Money Lending: Commerce Commission v. Eagle MAN

 

Seeking a substantially reduced penalty for making excessive high-cost loans in breach of consumer credit legislation, Eagle MAN’s lawyers said evidence before the court indicated the money-lender was not profitable, was running down its loan book and was not making any new high-interest loans. 

Noli Alea’s Christchurch-based Eagle MAN subsequently sported a high-profile internet presence, touting for business, with its webpage updated indicating that it has learnt its lesson after the earlier Commerce Commission intervention.

Past profitability, or unprofitability, of Eagle MAN is unknown.  The High Court redacted financial information about Eagle MAN from its published judgment.  In addition, Eagle MAN got a court ruling pre-emptively refusing any requests to search the court file.

The only published disclosure was that Mr Alea has been withdrawing no more than $500 each fortnight from Eagle MAN and that cash from Eagle was being used to fund a related business owned by Mr Alea, described at Companies Office as operating a dairy superette.     

Commerce Commission took legal action against Eagle MAN Group Ltd in 2023 alleging breaches of the Credit Contracts and Consumer Finance Act over a six year period.

In particular, it was looking to enforce new rules coming into effect since 2020 which circumscribe what are called high-cost consumer credit loans.  In general, these are loans where the annual interest rate is fifty per cent or greater.  Consecutive loans to the same borrower can be lumped together in assessing the fifty per cent threshold, catching the practice of rolling over unpaid debt.

The High Court was told most of Eagle MAN’s loans were to Filipino temporary workers and recent immigrants.

Eagle MAN admitted breaches of the Act, whilst disputing the extent.

It said the Commerce Commission had wrongly extrapolated the extent of its wrongdoing from a small sample of loans investigated.  It disputed a Commerce Commission claim that Eagle MAN’s failure to follow the rules resulted in a commercial benefit of some $270,000. 

Imposing a reduced $200,000 penalty, in partial recognition of Eagle MAN’s inability to pay, Justice Churchman allowed payment be made in twenty equal monthly instalments.

Credit was also given for Eagle MAN’s assistance with the Commission’s investigations and its pro-active steps to improve business procedures.

Eagle MAN’s website now advertises its short-term loans at an effective interest rate of 49 per cent.  A minimum loan of one thousand dollars attracts an establishment fee of $250.

Commerce Commission v. Eagle M.A.N Group Ltd – High Court (28.10.24)

25.022

Insurance: James Hardie v. Zurich

 

Harditex manufacturer James Hardie is back in court, now tussling with insurer Zurich Australia over recovery of its $32.5 million costs after successfully facing down a $300 million class action claim that its Harditex product was inherently unsuitable for use as exterior cladding.

In dispute, is the ambit of two insurance policies covering years 1998-2004 providing insurance cover for James Hardie’s defence costs in ‘property damage’ litigation, together with application of a 2007 Protocol agreed between James Hardie and Zurich designed to administer the then ongoing litigation.

Zurich says wording of the insurance contracts require their dispute be heard in Australia.

Justice Blanchard ruled the wording gives James Hardie the right to force Zurich into the Australian courts, but does not stop it suing in New Zealand.

A New Zealand court would be required to apply Australian law in hearing their dispute.  This is not insurmountable; in many respects, insurance law in New Zealand and Australia is similar.  Where it differs, expert evidence will assist the judge.

The High Court was told the main dispute is factual; whether claimed weathertightness issues arose during periods covered by Zurich’s insurance.  This could require detailed factual evidence covering over one thousand properties subject of the unsuccessful class action.

Practical difficulties in dealing with the volume of evidence anticipated meant the insurance dispute was better heard in New Zealand, Justice Blanchard ruled.

James Hardie New Zealand Ltd v. Zurich Australian Insurance Ltd – High Court (25.10.24)

25.021

Money Laundering: Commissioner of Police v. Che & Fu

 

Convicted of money-laundering, Lily Che and her son Michael Fu charged alleged fraudster Xiao Hua Gong a premium when he remitted $77 million into New Zealand through their money remittance business Jiaxin Finance.  They surrendered assets valued at $2.2 million as benefits gained from proceeds of crime. 

Recently, Chinese national Xiao Hua (Edward) Gong has faced prosecution in Canada for securities fraud following allegations he master-minded a pyramid investment scheme; a prosecution eventually resolved in a settlement with Canadian regulators.  Prior to that, there were allegations of fraudulent pyramid selling schemes orchestrated by Gong in China.

Fraudulent pyramid selling schemes see promoters earning quick returns selling multiple overlapping distributorships in the guise of selling a product or service.  For supposed investors, the market is quickly saturated with too many distributors looking to hawk the same product or service.

Back in the southern hemisphere, Internal Affairs in New Zealand successfully prosecuted Fuquin (Lily) Che, Qiang (Michael) Fu and their company Jiaxin Finance Ltd for breaching money-laundering legislation following their involvement remitting Gong profits to New Zealand.  Their company was fined $2.55 million; Che $202,000; Fu $180,000.    

Police took further action under the Criminal Proceeds (Recovery) Act.

The High Court was told Che and Fu charged a 2.9 per cent commission rate for FX transfers made on Gong’s behalf.  This rate was some three times higher than rates charged other customers.

An agreed $2.2 million proceeds of crime settlement was approved by the court, with forfeiture of both cash found at their home and up-market vehicles together with forfeiture and sale of an investment property in Auckland suburb New Windsor.

If proceeds of sale are insufficient to meet the agreed $2.2 million settlement, they are given four months to raise a loan for the balance, or face sale of their family home in adjoining suburb Lynfield.

The Lynfield property is owned by a family trust.

Under terms of the settlement, Che and Fu both deny any wrongdoing.

Commissioner of Police v. Che & Fu – High Court (23.10.24)

25.020

Health & Safety: Commissioner of Police v. Salter

 

Health and safety breaches led to a proceeds of crime financial penalty.  Auckland waste oil contractor Ron Salter agreed to forfeit four million dollars.  Police described his attitude to health and safety requirements as derisory.  Operation of his South Auckland waste oil operations led to multiple public safety convictions and contributed to the death of a contractor working on site.  

Police alleged Mr Salter’s failures over a seven year period to comply with health and safety legislation and his subsequent inaction in the face of ‘make safe’ demands from Worksafe meant revenue earned was unlawfully derived from criminal activity.

Health and safety prosecutions followed the 2015 death of a contractor; killed when sparks from a welding torch or grinder ignited vapour leaking from a 3000 litre waste oil tank, causing a massive on-site explosion.

Mr Salter challenged use of the Criminal Proceeds (Recovery) Act to impose a penalty beyond fines already imposed on him and his company.  Police applied for a $10.9 million forfeiture order; the value of nearly all personal assets owned by Mr Salter and his spouse.

Two days into a scheduled seven week trial, a deal was done with police.

Mr Salter admitted he benefitted financially from failures to comply with the Hazardous Substances Act and from failing to respond adequately to Worksafe’s ‘make safe’ notice.

High Court approval was needed for any agreed proceeds of crime deal.

Justice Down approved the four million dollar settlement.  This amounted to roughly half the value of real estate owned by Mr Salter and his spouse in South Auckland and on Waiheke Island.

While Mr Salter’s spouse was also a director of their waste oil business, police conceded there would be difficulties in proving the extent of her involvement in company management.

Four million dollars is the amount police expected to recover if the proceeds of crime trial had run its course and its application had been successful, Justice Down said.

Mr Salter was given six months to make payment.

Insolvency Service was authorised to sell any and all of the nominated properties if payment is not made by due date.

Commissioner of Police v. Salter – High Court (21.10.24)

25.019

Modular Homes: Francis v. Gross

 

Rising construction costs have increased interest in modular homes, mass-built offsite and then trucked to their final destination.  Should the builder go bust, buyers stand as unsecured creditors for instalment payments made on unfinished houses unless they previously registered a personal property security to protect payments made, the Court of Appeal ruled.

Podular Housing Systems Ltd went into liquidation insolvent in late 2022.  There were 15 partly-completed houses at its Hamilton site, three at Christchurch.  Customers who had made instalment payments during construction wanted to truck away ‘their’ houses; completed, or not.

An early High Court hearing helped.  The judge ruled they held an equitable lien over ‘their’ unfinished house in respect of money paid.  They could take possession.  The build contract was treated as a sale of goods contract.

In light of this ruling, Podular’s liquidator did a deal with some customers; valuing work done to date of liquidation, with houses then released to each customer after any further required payment.

Insolvency practitioners’ professional body, the Restructuring, Insolvency and Turnaround Association, then supported an appeal to get a considered ruling on the status of modular home purchases.  There was concern that the High Court ruling cut across recognised insolvency principles: payment to secured creditors and suppliers taking security over any company’s work-in-progress was being shunted down the line in favour of customers given the nebulous status of having an equitable lien.

This High Court ruling had wide implications; potentially affecting the status of contracts for the construction of specialised machinery, modular sections for high-rise buildings and the likes of custom-made joinery and jewellery.

The High Court decision was overturned.  The Court of Appeal ruled Podular’s construction contract was not a contract for sale of goods, it was a contract for work and materials.

Unfinished houses were no more than work-in-progress, part of Podular’s inventory.

To create rights of an equitable lien favouring Podular’s customers would disrupt structured rules giving priority for secured creditors, the court ruled.

Customers part-paying for customised work can protect themselves by registering their status as a secured creditor under the Personal Property Securities Act, the court said.

Evidence was given that one Podular customer, having a partly-finished modular home when liquidation started, had registered their security interest in Podular’s inventory.  They were able to take away their house.

Francis v. Gross – Court of Appeal (17.10.24)

25.018

Overseas Investment: Land Information v. Mitchell & Keiling

 

Using dummy shareholders to hide their forestry investment in breach of the Overseas Investment Act cost two Singapore-based investors profits earned on their investment.  Add to that, their legal and accounting costs dealing with the problem plus the opportunity cost of time which could have been spent on more profitable work.

British citizen William Mitchell lost $972,800, part of the profit generated on his 2011 investment in two Gisborne forestry lots.  He has agreed to surrender a substantial chunk of any profit made on the pending sale of his remaining holdings.

German citizen Marzio Keiling lost the entire $630,500 net profit made on his 2014 investment in a North Auckland forestry block in Rodney.

They both said their separate investments used a trust-based structure on advice of lawyer Andrew Jarvis.  Land Information is currently taking legal action against Mr Jarvis.

The High Court was told Mr Mitchell was made aware in 2011 that overseas investment consent was needed for his planned purchases.  He relied on advice (which turned out to be incorrect) that consent is not required if the purchasing company is majority owned by New Zealand shareholders who could hold their shareholding in trust for him.

The finalised deal saw a company set up with Mr Mitchell as director and minority shareholder.  A New Zealand national took an eighty per cent shareholding, held in trust for him.

Evidence was given that Mr Mitchell then lent funds to his company for its forestry purchase.  It was intended full ownership of the company would pass to Mr Mitchell should a subsequent overseas investment application prove successful.

Mr Keiling replicated this process, contacting Mr Jarvis three years later saying he wanted to copy Mr Mitchell’s investment format.

As Overseas Investment Act regulator, Land Information New Zealand took legal action.

In a High Court approved settlement, it was agreed Mr Mitchell would surrender 85 per cent of his profits.  A discount was allowed for his co-operation with the investigation.

In addition, he was ordered to personally pay a $82,500 penalty for proceeding with the scheme in knowledge there are strict approval procedures for purchase of sensitive land.

Mr Keiling lost his entire net profit.

Calculation of net profit included the value of emission trading scheme credits earned whilst owning the forests.

Land Information New Zealand v. Mitchell & Keiling – High Court (16.10.24)

25.017

Estate: Commissioner of Police v. Howard

 

Death does not block proceeds of crime claims.  Relatives of the late David Allan Howard agreed to a police offer that one of two houses he owned be confiscated as a penalty for cannabis dealing.  Kaeo-based Mr Howard died before criminal charges got to a court hearing.

In approving the Criminal Proceeds (Recovery) Act settlement, the High Court heard that a 2022 police drugs bust found a large cannabis growing operation at Mr Howard’s School Gully Road property.

Over a five year period ending 2022, he declared in total to Inland Revenue income of $73,600.  Banking records showed nearly $140,000 cash passing through his bank account over the same period.  This despite Mr Howard’s local reputation for living a largely cash-based lifestyle.

In 2021, he paid off a mortgage on his School Gully property and also purchased a neighbouring property for cash.    

Police claimed both School Gully properties were ‘tainted:’ the mortgage on his home paid down from proceeds of crime; the neighbouring property purchased with ill-gotten gains. 

On Mr Howard’s death, close relatives approached police seeking to resolve these outstanding proceeds of crime claims.  Estate beneficiaries could not be paid out until this was sorted.

Police accepted that forfeiture and sale of the neighbouring property would be sufficient to recover the approximate value of cannabis profits made.

Police also accepted there might be legal complications in seeking forfeiture of Mr Howard’s School Gully home.  His descendants might challenge this forfeiture on hardship grounds.

Police applied for forfeiture of the neighbouring property only.

Justice Brewer agreed.  There was no evidence that any beneficiaries of Mr Howard’s estate had anything to do with his criminal activities.

Commissioner of Police v. Howard – High Court (15.10.24)

25.016

Family Trust: re Mountain View Trust & Hill View Trust

 

Recent Trusts Act rules were used to wind up two Taranaki family trusts without the need to get prior approval from adult beneficiaries; a law change avoiding prolonged negotiations with trust beneficiaries.

Allocation of trust benefits had become a bone of contention between two sisters Gail Fisher and Carol Mobbs, following deaths of their parents.

The High Court was told two family trusts set up by their parents Toss and Betty Robertson provided financial assistance for daughter Gail and her spouse to purchase a farm near Hawera.

More than a decade after their parents’ deaths, the two daughters discussed with the trusts’ trustees as to how each Trust could be wound up and assets distributed.  No agreement was reached.  Carol claimed her sister’s family had received considerable benefits from the two trusts whilst her family had not.

A mediated settlement was reached in the face of threatened High Court litigation.  The effect of this settlement is to see Carol receive a cash payment of $730,000 with sister Gail to take the balance of Trusts’ assets.

The legal complication was that Carol and Gail are not the only trust beneficiaries; their children and grandchildren are also named beneficiaries.  Trust law imposes checks and balances to stop their rights as beneficiaries being improperly negotiated away.

Long-standing Trusts Act rules allow the High Court to give approval on behalf of those beneficiaries not of full legal age.  Adult beneficiaries have been in a different position.  They could give, or withhold, permission on their own account.  This has led to messy stand-offs in some family trust disputes.

New Trusts Act rules allow the High Court to dispense with approval from adult beneficiaries, approving family trust changes on their behalf.

Justice Grau gave approval to the agreed Trusts’ windings up on behalf of Carol’s and Gail’s seven adult descendants.  It was only ever intended they would be primary beneficiaries should either Carol or Gail die before the Trusts were wound up, she said.  Justice Grau commented these adult beneficiaries will still share in trust assets through those assets being transferred to their mothers, and for one adult beneficiary to a grandmother.

re Mountain View Trust & Hill View Trust – High Court (15.10.24)

25.015

Money Laundering: Toleafoa v. R.

 

Spending cash generated from drug dealing on personal expenditure, travel and accommodation amounts to money laundering ruled the Court of Appeal, confirming Paula Toleafoa’s conviction after she acted as a conduit dispersing cash received from her spouse Luther who was subsequently convicted of meth dealing.

Her unsuccessful appeal against conviction for money laundering came following a sentence of ten months home detention.

The Court of Appeal was told more than $537,000 passing through her hands came from funds having no known source.

She claimed most of this money came from her property management business and her spouse’s house wash business.  Forensic examination of financial records for these businesses showed no evidence of business expenses or employee expenses expected to parallel any receipt of cash for work done.

Much of this cash was paid into bank accounts by ATM deposit.  CCTV footage showed Ms Toleafoa using both her own bank card and her spouse’s bank card to make multiple ATM deposits.

Income tax filings did not match claimed business activity.

At least $73,000 of this money was spent on ‘lifestyle expenses’ such as overseas holidays, hotel accommodation, jewellery, party expenses, handbags and Botox treatments.

This personal spending amounted to Crimes Act money laundering, the court ruled.  Converting drug dealing cash to any other form of property fell within the definition of ‘concealment’ as an element of money laundering, the court said.

In her defence, Ms Toleafoa claimed her behaviour was driven by fears of further domestic violence from her spouse.  For a time during police surveillance of Mr Toleafoa’s activities the two lived apart; she in Auckland, he in Rotorua.

The court said the scale of her support in managing his cash, coupled with their continuing communication and three trips together overseas indicated she was a willing participant in laundering proceeds of her spouse’s drug dealing.

Toleafoa v. R. – Court of Appeal (14.10.24)

25.014

Insurance: Proclaims Management v. Bately

 

‘No win, no pay’ agreements are all the rage in insurance litigation, but what amounts to success depends on the fine print.  The High Court ruled Christchurch advocacy firm Proclaims Management was not entitled to any success fee on ‘over-cap’ ex gratia payments made by government to settle on-going claims against EQC.

The Earthquake Commission (EQC), now rebranded as the Natural Hazards Commission, faced its own seismic shock with never-ending litigation from disgruntled property owners following the Christchurch earthquake sequence some ten years ago.  

Complaints about disallowed claims and shoddy repairs for those claims accepted led to threats of a class action against EQC for negligence.  This led to EQC re-opening claims for re-repairs and government stepping in with offers of ex gratia payouts where further claims against private insurance companies were no longer available.

Back in 2011, Hoani Hipango and Chris Fleury set up Proclaims Management Ltd, an insurance advocacy service intended to help clients navigate insurance claims for earthquake repairs. 

New Zealand is unusual in offering natural hazards insurance to all insured residential property owners.  Take out private fire insurance and part of the premium is diverted to Natural Hazards Commission.  It currently provides first tranche insurance cover against natural hazards up to a limit, or cap, of $300,000.

At time of the Christchurch earthquakes, the cap was $150,000.

The High Court was told Proclaims Management signed up multiple clients more than five years ago offering to assist with claims against EQC for re-repairs and subsequently for ex gratia grants on offer.

Its standard ‘no win, no pay’ contract required clients to pay an upfront fee of $2500, pay costs of all expert engineering reports in support of their new claim and in return surrender fifteen per cent of any payment received.

Not all its clients are happy.  They dispute fees claimed by Proclaims.  Their humour was not improved by later learning that Proclaims received a kickback from some firms providing expert reports in support of their claims: Proclaims’ clients paid for the reports; five per cent of this fee being later paid under the table to Proclaims.    

A High Court test case clarified what payments Proclaims is entitled to with its ‘no win, no pay’ contracts.

Critical, was wording of Proclaims’ client contract; describing the success fee as calculated on fifteen per cent ‘of the money achieved from EQC and the Insurer.’

It was clear Proclaims’ clients have to pay fifteen per cent of compensation received for re-repairs where the cost of re-repairs brings the total repair bill up to the then statutory EQC cap of $150,000; so-called ‘under-cap’ payments.

But no success fee can be claimed for that compensation received by Proclaims’ clients for ‘over-cap’ repairs, Justice Preston ruled.    

Over cap compensation is paid by neither EQC nor an insurer; it is a politically agreed, taxpayer funded, ex gratia payment with no admission of liability by any insurer.  It was a politically expedient way of dealing with never-ending Christchurch earthquake litigation against EQC.  Taxpayers ultimately bankroll EQC if premiums are insufficient to cover claims. 

Government chose to use EQC as its agent to process and disburse the ‘over-cap’ payments, but it is not an EQC payment, Justice Preston ruled. 

Proclaims then argued it is entitled to payment for work done in respect of ‘over-cap’ payments as a quantum meruit claim.  This legal rule applies where one person receives a benefit, but was never under any contractual obligation to pay for the benefit received.

Proclaims argued the value of over-cap work done equated to fifteen per cent of any over-cap payment received.  Justice Preston dismissed this calculation as a nonsense.

She ruled a $500 quantum meruit payment is sufficient in each case.  Proclaims did little beyond registering clients as parties interested in claiming.  The paperwork and specialist reports needed to support an ‘over-cap’ claim had already been prepared as if it were an ‘under-cap’ claim.  EQC, acting as government agent when actioning ‘over-cap’ claims, resolutely refused to engage with Proclaims, instead dealing direct with ‘over-cap’ clients.

Proclaims Management Ltd v. Bately – High Court (11.10.24)

25.012

Construction: Solicitor-General's Refererence (No.1 of 2022)

 

Filing Building Act producer statements with local councils as proof construction complies with both the building code and the relevant building consent amounts to ‘building work,’ leaving engineers and architects open to prosecution if incorrect.

Producer statements were developed as an industry initiative to speed up compliance processes for building work.  Architects and engineers filed with local councils their sign-off, stating building work was compliant.  Councils came to rely on these professional assessments as definitive, avoiding the need to have their staff make an assessment.

The inevitable happened.

Producer statements came to be filed incorrectly assessing work as compliant, when it wasn’t.  Potential Building Act criminal liability followed, hinging on whether a producer statement amounted to ‘building work.’

Conflicting High Court cases followed: one ruling producer statements are not ‘building work;’ another ruling they are.  To settle the issue, the Solicitor-General initiated a generic appeal.

The Court of Appeal ruled producer statements are ‘building work.’

Producer statements are more than a statement of professional opinion, the court said. They have become part of the construction process.

They are an analysis and assessment of work done, the court ruled.  They promote accountability for both owner’s and builder’s construction work, which implements Building Act policy objectives.

Solicitor-General’s Reference (No.1 of 2022) – Court of Appeal (11.10.24)

25.013

Pegasus Resort: Rotorway Ltd v. Sports & Education Corp

 

Attempts by Xiangming Huo to extract himself from his unprofitable Pegasus Resort development near Christchurch saw High Court involvement in his ongoing dispute with potential saviour Hong Kong-based Rotorway Ltd.

Rotorway is part of Yellow River Global Capital.  It agreed in late 2023 to inject approximately $90 million dollars into Pegasus Resort.  About sixty million dollars is intended to fund a Pegasus upgrade; the balance to buy out Mr Huo’s majority shareholding in Pegasus’ holding company: Sports & Education Corporation Ltd.

If all goes to plan, Rotorway will have a ninety per cent shareholding in Pegasus Resort, giving it majority control.

Evidence before the High Court shows not all is going to plan.

This refinancing is subject to both due diligence by Rotorway and government Overseas Investment Act approval.

Mr Huo says that Rotorway has failed to progress its due diligence and that it will never get overseas investment approval.

In early 2024, Mr Huo put Pegasus up for sale; a breach of their conditional refinancing agreement, Rotorway claims.

It asked the High Court for an injunction to have Mr Huo remove Pegasus’ market listing.

While ruling there is clearly a live legal issue as to whether Mr Huo is entitled to list Pegasus for sale at a time when Rotorway’s refinancing remains conditional, Justice Campbell refused Rotorway’s request for an injunction.

Mr Huo and his holding company are able to pay damages if later found to be in breach of their agreement, Justice Campbell said.  Mr Huo claims Rotorway agreed the Resort could be listed.

In contrast, Rotorway has not provided sufficient evidence of its financial strength should it be required to pay costs on any unsuccessful subsequent court hearing, Justice Campbell said.

Rotorway told the court it had assets valued at USD 15 million; the value of a trademark in respect of Rotorway helicopters.

Justice Campbell pointed out this trademark is not held by Rotorway based in Hong Kong, it is held by one of its US subsidiaries.  And he questioned the reputed USD 15 million valuation.  Evidence was given that this valuation is based on prospective helicopter sales in coming years jumping from a recent three to four sales per year to a projected 110 helicopters to be sold annually.

Rotorway Ltd v. Sports & Education Corp Ltd – High Court (10.10.24)

25.010

Property: Finsbury Trustee v. Cowell

 

It was a speculative Auckland townhouse off-the-plan 2021 purchase with an intention to on-sell before settlement.  The market tanked.  Values dropped by some thirty per cent.  The developer held them to their contract, with the High Court ordering Li Zhang and Stephen Cowell pay the $1.02 million balance due.

Property developers dread a distressed sale in a falling market following a purchaser’s default; a low sale price is fixed as the new benchmark, with other apartments still unsold.  Forcing defaulters to cough up is preferred.

In 2021, Ms Zhang and Mr Cowell signed up to purchase a townhouse in the Park Ave development on Great South Road in Ellerslie, paying a $180,750 deposit.

Payment of the $1.02 million balance fell due in March 2024.

The High Court was told they refused to settle.  They claimed a sales agent acting for the Park Ave developer told them before signing that they would never be called to pay; the property could be on sold at a profit in the intervening three years.  This was a misrepresentation, they alleged.  They were excused payment, they claimed.

The developer could keep their deposit, then cancel the contract, they said.

Associate Judge Brittain ruled the sales agent never guaranteed property market values would keep rising.  There was no misrepresentation.  The agent’s comments about potential future property price movements and the possibility of on-selling at a profit were no more than a statement of opinion. 

Genuinely held statements of opinion do not amount to a misrepresentation when later proved wrong.

Judge Brittain ordered the two pay up and complete their purchase.

Separately, Ms Zhang was ordered to pay a further $1.02 million to complete purchase of a second Park Ave townhouse she purchased in her own name.

Finsbury Trustee Ltd v. Cowell & Zhang – High Court (10.10.24)

25.009

Tax Evasion: Commissioner of Police v. Cribbett

 

Facing a proceeds of crime claim following allegations of tax evasion, Christchurch-based Kathy Emily Cribbett took a pragmatic approach; agreeing to pay $49,600 in full settlement, conditional on a successful relationship property claim against former partner Darrin Stephen Baylis.

Mr Baylis has a history of court appearances on meth charges.

The High Court was told Inland Revenue alleges Ms Cribbett as director failed to ensure her company Baylis Motor Company Christchurch Ltd paid GST and PAYE due.

Police weighed in with a Criminal Proceeds (Recovery) Act claim alleging she unlawfully benefitted from criminal activity, aiding and abetting tax evasion by Baylis Motor Company.

Evidence was given that Ms Cribbett extracted $49,600 from the company at a time when tax debts were left unpaid.

In a proceeds of crime settlement negotiated with police, she agreed to surrender this $49,600 benefit.  No payment is due should she fail to recover anything in her ongoing relationship property claim against Mr Baylis.

Several properties in Christchurch controlled by Mr Baylis are currently facing forfeiture in a separate proceeds of crime application brought by police against him.

Justice Churchman ordered the first $49,600 of any relationship property payout received by Ms Cribbett be forfeit.

As part of this court-approved profit forfeiture order, Ms Cribbett negotiated a right of pre-emption over a Frankleigh Street property currently controlled by Mr Baylis.

Should Frankleigh Street become forfeit and ordered sold in the proceeds of crime claim against Mr Baylis, Ms Cribbett has first opportunity to buy at market value, before the property is offered for sale on the open market.

Commissioner of Police v. Cribbett – High Court (10.10.24)

25.008

Property: Ranfurly Jixiang Development v. GWT New Zealand

 

High Court refused fast track summary judgment for a $1.2 million loss on resale after default on a 2021 purchase of two Auckland apartments following allegations the resales were not bona fide sales with the developer accused of rigging the resale.   

A full court hearing is required to sort out the facts.

Evidence was given that an investment company called GWT NZ Ltd purchased the two apartments in Ranfurly Road Epsom at some $1.8 million each.  Director Wei Lang guaranteed payment.

GWT defaulted on settlement eighteen months later.  Property prices had fallen in the interim.

The general rule is that a defaulting purchaser is liable for any loss on resale.

Property developer Ranfurly Jixiang Development Ltd sued both GWT and Ms Lang, seeking High Court fast track summary judgment for the resale loss.

Associate Judge Taylor ruled circumstances surrounding each resale require investigation.

Ms Lang alleges there was no bona fide resale process.

The apartments were offered for sale at an immediate discount of more than $500,000 each with no attempt to gauge current market prices, she claims.  Listing agreements with real estate agent Barfoot & Thompson made no provision for advertising costs.  These listings expired with no advertising and no sales.  The two apartments were subsequently sold in what amounted to private sales with the purchasers suspected of having links to a director of Ranfurly Jixiang Development, she claims.

Ranfurly Jixiang Development Ltd v. GWT New Zealand Ltd – High Court (10.10.24)

25.011

Conversion: Shotcrete Auckland v. Tira

 

Claiming he was ripped off by his business associate, Glenn Tira decided on a ‘self-help’ remedy; carting away plant and equipment used by their construction company Shotcrete Auckland Ltd.  The High Court ordered he pay Shotcrete $130,400 damages for company equipment not returned.

The decade-long business relationship between Mr Tira and Duncan McLay came to an abrupt end in 2020 when Mr Tira had his supporters break into Shotcrete’s yard, trucking away equipment.

He justified this move as needing equipment to finish current jobs.

Shotcrete’s speciality was application of wet sprayed concrete and waterproofing.

With Shotcrete now in liquidation, Mr Tira opened negotiations with its liquidator about buying or leasing the purloined equipment.  Nothing was resolved.

The High Court was told some of this equipment was later delivered, with little explanation, to Turners Auctions.  Turners sold this equipment on the liquidator’s behalf, grossing $434,300 for Shotcrete.

No progress was made in recovering the rest of the equipment.

The liquidator sued Mr Tira in tort for conversion.  This required proof of deliberate conduct, depriving Shotcrete as the true owner from its use and possession of specified equipment.

The liquidator provided the court with an itemised list of equipment still missing.

Ruling Mr Tira liable in conversion, Justice Walker awarded Shotcrete damages of $130,400; the book value of missing equipment.

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

Shotcrete Auckland Ltd v. Tira – High Court (8.10.24)

25.007

Duress: Wu v. Liu

 

The disputed $1.2 million loan was supposedly fictitious, but the threats of blackmail were real.  Justice Lang ruled the loan enforceable; both sides lacked credibility in their evidence before the court and debtor Hua Wu waited four years before challenging the loan’s existence.

The High Court heard a tangled narrative of Mr Wu’s dealings since his emigration from China, after enrolling as a student at Massey University in 2008.

Also known as Danny Wu, Mr Wu was in court attempting to recover ownership of a property in Auckland suburb of Mangere, a property transferred to Jinxing Liu as part-repayment of a supposed $1.2 million loan.

The court was told Mr Wu was confronted in 2018 by his then employer Timber King Ltd with allegations of theft in his role as general manager of the company.  Timber King, trading as Three Brothers Building Centre, was part-owned by Mr Liu’s son.

Mr Wu paid $400,000 to the company.

Soon after, Mr Liu and his son stepped up the pressure threatening to report Mr Wu to the Police, Inland Revenue and immigration authorities unless he paid more.

Mr Wu took legal advice, telling his lawyers he had not stolen from his employer but needed help in what he said was an employment dispute.  They were surprised to next hear from Mr Liu’s lawyers that all that was needed was Mr Wu’s acknowledgement of receiving a $1.2 million loan.

Behind their lawyers’ backs, the two hatched a deal in which Mr Wu would hand over cash plus Mangere real estate in a subdivision Mr Wu was involved in.

In court four years on, each had entirely different explanations for what had happened.

Mr Wu said he was blackmailed into promising to pay $1.2 million with threats he would be reported to the authorities for theft.  Mr Wu said Mr Liu has a reputation as a loan shark with contacts in China who had threatened his parents.

Mr Liu said Mr Wu lacks credibility, pointing to allegations of his thefts from Timber King plus evidence of Mr Wu’s careless handling of money when working for another employer and his improper use of another employee’s email account when working for a third employer.

Mr Liu told the court that the disputed payments were in fact repayment of a RMB six million advance made to Mr Wu in China back in 2008.

Justice Lang dismissed as lacking any credibility Mr Liu’s claim that Mr Wu had borrowed in China the equivalent of $1.2 million back in 2008 at a time when he was a student in New Zealand, and that Mr Liu had written off this debt as unrecoverable until by chance he met up with Mr Wu again as an employee of his son’s business.

Justice Lang ruled Mr Wu’s signature in 2018 to a document evidencing a debt to Mr Liu of $1.2 million was extracted by duress, after Mr Liu blackmailed Mr Wu with threats to report him to the authorities.

The general rule is that any agreement extracted under duress is voidable; it can be set aside by the courts.  This must be done promptly.

A delay of four years is too long, Justice Lang said.  The loan agreement stands and is enforceable.

Mr Wu said it was only after four years that he was no longer cowed by Mr Liu’s threats and by then had sufficient money to fund a court case.

Wu v. Liu – High Court (7.10.24)

25.006