Services investigation found Pastor Papu’s son wrongfully received over $316,000 for his personal benefit.  Both father and son dispute this finding.

Charities Services also named other Church officials allegedly receiving amounts without proper authority, including Church treasurer Joseph Stowers named as taking nearly $499,000 of Church funds as undeclared income.

In 2020, the Charities Registration Board de-registered the Samoan Independent Seventh Day Adventist Church Trust, on grounds of Ms Papu’s and Mr Stowers’ ‘unlawful or corrupt’ use of Church funds.

Meanwhile, the Church transferred its substantial property holdings to a separate property trust, avoiding the tax consequences of de-registration.  Church assets are estimated to total forty million dollars.

It is alleged Pastor Papu controls operation of this Property Trust, despite his current disqualification order.

Justice Wilkinson-Smith said email evidence indicates Pastor Papu is in de facto control of Trust assets with his approval needed for all financial decisions.  Tithes and donations paid to the Church are being paid into bank accounts controlled by Pastor Papu’s supporters, she said.  

There have been complaints about lack of accountability: decisions made without proper meetings; poor record keeping; and no financial statements.

The High Court was told the Church auditor resigned in frustration, lacking proper information to complete his audit of the 2019 accounts.  No financial statements for Trust assets have been completed since that date.

Mr McKay was appointed under the Charitable Trusts Act to take control of Church assets, to identify the extent of its assets and liabilities, and to report back to the High Court every three months.

No time limit was imposed on his appointment.  A time limit creates potential for obstruction with a view to simply waiting out the management period, Justice Wilkinson-Smith said.

Toailoa v. Eliu – High Court (10.06.24)

24.147

 

Post judgment Note: Pastor Papu and interests associated with him are appealing the High Court’s appointment of a temporary manager.  Mr McKay’s appointment is stayed, pending this appeal.