Biosecurity: van Leeuwen v. Attorney General

 

On to a winner with a $7.8 million arbitration award on top of its earlier nine million dollar compensation following Primary Industries, mycoplasma cull, van Leeuwen farms is fighting for the same arbitrator to decide its follow-up $75 million claim.   No dice, ruled the High Court.  The Biosecurity Act does not require the same arbitrator hear subsequent claims.

The van Leeuwen Group owned 13 dairy farms and six dry stock units across South Canterbury when M.bovis was identified on one of its farms in 2017.  A government-ordered cull affected some 1500 farmers.

Van Leeuwen Group received some nine million dollars compensation in first round payouts for stock culled and lost milk production.  A dispute over compensation for ongoing finance costs, together with claims for professional fees, went to arbitration.

Arbitrator Alan Galbraith KC required Primary Industries pay van Leeuwen a further $7.8 million of an extra $10.5 million claimed.  This ruling signalled there are ‘residual issues’ still left undecided.

The High Court was told the two sides are at odds over both what might be residual issues and what evidence is required from van Leeuwen to support its further claims.

Looking to pre-empt how any further arbitration might proceed, van Leeuwen sought a High Court ruling that Mr Galbraith must be the arbitrator.

There is no legal requirement to use Mr Galbraith, Justice McHerron ruled.

Primary Industries told the court it is not committed, at this point, as to who might be appointed arbitrator, if a further arbitration is required.  First, it is awaiting more evidence from van Leeuwen Group to define what is in dispute, Primary Industries says.

With van Leeuwen seeking over $75 million dollars for what it describes as loss in value of its farm properties and working capital losses directly attributable to the cull, Primary Industries wants to see the accounting evidence.

Specifically, it wants detailed information around van Leeuwen’s decision to sell, then lease back, its farms, plus access to van Leeuwen’s correspondence with its financiers.  Without this information, it cannot assess whether further compensation should even be considered, Primary Industries, says.

van Leeuwen v. Attorney General – High Court (31.3.25)

25.096

Airbnb: Cameron Drive Management v. Jo-Anne Estate

 

Designed as a select gated community near Taupo’s Acacia Bay, the Cameron Drive development looked to keep out rowdy renters by prohibiting any commercial activities other than private homestays.  This prohibition does not block use by Airbnb customers, the High Court ruled, in what is a win for Napier-based rental management company Jo-Ann Estate Ltd. 

Online renting platforms such as Airbnb did not exist in 1999 when the fourteen-lot subdivision was established.  Subdivider Bruce Bartley told the High Court a restrictive covenant was lodged on title to each lot with the intent properties could not be rented out, but homestay guests permitted.

Justice Lang was asked to rule whether Jo-Anne Estate’s practice of having clients who booked through Airbnb staying at its Cameron Drive property, without owners being present, breached this restrictive covenant.

Historically, a homestay sees guests using part of the property whilst owners remain in occupation, Justice Lang said.

In contrast, Airbnb clients are usually given rights to occupy an entire property for the period booked.  Airbnb is probably best viewed as a short-term licence to occupy, rather than a short-term lease, Justice Lang said.

Key wording in the Cameron Drive restrictive covenant blocks owners from carrying on ‘any commercial activity [other than private homestays] from the dwelling.’

Justice Lang read the key words narrowly.

An Airbnb booking is not being made ‘from’ the property; it is an online commercial transaction concluded elsewhere.

Outcome of this online commercial transaction sees guests subsequently occupying Jo-Ann Estate’s property, but this Airbnb occupation, by itself, is not a breach of the restrictive covenant, Justice Lang ruled.

This ruling mirrors similar decisions made in UK residential property disputes.

Cameron Drive Management Company Ltd v. Jo-Ann Estate Ltd – High Court (31.03.25)

25.095

Bulk Order: Winton Stock Feed v. Southern Farms

 

There was an Alice in Wonderland feel about Invercargill feed supplier Winton Stock Feed claiming $2.2 million from customer Southern Farms for failing to take up its agreed annual tonnage when Winton itself was previously dependent on Southern sourcing bulk supplies of palm kernel mixed into stock feed for use by Southern.

What had been a long-standing mutually beneficial commercial arrangement for the supply of supplementary livestock feed fell apart in late 2022 following Southerns’ allegations of fraud by Winton Feed.

The High Court was told Southern Farms NZ Ltd, controlled by high profile farmer Philipp Haas, negotiated each year a bulk contract with Nelson Lindsay’s Winton Stock Feed Ltd for supply to farms owned by Mr Haas.

Commitment to annual supply contracts helped Winton Feed; it could bulk buy in the knowledge it had customers for ingredients bought in.

Palm kernel extract is a common component in supplementary stock feed.  Evidence was given of Winton Feed relying on Mr Haas’ international connections to source palm kernel.

This led to some byzantine accounting procedures: Southern imported palm kernel, which was offloaded and stored by Winton Feed before being mixed with other ingredients and sold back to Southern.

Day to day liaison between Winton and Southern was left to then Southern director Graham Hand.  He ceased being a director in November 2022, at a time when the commercial arrangement between the two companies fell apart spectacularly.

Mr Haas told Winton that Southern would not be paying outstanding invoices totalling some $195,000 and that no further supply orders would be placed.

The High Court later ruled this $195,000 debt owed Winton was due, and payable.

More controversial was Winton’s demand that Southern pay for the balance of its 2022 season bulk order, regardless of Southern’s cancellation: a total cost claimed to be some $2.2 million.

The fine print in Winton’s annual supply contracts requires customers to pay at end of season for any feed contracted to buy but not required, with Winton offering to deliver if later requested while not guaranteeing delivery will be made.

In the High Court, Associate Judge Lester said it is arguable Winton is keeping the 2022 contract with Southern alive simply to benefit from their previous palm kernel supply arrangement, with the suggestion Winton might be able to profit by making good any later deferred deliveries with new supplies of palm kernel sourced more cheaply.

While ruling Southern is liable to pay for undelivered feed under their 2022 bulk contract, Judge Lester left open any calculation of payment required.  This requires detailed accounting analysis of arrangements between the two companies for supply of imported palm kernel.

Winton Stock Feed Ltd v. Southern Farms NZ Ltd – High Court (28.03.25)

25.094

Sequestration: Knight Investments v. Peng

 

Pleading poverty, Jay Peng claims he cannot stump up the nearly $750,000 owed for two sections on a Manukau Harbour subdivision at Clarks Beach in Auckland.  He was ordered to provide evidence of his financial position with the possibility his $2.5 million Mt Eden property will be sequestered as security.

Mr Peng, also known as Yaowei Peng, agreed to buy the two lots from Daniel Nakhle’s Knight Investments Ltd in 2021, then defaulted.

Rather than putting the properties back on the market, Knight Investments got a court order forcing Mr Peng to complete his purchases.  Stalling for time, Mr Peng’s efforts to on-sell the two properties were unsuccessful.

A stand-off followed.

To force the issue, Knight Investments applied for a sequestration order over a property in Woodford Road, Mt Eden, owned by Mr Peng.

Sequestration orders serve as punishment for refusing to comply with court orders.  They remove an owner’s control over sequestered property.  Sequestration orders are granted only as a last resort.

The High Court was told Knight Investments suspects Mr Peng can pay.  He has been unwilling to fully disclose his financial position.

Justice Gardiner ruled there are legitimate questions about Mr Peng’s financial position: his interest in a family trust; what had happened to substantial dividend income received from one of his companies in 2022; and valuation of his shareholdings in the eighteen companies where he is listed as a director and/or shareholder.

Mr Peng was ordered to file in court, within three weeks, detailed accounting information for the 2023 and 2024 financial years.

Knight Investments Ltd v. Peng – High Court (27.03.25)

25.093

Road User Charges: Rams Logistics v. Land Transport

 

The High Court upheld Land Transport’s decision to revoke Bipendra Dheeraj Ram’s goods transport service licence with overdue road user charges totalling some one million dollars owed by his transport company Rams Logistics Ltd.  Inland Revenue subsequently forced his company into liquidation for unpaid tax debts.

The High Court was told of Mr Ram unable to get bank refinancing for his Auckland business at a time when Rams Logistics was cheating on its road user charge payments and also fending off Inland Revenue with a promise his company would pay $100,000 per month in reduction of tax debts.

In court, Mr Ram was described as among the worst offenders for non-payment of road user charges.  

Evidence was given of a 2023 Land Transport investigation finding a shortfall in payment of road user charges for 39 of Rams Logistics 52 vehicle fleet.

Mr Ram promised to better manage fleet records and make good excess charges owed of $760,000 with instalment payments of at least $25,000 per month.

A follow-up investigation found underpayments of over $108,000 on another four trucks, together with a further failure to properly account for road user charges on some of the 39 trucks previously inspected.

In December 2024, Land Transport warned Rams Logistics it was at risk of losing its transport service licence.

Land Transport required new management be installed, capable of properly managing the business.

Mr Ram pleaded for time; he was doing all he could to remedy the problems, he said.

Three weeks later, Land Transport revoked Rams licence, stating Mr Ram was not a ‘fit and proper’ person to run a transport business.

He challenged this decision in the High Court, stating he had not been given the opportunity to answer allegations raised by Land Transport.

High Court judicial review enables citizens to challenge decisions made by state officials.  If state power has not been exercised ‘in compliance with the law, fairly and reasonably,’ then government decisions can be overturned.    

In its covering letter advising cancellation, Land Transport set out its version of mismanagement within Rams Logistics, without first giving Mr Ram a chance to challenge some of these assumptions, Justice Jagose said.

But these disputed issues were only a small part of the overall picture previously put to Mr Ram requiring remedy, he ruled.

Mr Ram had been given every opportunity to respond to the main issues raised by Land Transport prior to cancellation, Justice Jagose ruled.

Rams Logistics Ltd v. Land Transport – High Court (27.03.25)

25.092

Storm Damage: Du v. Youn

 

Ningfei Du’s Remuera property was ‘red-stickered’ following Auckland’s 2023 Anniversary Weekend torrential rain, leading purchasers David Youn and Miji Sunwoo to cancel their $10.6 million purchase because a lack of access meant the property was not liveable as at settlement date. 

Land on part of the one hectare property slipped downhill, killing a neighbour when his house was crushed.  One corner of the foundations on Mr Du’s Arney Road dwelling was left exposed.

Mr Du subsequently spent just over one million dollars stabilising the property, later suing purchasers Mr Youn and Ms Sunwoo, claiming they had no right to cancel.  The property was now habitable.

Legal argument centred on fine print in their agreement for sale and purchase.

Mr Du argued the 31 January 2023 contract settlement date had been deferred and that his subsequent demand for payment of the agreed price, less estimated loss of the property’s value following the landslip, was valid.

Justice van Bohemen ruled there was never any agreement to defer settlement.  The purchasers’ right to cancel had to be assessed on the facts as known at settlement date: 31 January.

At that date, an Auckland City engineer had ‘red stickered’ the property, using powers under the Building Act to prohibit entry or occupation.

It was irrelevant, Justice van Bohmen ruled, that a subsequent detailed engineering inspection saw the property instead ‘yellow stickered;’ allowing access weeks later to all parts of the house, bar the main bedroom and outdoor decking.

Arney Road is built across three levels; with four bedrooms, five living areas, four bathrooms and a large kitchen.

The fact no-one was permitted to live at the property as at settlement date, meant the purchasers were entitled to cancel, Justice van Bohemen said.  In legal jargon, the property was ‘untenantable.’

Justice van Bohemen ordered Mr Du refund the purchasers’ $1.063 million deposit.

Mr Du, as vendor, had received this deposit when the sale went unconditional, less $251,200 deducted for real estate agent commission.

The High Court was told that when his Arney Road sale went unconditional, Mr Du immediately signed up to buy a replacement property for $3.7 million at Mellons Bay in Auckland suburb Howick.

He was unable to pay for Mellons Bay on settlement date after the Arney Road sale stalled.  He on-sold Mellons Bay eleven months later, at a $320,000 loss.  In the interim, he rented Mellons Bay, before later shifting back to Arney Road, the court was told.

Du v. Youn – High Court (24.03.25)

25.091

Corporate Opportunity: Marx v. Roban

 

Argument over copyright in an app facilitating shuttle pick-ups has seen Rohan Marx, owner of Australasian car rental company East Coast Car Rentals, suing former business colleague Dmitry Ruban.  The High Court blocked Mr Ruban from commercially exploiting the software until their dispute was sorted out.

Mr Ruban developed the software, known as ‘PickMeUp,’ several years ago during pandemic lockdowns.  This work followed discussions with colleague Mr Marx about improving the way customers could be better delivered from airport arrival to East Coast Car’s off-site vehicle depots. 

This arrangement saw the two become joint directors and 50/50 shareholders in a newly formed company called Shuttle Solutions Ltd.

It was intended that East Coast Cars would pay a fee to Shuttle Solutions each time a customer used the app.  Longer term plans were for Shuttle Solutions to also licence the software to other businesses.

Evidence was given of Mr Ruban getting increasingly frustrated about the lack of progress in finding further customers beyond its contract with East Coast Cars.

Claiming he owned the software since he had written the programme, Mr Ruban gave notice of cutting links with East Coast Cars and promoting new sales through another company he had recently formed.

Software, source and object code are all treated as ‘literary works’ under copyright law.

The general rule is that copyright lies with the author.

If work has been commissioned, the person commissioning the work holds copyright.  This requires proof of agreement to pay for the work being done.  No formal contract is required.

Justice O’Gorman ruled there was evidence suggesting Mr Ruban’s work was ‘commissioned.’

The scope of the project arose from on-going discussions between Mr Ruban and Mr Marx, with Mr Ruban being ‘paid’ by taking up his fifty per cent shareholding in their joint venture company, Shuttle Solutions Ltd.  In addition, Shuttle Solution’s accounts record a debt owed Mr Ruban for work done on ‘research and development.’

Arguably, Mr Ruban’s plans to fly solo with the PickMeUp app amounts to misappropriation of both a company asset and the opportunity for their company to exploit further use, Justice O’Gorman ruled.

Directors can be held liable should they divert a corporate opportunity to their own benefit.

It is no defence that prospects of the company being able to take up the business opportunity are remote, or even non-existent.

Mr Ruban strongly disputes that he was commissioned to write the software.

A decision on ownership of PickMeUp requires a full court hearing.

In the interim, Justice O’Gorman blocked Mr Ruban from commercially exploiting the PickMeUp software and from promoting any rival product derived from PickMeUp.

Marx v. Ruban – High Court (21.03.25)

25.090

Commission: Fogel v. Bayleys Real Estate

 

It was a thirty million dollar Queenstown property deal with real estate agent Ashley Fogel now suing Bayleys Real Estate arguing he is entitled to a share of commission having introduced the buyer, even though at time of sale he was not employed by Bayleys.

Several months prior to the 2023 sale brokered by Bayleys Auckland office, Mr Fogel had been dismissed by Bayleys Queenstown office: for unethical conduct Bayleys Queenstown says; grounds Mr Fogel disputes.

The High Court was told Mr Fogel’s contract with Bayleys Queenstown ended early July 2023.  Despite his contract stating he was not entitled to any commissions on contracts concluded after his departure, a Bayleys Queenstown email agreed to payment for ‘referrals on current opportunities you are working on.’

Current projects included the potential sale of vacant land next to a new development; Remarkable Residences in Frankton.    

Bayleys Auckland had contacted Bayleys Queenstown, seeking help in arranging a quick off-market sale, without the need for an extensive marketing programme.

Mr Fogel, while then still working for Bayleys Queenstown, contacted a Mr Gibbons who expressed interest in the vacant land.  He carried out some preliminary inquiries on Mr Gibbons’ behalf.  Negotiations stalled on price.

No buyer was found for the intended off-market sale.

Four months later, Mr Gibbons responded to Bayleys Auckland’s advertisement on TradeMe marketing the Queenstown land, agreeing to buy at a price in excess of thirty million dollars. 

Bayleys Auckland refused to pay Mr Fogel any share of the commission as a referral fee.

In the High Court, Associate Judge Lester ruled Mr Fogel had no contract with Bayleys Auckland entitling him to a referral fee.  And being unaware of detailed email negotiations between Bayleys Auckland and Bayleys Queenstown about potential splitting of commission between the two offices, Mr Fogel could not claim Bayleys Queenstown was negotiating on his behalf.

It is clear that Mr Fogel did contribute to the sale, Judge Lester said.

Mr Gibbons prompt response to the later TradeMe advertising was assisted by Mr Fogel’s earlier work on his behalf when an off-market sale was in the offing.

Mr Fogel has grounds for a quantum meruit claim, Judge Lester ruled.

Quantum meruit is payment for work done benefitting another, where there is no prior contract.

While under no contractual obligation to split its commission with him, Bayleys Auckland benefited from Mr Fogel’s earlier referral, assisting Mr Gibbons as a potential buyer, Judge Lester said.

If no agreement is reached as to how much Bayleys should pay Mr Fogel, a further court hearing is needed.

Fogel v. Bayleys Real Estate Ltd – High Court (21.03.25)

25.089

Family Trust: Mason v. Triezenberg

 

Six years after court-ordered removal as trustee of his family trust, Alex Mason’s attempt to take control of trust assets was dismissed in the High Court.  His status as discretionary beneficiary in his own trust gave him no direct claim over trust assets.

It has been trying decade within the Mason family with patriarch Alexander, now aged 88, apparently unwilling to accept that creation of his family trust meant he no longer had absolute control over assets transferred to the trust.

In 2019, evidence of his hostile and abusive behaviour towards fellow trustees and his un-co-operative and dismissive attitude towards caregivers engaged to care for spouse Wendy suffering from dementia led the High Court to remove him as trustee.

The court was told Mr Mason set up two family trusts following a successful and profitable career as a building contractor: a 1997 trust holding two properties, one being the family home in Auckland suburb Pakuranga, and; a 2013 trust holding investment assets, primarily bank deposits then totalling some three million dollars.

Evidence was given that he decided to set up these family trusts following discussions with friends who had similarly set up family trusts.

He was later to claim in the High Court that he had been misled by professional advice stating he could shift assets in and out of these trusts as he pleased. 

Family trust litigation in 2019 saw Mr Mason attempting to remove as fellow trustees his daughter Vicky and family accountant Paul Dodd.

Hostility ran so deep that court security was called to calm tempers during the hearing.

Justice Fitzgerald used Trust Act powers to remove Mr Mason as trustee, ruling his behaviour was so disruptive as to seriously and significantly impair trust operations.

Evidence was given of Mr Mason disputing medical advice about his spouse’s dementia, challenging plans put in place for her care and refusing to authorise trust payments for her ongoing support.

Mrs Mason was also one of the original trustees.  She was removed as trustee by the court on grounds of her dementia.

Their daughter Vicki and Mr Dodd were left as the remaining trustees.

They have acted conscientiously as trustees, Justice Fitzgerald said.

A non-binding ‘memorandum of wishes,’ signed by Mr Mason at time the 2013 trust was set up requires Mr and Mrs Mason’s ‘comfort and welfare’ be the Trust’s primary obligations whilst the two are still alive, with trust assets to be split equally between their three children on their deaths.

Following the death of his spouse, Mr Mason laid claim to absolute ownership of the two properties transferred to the 1997 family trust: the Pakuranga family home where he lives, and a commercial property in Onehunga.

The High Court ordered removal of caveats he registered against title to the two properties; caveats intended to protect his claimed interest.

As trust assets, the two properties are held in name of the trustees.  It is for the trustees, acting within terms of the trust, to deal with these assets.

Mr Mason has no direct claim to these assets, Associate Judge Cogswell ruled.  As a discretionary beneficiary, any trust assets passing directly to him are at the discretion of the trustees.

In legal jargon, his potential right to full ownership of the two properties is a ‘mere expectancy,’ dependent on how the trustees exercise their discretion to distribute assets.

Triezenberg v. Mason – High Court (19.02.19) & Mason v. Triezenberg – High Court (20.03.25)

25.088

Consultant: Middleton v. Leef

 

It is a common tax tactic to split income by arranging consultancy work through a corporate, a tactic which hampered Philip Middleton in his dispute with Douglas Leef in their tussle over control of a one million dollar pot left unused from a Social Development grant to train Maori apprentices in the construction industry.

The two are 50/50 shareholders in West Auckland based Mana Within Ltd, which had a two year contract with Social Development starting late 2021.  It was expected Mana would provide training and pastoral support to about fifty apprentices.

Both are directors.  Neither Mr Middleton nor Mr Leef were on the Mana payroll as fulltime employees.  Each set up separate consultancy companies, invoicing Mana Within for work done.

This arrangement worked to Mr Middleton’s disadvantage when the two fell out

He alleges Mr Leef was working behind his back, bad mouthing him to Social Development and attempting to cut him out of any contract renewal.

In turn, Mr Leef alleges Mana funds have been wrongly diverted to Mr Middelton’s consultancy company.

In 2023, Mr Middleton had the High Court partially freeze Mana’s bank account; as leverage in negotiations between the two, Mr Leef alleges.

Two years later, their dispute came to a full court hearing.

In the interim, Social Development has been undertaking an audit of Mana’s performance and use of funds.  To date, it has not stepped in asking the unspent one million dollars be kept frozen, the court was told.

In the High Court, Justice Gardiner ruled Mr Middleton, as a shareholder of Mana Within, had no grounds to demand company assets be frozen.  He had suffered no harm or loss, as a shareholder.

The earlier freezing order was lifted.

Mr Middleton’s primary complaint is that Mr Leef’s conduct may have adverse consequences for his future consultancy work.  In his role as an outside consultant to Mana Within Ltd, Mr Middleton cannot use Companies Act rules to resolve a dispute with a fellow director, she ruled.

As a final observation, Justice Gardiner commented the only sensible way forward is for one shareholder to buy out the other, or their company be liquidated.

Middleton v. Leef – High Court (18.03.25)

25.086

Freezing Order: De Lange Landen v. Reddy

 

Auckland dentist Madhava R Gopi Reddy failed to get a High Court freezing order lifted over all his personal assets with the High Court ruling that unwillingness to fully disclose his current financial position to finance company De Lage Landen owed some five million dollars justified a continued freeze.

An interim freezing order was imposed in December 2024, with De Lage Landen concerned that Mr Reddy was selling up and shifting back to India.

Branded as DLL, De Lage Landen finances business equipment purchases.

In late 2024, Mr Reddy was in India (to assist his sick mother, he later explained) and a real estate agent handling sale of an Auckland property told DLL that Mr Reddy was ‘moving home’ (a statement wrongly interpreted by DLL at the time that he was shifting to India, when he was in fact shifting across town to another Auckland property he owned, Mr Reddy later told DLL).

The High Court was told Mr Reddy stands as guarantor for DLL loans used to buy equipment used at his multiple dental surgeries across Auckland.  Some of these dental practices have since gone into liquidation, insolvent.  Increased costs and a downturn in consumer demand during the recent recession caused these business failures, Mr Reddy said.

In August 2024, DLL called up its loans and demanded repayment from Mr Reddy.  It says some five million dollars is outstanding.

It dismissed Mr Reddy’s repayment proposal as inadequate.  Learning that Mr Reddy was selling up real estate he owned across Auckland, concerned that he was intending to permanently leave New Zealand, and suspicious that Mr Reddy was being less than forthcoming about his personal financial position, DLL had the High Court freeze his personal assets.

Mr Reddy’s later application to have this freezing order lifted was dismissed.

Having returned to New Zealand, he told the court he had no plans to depart permanently.

Whilst under no legal obligation to disclose his financial position to DLL, Mr Reddy’s decision not to provide any detail justifies continuing the asset freeze, Justice O’Gorman ruled.

There is a risk these assets may be dissipated.

Terms of the freezing order allow release of funds to pay household expenses and business debts falling due in the normal course of business.

Mr Reddy’s plans to sell his Auckland properties can continue, Justice O’Gorman said, with DLL agreeing sale-by-sale that each property be released from the freeze and net proceeds of sale then frozen.

De Lange Landen Ltd v. Reddy – High Court (18.03.25)

25.087

Maori Land: re Pukerewa A Trust

 

Declining to remove current trustees, the Maori Land Court said thirty years poor governance of a Maori-owned one thousand hectare Waikato beef and sheep farm on the coast north of Raglan was being turned around by new trustees.

Pukerewa A Trust has about 240 beneficial owners.  They have received no annual dividend since 2017.

The Maori Land Court was told a history of fences left unrepaired, stock lost to rustling, a farm manager (since dismissed) who ran operations primarily for his own benefit, coupled with deals seeing Pukerewa trustees benefitting from uneconomic transactions leasing land to themselves.

These transactions led to further loss of Trust funds when trustees were bailed out to forestall a mortgagee sale.   

The farming block was previously managed by Lands and Survey on behalf of its geographically dispersed owners.  In 1981, management and control were passed across to beneficial owners, following creation of an ahu whenua trust; part of political initiatives returning control of Maori assets to Maori, ending a long period of state benevolence with civil servants making all management decisions.

Pukerewa beneficiaries have made multiple applications to the Maori Land Court for a review of farm operations since 2010.

Each time, the court ordered financial information be provided to beneficiaries and communications improved.

The most recent court hearing concerned a 2021 application that all then current trustees be removed.  By the time a court decision was made four years later, both the applicant and his legal adviser had died.

Declining to remove current trustees, Judge Mullins said the Trust is making steady progress, with a genuine effort by trustees to return to profitability.

Trustees were ordered to provide a full financial update within two months, to be followed by a general meeting of all beneficiaries to present their report.

In 2020, the Trust received a $912,000 grant from the provincial growth fund to rebuild 100 kilometres of fencing and upgrade 60 kilometres of water reticulation.

Trust beneficiaries questioned whether the trustee who negotiated this grant should receive extra payment for work involved.

The general rule in trust law is that trustees are not paid for their time, Judge Mullins said.  Reimbursement is permitted for actual and reasonable expenses.

Amongst the complaints from Pukerewa beneficiaries are the extent of unexplained payments baldly described as ‘trustee meeting expenses.’

re Pukerewa A Trust – Maori Land Court (14.03.25)

25.085

Charity: re Ngati Tawhirikura Hapu

 

A routine 2023 annual audit of New Plymouth-based Ngati Tawhirikura Hapu Charitable Trust found $487,000 was paid in wages in the past year with no contracts in place.  Questions were raised at the Trust AGM asking why employee numbers had jumped by six hundred per cent.  Differences have now spilled over into litigation with Trust board members suing fellow Trust board members, litigation seeing so-called ‘tribal trusts’ allowed a generous interpretation of what qualifies as a charity.

Charitable status has tax benefits.  Charities are excused payment of income tax.

Before their intra-trust board dispute even gets a hearing, the Maori Land Court was asked to unravel the status of Ngati Tawhirikura’s trust.

The Trust has valuable land holdings, primarily a former Ravensdown fertiliser site on New Plymouth’s northern boundary, valued in trust financial statements at a little over one million dollars.

Judge Warren ruled the Trust is a charity.

One key component of the legal test for recognition as a charitable trust is that benefits must extend to society in general.  Limit the numbers who benefit; the charitable purpose is not satisfied.

Tax benefits for charities are justified as a reward where non-state actors carry out good works of benefit to society as a whole, reducing the financial burden which might otherwise fall on general taxpayers.

The legal mantra is that charitable trusts are trusts for a purpose.  In contrast, private trusts (like discretionary family trusts) are trusts for persons.

Tribal trusts do have a purpose, but by definition they are not trusts for the benefit of society as a whole; they benefit a restricted number of individuals, those who whakapapa from a common ancestor.

Judge Warren ruled tribal trusts benefiting individuals narrowly defined by blood line can be charitable; allowing Maori institutions to enjoy the legal and taxation benefits of charitable status without having to fully satisfy the underlying legal test for a charity.

In any event, the Ngati Tawhirikura Hapu trust deed envisages members of the wider Taranaki community benefiting, allowing a possibility that benefits could pass to people outside the hapu.

Generally, legal issues involving charities are heard in the High Court.

Control and management of the Trust lies with Ngati Tawhirikura, Judge Warren said.

This gives the Maori Land Court jurisdiction to hear their dispute, he ruled.

re Ngati Tawhirikura Hapu Charitable Trust – Maori Land Court (14.03.25)

25.084

Share Valuation: Kroll v. Envirocon Ltd

 

Julian Kroll was for five years a director of Envirocon, manufacturer of precast concrete wall units.  His abrupt departure in 2023 now sees argument over value of his sixteen per cent shareholding, with the High Court refusing him Companies Act access to financial information post-dating his departure.

Envirocon Ltd management told the High Court of concerns that Mr Kroll was asking for commercially sensitive information, potentially of benefit to competitors.  

Mr Kroll took up his sixteen per cent Envirocon shareholding in 2018, funded with a loan from majority shareholders, a Russell family trust.

He claims company management has not provided adequate financial information to enable valuation of this shareholding as at the May 2024 date when he was removed as a shareholder.

His shares were forfeited when the Russell family trust called in its loan.  He wants to know what surplus value, if any, exists in his former shareholding, above what was owed on the Russell loan.

Mr Kroll was given a draft share valuation report prepared by chartered accountants Grant Thornton, based on Envirocon’s financial statements for year ended March 2023, a date some fourteen months prior to his removal as shareholder.  The court was told this draft has never been finalised.

He subsequently made a Companies Act application for disclosure of further company financial information; financial statements for the year ended March 2024 plus access to Envirocon’s current accounting records held with Xero.  This was needed to get a complete picture of his former shareholding’s value as at May 2024, he claimed.

Envirocon refused access.  It did belatedly provide Mr Kroll with management accounts covering the period April-December 2023, providing some extra financial information.

His Companies Act application for further financial information was dismissed.  The purpose of this rule is to ensure accountability by management to shareholders, Justice Walker said.

This shareholder right was lost when he was removed as a shareholder, she ruled.

Alternative court processes to order discovery of relevant information from third parties like Envirocon are available to Mr Kroll, Justice Walker said.  Companies Act investor protection rules are not to be used as a cheap shortcut to get pre-claim information, she said.

Generally, it can be very expensive to force information from third parties as part of pre-trial discovery; third party costs incurred gathering this information must be paid in full.

Kroll v. Envirocon Ltd – High Court (13.03.25)

25.083

Leaky Building: Sole v. Hutton

 

Ordered to pay $927,000 damages, John and Heather Dutton misprepresented weathertightness of their Mount Maunganui penthouse apartment in their family trust’s 2018 sale to Murray and Lorette Sole, the High Court ruled.

The Soles claimed compensation for their share of remediation costs for the three level Belle Mer apartments on Marine Parade, plus replacement of their kitchen and two years alternative accommodation costs whilst repairs were carried out.

The High Court was told the Soles discovered weathertightness issues within a year of their $1.49 million purchase.  They learnt a series of building reports obtained by Belle Mer’s body corporate dating back over four years prior to their purchase had identified various issues, primarily leaks around apartment balconies.  Belle Mer was built in the late 1990s.

They emailed Mr Dutton, seeking an explanation.  He responded, stating the situation was ‘quite alarming’ and that he ‘did not know about the reports.’  Later confronted with evidence that he was present at body corporate meetings where weathertightness reports were discussed, Mr Dutton apologised, saying he ‘now recalled the reports.’

Justice Blanchard ruled the Duttons breached a warranty clause in the sale agreement for failing to disclose body corporate expenses were likely to rise for weathertightness repairs.

They were also liable for misprepresentation; having ticked a box in their real estate agent’s checklist stating they had no knowledge of any hidden or underlying defects.

The Soles were aware of the checklist’s existence.  The real estate agent (as agent for the Duttons) commented, when asked, that the Duttons told him there were ‘no known issues with the building.’

Damages awarded were less than the Soles’ actual remediation costs.  A deduction was made for ‘betterment;’ a deduction for the Soles now having a repaired building and new kitchen, both in better condition than if no repairs had been needed because of water ingress.

Sole v. Hutton – High Court (7.03.25)

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