Holiday Home: Sheffield v. Sheffield

 

As a holiday home-share arrangement for extended family, the deal survived barely six months before Daryl Sheffield took up full time occupation of a jointly owned Opotiki property to the exclusion of brother Merlin and his family.

The High Court was told the two agreed jointly in 2018 to buy a small lifestyle property on Walker Road about six kilometres out of Opotiki.

Plans were to use the property as a casual holiday retreat, shared with times agreed between the two.

Over his brother’s objections, Daryl moved in permanently some six months later, saying he had been kicked out of his rented accommodation.  While he kept up payment of rates and insurance, Daryl paid no occupation rent for his permanent use of Walker Road.  Merlin complained that Daryl was not keeping up with regular maintenance around the property.

Bach sharing arrangements broke down.

Merlin got a High Court Property Law Act sale order, forcing a sale after no agreement could be reached with Daryl to either buy brother Merlin’s half share, or failing that, an on market sale enabling both to cash up.

Daryl did not defend the application, other than send an email to court agreeing the property should be sold.

There had been prior informal agreement between the two as to what should be a minimum sale price.

Associate Judge Taylor ordered the property be listed for sale at the minimum agreed price, or better, with net sale proceeds divided between the two.

Judge Taylor ordered deduction from Daryl’s half share some $44,000 occupation rent for the time he has been in full occupation plus $14,700 compensation for maintenance expenses incurred by his brother.

Sheffield v. Sheffield – High Court (20.12.24)

25.059

Asset Forfeiture: Commissioner of Police v. Baylis

 

Three Christchurch properties, seven art works, a jet ski and some $70,000 cash was ordered forfeit as proceeds of crime with patched Headhunter gang member Darrin Stephen Baylis described in the High Court as making illegal gains selling methamphetamine, trading in motor vehicles without a licence, acting as a repossession agent without a licence, and fraudulently obtaining unemployment benefits.

Now aged 59, Baylis purchased the first property on Ensign Street in Halswell as his then family home.  Two other properties were later purchased on Frankleigh Street in Somerfield, partly in cash and partly with a mortgage collateralised over all three properties.  

All three properties were ‘tainted,’ funded in part from proceeds of crime.

Justice Churchman ordered all three properties together with the other seized assets forfeit under the Criminal Proceeds (Recovery) Act.

Baylis said his former spouse Kathy Cribbett was entitled to half the net equity in the three properties; her entitlement under the Property (Relationships) Act, he stated.  He produced an unsigned agreement as evidence.

Justice Churchman said this document appeared to be no more than an attempt by Baylis to preserve some share of his equity.  The share promised to his former spouse went beyond what she would be likely to receive when applying relationship property rules, he said.

Instead, Justice Churchman made a Criminal Proceeds (Recovery) Act hardship order favouring Ms Cribbett in respect of the Frankleigh Street property where she currently lives and has been paying rent.

The effect of this hardship order is to award her a half share in the Frankleigh Street property with a requirement she raise a mortgage to buy out Baylis’ forfeited half share.

Ms Cribbett is required to borrow $300,000.  This money is to be paid across to Insolvency Service which is managing realisation of Baylis’ forfeited assets.  She remains liable to pay off this mortgage over time.

Commissioner of Police v. Baylis – High Court (20.12.24)

25.058

 

Postscript: In October 2024, Ms Cribbett negotiated a Criminal Proceeds (Recovery) Act settlement approved by Justice Churchman in the High Court following allegations of tax evasion in which she agreed to forfeit $49,600 conditional on a successful relationship property claim in respect of Frankleigh Road against former spouse Mr Baylis. 

Family Trust: Cooper v. Pinney

 

A ‘trust-busting’ claim saw the Supreme Court rule family trusts are immune from relationship property claims where a spouse establishing the trust does not have sole control over decisions to distribute trust assets.

Farming assets near Whataroa in South Westland held by MRW Pinney Trust remained intact following an unsuccessful claim by former spouse Raewyn Cooper to share in Trust assets as relationship property.

She claimed her previous de facto spouse Marcus Pinney held such control over the family trust that the assets were in essence his own, liable to be split 50/50 following their 2014 separation.      

The two lived together for a decade.

With Marcus, she jointly ran a farm and tourism hospitality business at Te Taho.

The Supreme Court was told that while she initially thought she was part-owner of the business, it was after learning that she held only a one per cent stake in a company owning Trust business assets that her relationship with Marcus soured.

After separating, she sued for half share of the approximately $1.8 million business, claiming the business was relationship property.

She is not a beneficiary of the MRW Pinney Trust; deliberately so, the court was told.

The Trust was established following the failure of Marcus’ earlier relationship and after he and Raewyn started living together.

Trust assets came from a separate family trust, established by his father.

In 2016, the Supreme Court ruled in a landmark case, known as Clayton v. Clayton, that where one spouse has effective control of all trust decisions, those trust assets became relationship property.

The court ruled this case was different.

While Marcus is both a trustee and beneficiary of the MRW Pinney Trust, there are constraints on how he may act, the court ruled.

Marcus could be a trustee, but there has to be a minimum of two trustees at all times.  Trustees must act unanimously.

Marcus is unable to take sole control of trust decisions.

He is a discretionary beneficiary.  Potentially, all trust assets could be distributed to him personally.

Any decision to make distributions requires all trustees to take into account the situation of all beneficiaries, the court said.  Distribution decisions could be challenged if made in bad faith, for an improper motive, or after inadequate deliberation.

Powers given Marcus by the trust deed are sufficiently limited that these powers do not amount to a relationship asset, the court ruled.

Cooper v. Pinney – Supreme Court (20.12.24)

25.057

Asset Forfeiture: Commissioner of Police v. Woodrow

 

Text messages extracted from a stoner’s phone led police to a commercial cannabis operation in Southland.  A $150,000 proceeds of crime recovery order against each of Corey Robin Woodrow and Veronica Mary Cope sees likely sale of Woodrow’s rural property between Gore and Mataura, with Cope’s required payment also taken from any sale proceeds despite her not being registered as part owner. 

Woodrow pleaded guilty to cultivation of and dealing in cannabis, sentenced in 2022 to nine months home detention.  Spouse Cope was not charged.

Police discovered Woodrow’s illicit activities during a routine traffic stop of a Lumsden motorist in 2020.  Smell of cannabis in the car led to a vehicle search which uncovered two chilly bins containing cannabis.  Text messages on the driver’s phone led police directly back to Woodrow as supplier.

Both Woodrow and Cope refused to engage in a Criminal Proceeds (Recovery) Act profit forfeiture hearing.  Standing at back of the courtroom, they interjected during proceedings claiming as ‘sovereign citizens’ they did not recognise the state as having any authority over them.

Justice Preston continued the hearing over their objections.

Evidence was given of police finding a commercial cannabis operation in a woodshed at back of their rural property.  Substantial sums in cash had been banked to their bank accounts.  Analysis of their supermarket loyalty card identified regular purchases in cash.  Household whiteware had also been purchased in cash.

In the absence of evidence to the contrary from Woodrow, Justice Preston accepted police evidence that the two had generated revenue of at least $300,000 from cannabis dealing.

Cope’s statement to police that she had no knowledge beyond ‘some suspicion’ that her spouse was growing cannabis was at odds with regular text messages between the two detailing daily tasks required of Cope to maintain a healthy crop.

Woodrow and Cope were each ordered to pay $150,000.  If not paid, Woodrow’s rural property is to be sold.

Woodrow was the sole registered owner, prior to Cope getting a Family Court order recognising her one half interest in the property.

In any event, Cope has an unregistered half interest in the property as relationship property, Justice Preston said.  Her $150,000 profit forfeiture payment can be sourced from her relationship interest becoming monetised on sale of the property.

Commissioner of Police v. Woodrow & Cope – High Court (19.12.24)

25.056

Pricing: Airports Association v. Commerce Commission

 

Commerce Commission scored a D Fail on its homework calculating cost of capital for airports in the latest round of airport services pricing, with coding errors skewing calculations.  Result: chaos in the bespoke High Court appeal process currently underway deciding how much airports can charge airlines for services provided.

Major international airports throughout the country operate as local monopolies.  There are no alternative passenger and cargo facilities within Auckland, Wellington or Christchurch to land and service wide-body jets.

Landing and service charges are set by the Commerce Commission.  This requires detailed analysis to determine what is a fair return on each airport’s extensive infrastructure.

One critical component is an assessment of each airport company’s weighted cost of capital: primarily, the cost of equity and the cost of debt; capital used to finance airport assets.

All bread and butter stuff for experts in finance.

The High Court was told airports discovered statistical errors in Commerce Commission’s 2023 pricing determination, after the determination appeal process was underway.  Incorrect inputs had been applied to a programming language called R.

Airport pricing appeals follow a bespoke process.

An appeal is a re-hearing.  The High Court can only consider information put before the Commission prior to its pricing determination.

The Airports Association said this means its appeal will continue with the knowledge that the Commission’s figures are wrong, while all parties are unable to acknowledge in course of the appeal why the figures are wrong; despite this error being known to everyone in the courtroom.

Airports Association wants the current determination scrapped, with the Commerce Commission going back to square one, starting a new pricing determination all over again.

While recognising its mistake, the Commission is unwilling to amend its current determination; that would prejudice the appeal process currently underway.

In the High Court, Justice Radich ruled the better way forward is to have Airports Association continue with its current appeal.  After disputed points of principle have been resolved in court, the Commission can be invited to apply its corrected cost of capital formula to the court’s ruling.

Points of principle in issue are: how future traffic levels are to be assessed, given the historical record is warped by disruption caused by travel bans imposed during the covid-19 pandemic, and; what businesses should be used as comparators when assessing an appropriate return on capital.

High Court appeals from Commerce Commission pricing determinations are heard by a three-person panel: a judge and two lay assessors having expertise in finance and economics.

NZ Airports Association v. Commerce Commission – High Court (19.12.24)

25.055

Family Trust: Tillemans Family Trust v. Tillemans Familie Trust

 

Failure to tidy up family transactions prior to 2015 death of patriarch Leo Tillemans saw son and daughter fighting over ownership of a Tauwhare property, near Hamilton.

Son Michael said sale of Tauwhare by their father to sister Suzanne at below market price subsequently left their father’s estate insolvent, unable to pay debts he owed his family trust.

At heart was Michael’s annoyance that the earlier deal favouring his sister was described by their father as ‘equalising’ matters between his two children.  Michael disputes that any financial benefits he received during his father’s lifetime matched the $700,000 benefit gained by sister buying Tauwhare at an undervalue.

The High Court was told their father sold Tauwhare to Suzanne’s family trust in early 2015 for one million dollars, immediately forgiving $700,000 otherwise payable.  The remaining $300,000 was left as a loan due to Leo, secured as a mortgage over Tauwhare, with interest at 4.5 per cent.

In essence, this was an early bequest; patriarch Leo died months later.

Prior to his death, Leo controlled a separate family trust in which he was settlor, co-trustee, and also a beneficiary.  On his death, son Michael came to control this trust.

Leo had borrowed from this trust; the amount unclear, on limited financial records available.

Trust financial statements prepared just prior to his death recorded Leo as owing his Trust some $774,000 while at the same time recording an apparent gift from Leo to the Trust of $130,000.

In the High Court, Michael argued their father’s sale of Tauwhare for $700,000 less than its value left his estate insolvent, unable to repay the $774,000 owed their father’s family trust.

Michael asked this earlier sale of Tauwhare by Leo be reversed under the Property Law Act as a ‘disposition’ intended to defeat Leo’s own family trust as an estate creditor.  If successful, Tauwhare would become an estate asset, with its value available for distribution to beneficiaries of Leo’s estate.

Justice Tahana pointed out the entire problem could have been forestalled with a little professional foresight.  Before Leo’s death: his family trust could have been wound up; or any money he owed his family trust could have been written off, treated as a distribution to Leo as a beneficiary of his own trust.

Left to rule on the legal position as it is, rather than as it might have been, Justice Tahana declined to overturn Leo’s Tauwhare sale to Suzanne’s family trust.

In the context of a family transaction, the sale sought to implement Leo’s testamentary wishes, she ruled.  It was not a case of a debtor plotting to hide assets from a creditor.

Suzanne was given some three months to refinance the $300,000 mortgage, with accelerated repayment of principal and accrued interest to be made across to her late father’s estate.

It is for Leo’s family trust, now controlled by son Michael, to recover from his late father’s estate whatever amount he owed his family trust.

Leo Tillemans Family Trust v. Tillemans Familie Trust – High Court (19.12.24)

25.054

Joint Venture: Zixin Ltd v. Billion Straven Ltd

 

Kevin Qin thought joint venture partner Nathan Lin was matching his $1.2 million cash contribution towards a Christchurch property development, later finding Lin had borrowed $1.6 million against project assets as his supposed cash contribution.  This threw all risk onto Mr Qin, leading to arguments over who owed whom money. 

In the High Court, Associate Judge Paulsen refused each side’s application for fast track summary judgment.  A full court hearing is needed to hear both sides of what Judge Paulsen described as an undocumented project which proceeded with a surprising degree of informality.

Evidence was given that the 2021 project kicked off with purchase of a Straven Road property intended to be subdivided into four lots.

Potential profitability nose-dived early on; planning restrictions allowed only three lots.

Work proceeded under control of Mr Lin with informal agreement that he would bear construction costs, recovering this outlay on final sale.

Net proceeds from initial sales were split 50/50.

To provide further immediate cash return for Mr Qin, arrangements were made for him to periodically draw down on their joint venture bank account.

The two fell out when Mr Qin learnt of his joint venture partner’s subterfuge in mortgaging project assets to raise his cash half share and further learnt his partner had been manipulating their registered share ownership for their joint venture company reducing his supposed fifty per cent equity interest.

Mr Qin was refused access to company financial records.

With each side claiming money was due from the other, Judge Paulsen put litigation on hold telling the warring parties they need to come to court with detailed evidence about their business arrangement.

Zixin Ltd v. Billion Straven Ltd – High Court (18.12.24)

25.052

Cartel: R. v. Kumar

 

Manesh Kumar was caught cold, fixing tender prices on an Auckland bridge contract when details were inadvertently emailed to the head contractor.  Mr Kumar becomes the first to be convicted under revised Commerce Act rules criminalising cartel behaviour; prior to 2021, price-fixing attracted a civil penalty only.

He pleaded guilty to four Commerce Act charges; sentenced to six months’ night-time curfews as community detention, plus 200 hours community work.

His company MaxBuild Ltd also pleaded guilty; fined $500,000.

The High Court was told price fixing was discovered in respect of two Auckland projects: a northern corridor improvement project and repair of a Middlemore railway bridge.

Mr Kumar’s MaxBuild specialises in bridge jointing work.

In 2022, an un-named bridge jointing contractor sent in its quote for the northern corridor project, inadvertently including an email chain evidencing discussions with Mr Kumar agreeing its quote would be higher than MaxBuild’s quote.

The head contractor immediately contacted Commerce Commission.

A Commission swoop on MaxBuild’s offices and Mr Kumar’s home uncovered similar price fixing in respect of the Middlemore project.

MaxBuild immediately withdrew from its Middlemore contract.

Commerce Act prosecution followed.

Both Mr Kumar and MaxBuild pleaded guilty to price-fixing.

In sentencing, Justice Wilkinson-Smith said cartel pricing damages confidence in the tendering process.  Costs are borne by taxpayers where projects are publicly funded.

She indicated large companies with a high national profile can expect to be punished more severely than companies operating within a small local market.

Mr Kumar’s MaxBuild is at the lower end for market size, she ruled.  It employs some thirty people.

Imprisonment for Mr Kumar is not appropriate, she said.  He needs to be available on the job each working day to ensure company operations continue.

Mr Kumar was sentenced to six months community detention; a nightly curfew at home between the hours eight pm and six am, plus a period of community work.

Justice Wilkinson-Smith imposed a $500,000 fine on Mr Kumar’s company Maxbuild.  This figure was the amount offered as reparations, being Maxbuild’s contract price received for the northern corridor contract.

Maximum fine fixed by the Commerce Act is ten million dollars.

The dollar amount of civil penalties imposed previously are expected to provide a guide as to the level of fines levied for what are now criminal offences under the Commerce Act, Justice Wilkinson-Smith said.

But under the new rules, defaulters now face a criminal record, and the possibility of imprisonment in egregious cases.

R. v. Kumar & MaxBuild Ltd – High Court (18.12.24)

25.051

 

Contempt of Court: Ruscoe v. Cattermole

 

Victor Cattermole struck gold when a High Court clerk innocently sent him a USB drive listing customers of hacked Christchurch cryptocurrency exchange, Cryptopia Ltd.  Company liquidators failed in their application to have Cattermole convicted for contempt of court, alleging Cattermole’s subsequent contact with Cryptopia customers was disrupting liquidation procedures.

Mr Cattermole is the self-styled ‘chairman of the crown council’ and ‘prince of the principality’ of the Cogito Metaverse.  Its earthly representation appears to be a Montengrin-based trust.

Cryptopia liquidators Grant Thornton allege Mr Cattermole used data from the USB drive to contact Cryptopia customers offering a swap: handing over their rights to a payout in the liquidation in return for ‘cog,’ said to be a digital currency used in Cogito’s metaverse.

Liquidators received multiple enquiries from Cryptopia customers questioning what was going on, with some under the mistaken impression this was an offer made by the liquidators direct.  

Mr Cattermole came into possession of the USB data in 2020, one year after Cryptopia went into liquidation, following the loss of some thirty million dollars by value in cryptocurrency holdings at the hand of unknown hackers.

Data on a USB drive had been filed in court by the liquidators, part of a routine application for directions as to how the Cryptopia liquidation should proceed.

This data was released to Mr Cattermole at his request, with court registry staff thinking he was party to the liquidators’ application and entitled to the information.

It took liquidators some time to discover Mr Cattermole had access to sensitive liquidation data listing Cryptopia customers and their digital holdings.

In October 2020, the High Court ordered Mr Cattermole to disclose what information he had, where it was stored, how he had used it, and whether any copies had been provided to third parties.  He was less than forthcoming in his response.

Further court applications sought to stop Mr Cattermole from approaching Cryptopia customers.

Multiple applications were made to have Mr Cattermole held in contempt of court for failing to fully comply with court orders.

Contempt of court is treated as a criminal offence.  Proof is required beyond reasonable doubt.

Mr Cattermole said he is not the only person involved in Cogito.  He could not be held responsible for the actions of others supposedly acting in breach of court orders, he said.

Justice McHerron ruled there were two instances where Mr Cattermole was clearly in contempt of court: first, when he did not make full disclosure about emailing data offshore in late 2020 to a Mr Serafimov and a Mr Chaudry; and second, failing to disclose the existence of relevant emails.

No penalty was imposed.  The information Mr Cattermole was supposed to disclose, but did not, was later identified by Cryptopia liquidators from other sources.

Contempt of Court Act excuses failures to comply with court orders where compliance has been satisfied by other means.

Ruscoe v. Cattermole – High Court (18.12.24)

25.053

Asset Forfeiture: Commissioner of Police v. Piukana

 

Matangikolo Piukana’s extended family were unwittingly implicated in his Auckland Airport meth-smuggling operations when their bank account was frozen as proceeds of crime.  Forensic analysis of a shared community bank account was needed before the High Court approved release of their $192,100. 

Piukana was sentenced to eight years’ nine months’ imprisonment for his role as a baggage handler intercepting on the tarmac luggage containing meth flown in from Malaysia, bypassing Customs inspection.  This luggage was then handed on as instructed to contacts outside the airport.

A November 2021 police raid saw nearly $350,000 cash seized from two Auckland addresses.  In addition, funds totalling some $265,000 in a BNZ bank account were frozen.

Piukana later admitted that some, but not all, of the BNZ funds were sourced from pay-offs received for facilitating meth importations.

In a Criminal Proceeds (Recovery) Act High Court $413,200 settlement, Justice Gordon approved forfeiture of the cash plus some of the BNZ funds.

The court was told the BNZ account had a six figure balance prior to Piukana’s offending.

The normal rule is that all funds sitting in a bank account are ‘tainted’ as proceeds of crime whenever any ill-gotten gains are paid into that account, recognising the fungible nature of money.  Dollars in a bank account are not like cans of baked beans on a shelf, where there is the possibility of identifying the provenance of individual cans. 

Police accepted that $192,100 in the BNZ account were funds contributed by relatives unaware of and unconnected to Piukana’s criminal activity.

It was agreed this money is to be released to a new bank account controlled by innocent family members.

Commissioner of Police v. Piukana – High Court (17.12.24)

25.050

Defamation: Murphy v. Cai

 

Used car dealer John Murphy claimed $200,000 damages for defamation after posts on a Facebook page for his Auckland business Cornwall Motor Company claimed a Toyota Yaris on his yard offered for sale was stolen.  He was awarded $20,000 damages, with Justice Anderson stating a lesser award of token damages would have been appropriate but for the conduct of previous Yaris owner Jasmine Cai.

Jinzhen Cai, also known as Jasmine Cai, leapt into action after learning spouse Zheng Ping had sold her Yaris to Mr Murphy in early 2023 for $2700.

The High Court was told Ms Cai told her spouse to get it back.  There were plans to sell the Yaris, but not until a replacement vehicle arrived; expected in a few weeks.

Evidence was given of Mr Murphy rebuffing attempts by Mr Zheng to recover the car, with Mr Zheng then threatening to report the car stolen to the police.

Ms Cai followed up with a text to Mr Murphy saying she had not agreed to the sale and demanding return of her Yaris.

Within fifteen minutes of the text, she reported to police the car had been stolen, later stating the car had been stolen from her driveway.

An hour later, a posting on Mr Murphy’s Cornwall Motor Facebook page advertising sale of the Yaris stated the car offered for sale had been stolen.  This post came from an account named Jasmine Cai.

In the High Court, Justice Anderson subsequently ruled this Facebook post defamatory.

It implied Mr Murphy is a criminal, dealing in stolen vehicles.

No crime had been committed; it was a commercial dispute over ownership.

Ms Cai denied she was responsible for the Facebook post.

Justice Anderson ruled Ms Cai had authorised or encouraged the post.  She was responsible for the content.

The post remained up for eight days.  Mr Murphy said he did not take it down immediately because he did not know how to delete posts from his Facebook account.

The extent of publication is relevant when assessing damages.

Justice Anderson said it cannot be assumed how many followers linked to Mr Murphy’s Cornwall Motors’ Facebook account in fact read the defamatory post.

Mr Murphy was awarded $20,000; compensation for damage to his personal reputation.

Any claim for damage to his business has to be brought as a separate case by his business Central Car Co Ltd, Justice Anderson said.  Cornwall Motor Co is the trade name for Mr Murphy’s Central Car business.

Murphy v. Cai – High Court (17.12.24)

25.049

Fraud: Grant v. R.

 

Court of Appeal confirmed former police officer Joshua Hohua Grant’s two years and four months’ prison sentence for mortgage fraud, saying his claim to have been duped into a scheme designed to rip off banks had already been considered and dismissed at trial by the sentencing judge.

Serious Fraud Office prosecuted Grant together with three other individuals for fraud following an investigation into bogus mortgage applications between 2015 and 2017 netting some $8.7 million.

Evidence was given of mortgage applications submitted with false statements as to current incomes, supported by bank statements in which funds had been washed through personal bank accounts to create supposed evidence of the income declared.

Grant was convicted on five counts of fraud; the lead charge being one of obtaining $2.2 million mortgage finance by deception over a twenty month period, of which some $1.1 million was drawn down.

His mortgage application falsely claimed he earned $92,000 from employment with Cartridge World, and that household income totalled $242,000.

In fact, both Grant and his spouse lacked any steady income.

Spouse Sian Grant pleaded guilty to the fraud; sentenced to twelve months home detention.

On appeal, Joshua Grant said the trial judge did not fully take into account his personal circumstances when passing sentence.

Grant said that while his parents were hardworking and supportive, he was brought up in a community wracked by violence and alcoholism.  Close family had previously lost a large sum of money in an investment scheme which turned out to be a scam.

This background was included in a pre-sentence report made available to the trial judge, the Court of Appeal said.

Grant’s letter of remorse provided to the Court of Appeal added little extra, the court ruled.  There was no expression of genuine remorse, the court said.  The tenor of the letter is that he was ignorant and duped, an explanation expressly rejected by the trial judge, the Court of Appeal said.

Mastermind behind the fraud was a Bryan Martin.  He was sentenced in 2023 to four years’ imprisonment.

Grant v. R. – Court of Appeal (11.12.24)

25.048

Mortgage: Flexigroup v. Goldenberg

 

Jake Goldenberg’s Auckland dentistry practice is in liquidation.  He is angry that financier Flexigroup sold for $20,000 mortgaged equipment costing $377,000.  He is being sued for the shortfall on Flexigroup’s loan.

He is not the only one unhappy.  Liquidators of his former Ponsonby business report they have been contacted by a large number of clients who paid in advance for dental work not yet done.  They stand as unsecured creditors.

Flexigroup is a secured creditor of Mr Goldenberg’s business Total Health Dentistry Ltd.  Flexigroup financed purchase of surgical dental equipment by Mr Goldenberg’s company, taking security over equipment supplied.  Mr Goldenberg guaranteed payment.

Secured creditors stand outside the liquidation process.  Their remedy is to seize and sell their secured asset; ranking as an unsecured creditor for any shortfall on sale.

The High Court was told Flexigroup gave notice of repossession in early 2024 after monthly payments stopped.

Learning Mr Goldenberg’s dentistry company had gone into liquidation, Flexigroup invited liquidators to sell the mortgaged equipment on its behalf and to account for the net proceeds.  They declined; it was Flexigroup’s problem.

Flexigroup was in a bind.

Cost of de-installing the equipment was likely to be high.  Costs of reinstating the premises would be an added cost.  

Mr Goldenberg’s landlord gave Flexigroup one week’s notice to remove the equipment, or it would be deemed abandoned and dumped.

Under this tight time constraint, Flexigroup negotiated with an incoming tenant who was setting up a new dentistry practice.  The tenant bought at $20,000.

Flexigroup then sued Mr Goldenberg on his guarantee for $377,500 still owing.

In the High Court, Associate Judge Taylor ruled Mr Goldenberg was liable on the guarantee, but did not fix the amount owed; this requires a full court hearing.

Judge Taylor said an explanation is needed about circumstances of the $20,000 sale.

If secured goods are sold at an undervalue, any shortfall otherwise recoverable from the debtor and any guarantor is reduced.

Flexigroup (New Zealand) Ltd v. Goldenberg – High Court (6.12.24)

25.046

Will: Lane v. Li

 

If it were a film script it would read as a black comedy; a dying man in a hospital ward surrounded by six people, with four having a vested interest in benefitting from his estate, while a suspended and now retired lawyer makes a ham-fisted effort of drafting a new will taking little interest in his supposed client now slumbering in the bed beside him.

In the High Court, Justice Churchman ruled invalid this will signed by Frank Lane four weeks prior to his 2023 death.  The will left $500,000 to his sometime mistress Xinfeng Li (known as Lily) and made bequests to Lily’s son, while cutting some of his own children out of his estate.

On his death, Mr Lane owned two run-down properties in Auckland suburb of Kingsland plus bank accounts holding about $650,000.

He had six children, fathered with three women.  Lily knew Frank for nearly twenty years.  Early in their relationship she worked in the sex industry, later training for what was described as a cosmetic nurse.  They never lived together.  Lily was not the mother of any of Frank’s children.

With Frank in hospital, gravely ill with bladder cancer, Lily arranged completion of a new will.

The High Court was told of Lily bringing in a mandarin speaking lawyer called Paul Young to assist.

Mr Young was described as having qualifications in marine science from Taiwan and theology from the United States.  He qualified in New Zealand as a lawyer in 2013, retiring five years later after suspension from practice for professional incompetence.

The High Court was to learn he had very limited experience in drafting wills.  Under cross-examination in court over his role in preparing Mr Lane’s will, he struggled to explain the basic concepts.

Two phone videos of Mr Young’s bedside consultation with Mr Lane saw Lily, together with Mr Lane’s son James, dominating proceedings with Mr Young putting questions to Mr Lane seeking yes/no answers as to what should happen to his assets.  At times Mr Lane had to be nudged awake to provide an answer.  Mr Young and Lily conducted side conversations in mandarin, with no explanation or translation provided to Mr Lane.

The document, when finalised, was incomplete and in parts inconsistent.

Lily took the liberty of amending the will after it was signed to make it clear that the $500,000 bequest went to her personally and was not to be shared with her spouse.

Justice Churchman ruled it was clear Lily was the client, not Mr Lane.  Lily brought two of her acquaintances to the meeting, to witness Mr Lane’s signature.

Justice Churchman ruled Mr Lane lacked legal capacity in April 2023 to make a valid will. Hospital records at the time described Mr Lane as being delirious and aggressive.  He had been sedated for his own safety and for the safety of hospital staff.    

With the 2023 will ruled invalid, an earlier 2010 will stands as Mr Lane’s final will.

This will divides his estate between five of his six children.

Evidence was given that at time of Mr Lane’s death, Lily held considerable net worth, owning eight mortgaged properties across Auckland.

Lane v. Li – High Court (6.12.24)

25.047

Deceit: Hyzon Motors v. Bartlett

 

Using covid-19 travel restrictions as cover, Michael Bartlett engineered an elaborate fraud to extract nearly USD 2.5 million from unsuspecting US investors promising access to revolutionary technology capable of converting waste to hydrogen.

What US-based Horizon Fuel Cell Technologies thought would be a new source of cheap energy to fuel trucks turned out to be a nonsense conjured up by twice-bankrupt Mr Bartlett.

The High Court was told Mr Bartlett approached Horizon Cell in 2019 claiming to be president of a multi-national group called Global NRG.  In his telling, Global had operations in some fifty countries around the world, with plans underway to exploit a new gasification process leading to cheaper production costs for industrial hydrogen.

His proposal did spark interest from senior staff in a business subsequently spun off from Horizon Fuel, a Delaware-registered company: Hyzon Motors Ltd.

Mr Bartlett turned down an offer from Hyzon to invest in its business, bringing his new technology with him.

Instead, Hyzon committed to investing in Mr Bartlett’s business.    

Over a twelve month period, Hyzon put USD 2.5 million into a company formed by Mr Bartlett called Global NRG H2 Ltd, in return for a mix of shares and options.

Whilst Hyzon thought its money was being used to capitalise a new stand-alone venture, it later learnt its funds were used in part to buy shares from an existing shareholder under the control of Mr Bartlett, a company called Moonshine Oil & Gas Ltd.

To create an air of credibility to his scam, Mr Bartlett invited senior staff at Hyzon the opportunity to visit any of Global NRG’s world-wide plants before committing to their investment.  No such visits were achieved; Mr Bartlett advised pandemic travel restrictions were hampering inspections.

Believing Mr Bartlett’s low profile was intended to ensure confidentiality, and trusting to his veracity, Hyzon paid its money across to an Australia bank account nominated by Mr Bartlett.

Later investigations identified that Mr Bartlett was aged in his early eighties, had no previous experience in the industry, had twice been bankrupted in Australia (in 1977 and 2001) and that his named source of debt finance arranged for their project was a company which had been wound up in New Zealand ten years previously.

Learning its H2 Ltd investment was valueless, Hyzon sued.

In the High Court, Justice O’Gorman ordered Mr Bartlett pay USD 2.7 million; liable in the tort of deceit for lies told which induced Hyzon to invest, and also liable for misleading conduct in breach of the Fair Trading Act.

Mr Bartlett filed a statement of defence, but was barred from defending Hyzon’s claims following his failure to comply with court orders for production of relevant business documents.

Hyzon Motors Inc v. Bartlett – High Court (5.12.24)

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