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

 

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)

25.045

Will: Broadbent v. Broadbent-Matete

 

Michael Broadbent died in 2023, leaving unfinished: attempts to finalise a divorce from spouse Iris, with whom he had not been living for the last seven years, and; also leaving unfinished, a new will intended to leave all assets to his four children from an earlier marriage.  Iris claimed in the High Court that his 2003 will signed two decades previously should stand, leaving her sole beneficiary of his estate.

His assets pass to his four children after Justice Wilkinson-Smith approved a later incomplete and unsigned will together with his lawyer’s file notes be admitted to probate as Mr Broadbent’s final testamentary statement.

With court approval, the Wills Act allows a combination of written documents, which do not comply with Wills Act formalities, to be treated as if they were a coherent will, provided they clearly record a deceased person’s testamentary wishes.

The High Court was told the major assets in Mr Broadbent’s estate are a half share in each of two residential properties in Auckland suburb Manurewa.  The other half shares are owned by his estranged spouse Iris.

After separation from Iris, he lived at one of the Manurewa properties, she at the other.  It was not an amicable separation.

No agreement was reached at that time over division of relationship property.

No further steps were taken over the next seven years to dissolve their marriage or to sort out relationship property issues until the final weeks of Mr Broadbent’s life, when his impending death from prostate cancer caused his children to prompt a need for some resolution.

His application to file for dissolution of his marriage was not finalised; he did not have an available copy of his marriage certificate.

A meeting with his lawyer to draft a new will stalled when he indicated that he would instead use an online template and prepare his own will, preferring a do-it-yourself option to save legal costs.

It was file notes taken by his lawyer at this meeting which were later to form part of the court-constructed will evidencing a wish to leave all assets to his children.

Evidence was given that Iris was not told of Mr Broadbent’s death until after the funeral.

Three months after his death, those of Mr Broadbent’s children living at the Manurewa property where he lived prior to his death were told to pay rent, or leave.

At this point, the property was half-owned by Mr Broadbent’s estranged spouse Iris and half-owned by his estate, with the beneficiaries of his estate unclear.

The effect of Justice Wilkinson-Smith’s ruling is that now both Manurewa properties are half owned by Mr Broadbent’s children and half owned by Iris.

Sensing there is going to be ongoing difficulties between these co-owners, she recommended agreement be reached over division of the assets, rather than incurring legal costs of returning to court.

Earlier, evidence had been given of unresolved discussions prior to Mr Broadbent’s death to have he and Iris buy out the other’s ownership interest in each of the houses they lived in, with a cash adjustment to reflect the differing property values.

Broadbent v. Broadbent-Matete – High Court (4.12.24)

25.044

Building Covenant: Repotane Trust v. Hart

 

When Andrea Waddell subdivided sections off her ten acre block at Tamahere near Hamilton, she specified purchasers needed her consent prior to any house construction.  While this gave her some control over aesthetics of any planned dwelling, she could not unreasonably withhold consent, the High Court ruled, approving plans by the Hart family to continue their construction over Ms Waddell’s complaints their build was ‘too boxy.’ 

In 2015, Ms Waddell completed subdivision of what remained of the old family farm on Pencarrow Road.  Registered on title to the two subdivided sections is a requirement that purchasers not construct any dwelling without first obtaining her written approval as to plans and exterior colours.

The High Court was told a dwelling built following sale of one section in 2017 went ahead with no difficulties.  Ms Waddell approved what she called a ‘contemporary but still country’ design.

No such approval following the Harts’ 2022 purchase of the remaining section for $1.3 million.

Evidence was given of the Harts making enquiries before their purchase as to what style of architecture Ms Waddell was likely to approve.  They learnt she preferred a ‘country style.’  She listed examples of nearby houses she did not like as being too ‘boxy,’ with everything at right angles.  She particularly detested dwellings with a flat roof.

After their purchase, architects preparing drawings for the Harts provided Ms Waddell with their concept drawings; highlighting a front façade with roof pitches described as ‘a modern twist on the traditional gable roof.’

This design did not find favour with Ms Waddell.  Attempts to negotiate an agreed compromise were not successful.

The Harts started construction regardless.  Ms Waddell sued to stop work, demanding the site be cleared.  

Three days evidence in the High Court heard conflicting professional evidence as to what an architect might consider to be ‘boxy.’

Justice Robinson said Ms Waddell had refused consent to the Harts’ plans essentially because she did not like the design.  While she is entitled to her opinion, she cannot unreasonably withhold consent, he ruled.

The house has been carefully and skilfully designed, he said.  It has architectural merit and will be constructed with high-quality materials.

Making a Property Law Act order permitting the Harts construction to continue in accordance with their plans, Justice Robinson said the construction may not be to Ms Waddell’s taste, but there is no suggestion it is inherently objectionable.

Separately, the Harts counter-claimed against Ms Waddell for $1.1 million damages; expected increased costs because of construction delays.  Justice Robinson dismissed this counter-claim.  There was insufficient evidence these losses had arisen.

Repotane Trust Ltd v. Hart – High Court (3.12.24)

25.043

Romance Scam: Westpac v. Renner

 

Dealing in cryptocurrency, Tim Renner was not responsible for customer losses incurred purchasing bitcoin from him then lost as victims of a romance scam.  He took steps to ensure customers were purchasing bitcoin on their own account and warned them not to allow anyone else access to their digital wallet.

Mr Renner bought and sold bitcoin, using a Westpac bank account as a trading account. Westpac froze his bank account after receiving complaints from several of Mr Renner’s customers that they were victims of a romance scheme orchestrated by a person known to them as Mr Wilkinson.

Funds frozen totalled $777,200.  Scam victims claiming total losses of some $565,000 contacted Westpac demanding repayment from Mr Renner’s bank account.

Westpac put the disputed $565,000 into a suspense account, returning the balance to Mr Renner; leaving the two sides to argue in court over who was entitled to the suspended funds.

The High Court was told the scam victims had been conned online, willingly purchasing bitcoin from Mr Renner and then passing on digital wallet passwords to the persuasive Mr Wilkinson; with him promising he would be moving to New Zealand shortly and could then repay the money borrowed.  The money disappeared.  As did Mr Wilkinson.   

The victims argued Mr Renner must have been in on the scam. The fictitious Mr Wilkinson had directed then to Mr Renner’s bitcoin marketplace and had coached them on what to say and do. 

Justice O’Gorman ruled Mr Renner had acted in good faith, without knowledge of the frauds being perpetrated.

Being in the business of selling cryptocurrency, he was entitled to keep proceeds for what to him were bona fide bitcoin sales.

Evidence was given of Mr Renner requiring customer verification, to confirm their identity, and also carrying out due diligence to identify the reason for each purchase.

The script provided by Mr Wilkinson had his victims saying their bitcoin purchases were speculative personal investments, with the possibility of making a profit on sale.

Mr Renner said he had refused to make bitcoin sales to customers who said they were making payment to a boyfriend overseas they had never met.

Westpac v. Renner – High Court (2.12.24)

25.042