Joint Venture: Brown v. TF5 Ltd

 

With their proposed joint venture Auckland property development in negative equity, Julian Brown had no further legal claim over the land after fellow investor Troy Flavell paid off the mortgage debt and claimed full ownership.

Plans to turn a profit on subdivision of an Auckland residential property were not realised after buying in for $1.4 million at what was near the top of the market in 2022.

The High Court was told each put in $200,000 cash, with the balance borrowed from a second-tier lender who took additional security with a mortgage over Mr Flavell’s Kumeu home.

Having to bail out two years later, they put the property up for auction.

No bids were received.  A post-auction offer at $1.2 million was declined.

By time of notice threatening a mortgagee sale, their mortgage debt had climbed to $1.4 million.

Evidence was given of Mr Flavell then repaying the mortgage personally, transferring title to the land across to a company he controlled: TF5 Ltd.

Mr Brown then lodged a caveat on the title, claiming their joint venture agreement still entitled him to a half interest in the land.

Associate Judge Lester ruled Mr Flavell was entitled to assume full ownership of the land after paying off the joint venture debt; he could claim an indemnity from joint venture assets for the amount paid.  The amount of the joint mortgage debt exceeded the market value of the joint venture asset.

The amount paid to clear the mortgage exceeded the price any third party buyer was willing to pay for the property at the time.  There was no suggestion of Mr Flavell buying in at an undervalue.

Mr Brown’s shared interest in the property had vanished.

Brown v. TF5 Ltd – High Court (30.06.25)

25.149

Negligence: Routhan v. PGC Wrightson

 

Businesses might expect that by time a disputed negligence case reaches New Zealand’s highest court there would be some finality, with a measure of unanimity between five judges sitting on the Supreme Court bench setting out legal principles to guide future conduct.  Not so.  A dispute over financial losses suffered after a real estate agent misstated past milk production figures on sale of a West Coast dairy unit saw two judges supporting continued use of a much-criticised rule for assessing damages, two wanting to amend the rule, and one wanting to ditch it.

As Justice Kos wryly commented in the Supreme Court, negligence principles need to be coherent, not only for the benefit of lawyers and law students, but also for the very people facing liability for negligence.  He wants to ditch the contentious rule.

Courts in both Australia and Canada have refused to use it.

Legal argument centred on New Zealand’s application of a 1997 ruling from England’s highest court.

The case: South Australia Asset Management Corp v. York Montague Ltd, was about valuers’ liability for overvaluation of properties on which lenders subsequently lost money.

The case has come to represent a formulaic rule that damages for negligent advice are calculated on ‘the consequence of information being inaccurate.’  One complaint is that compensation might be awarded for losses which are unrelated to any negligence.

In the South Australia Asset Case, lenders’ losses were accentuated by a fall in property values.

Equally, this formula can, in some instances, force a limit on damages.

The formula leaves unstated an earlier question: what was the deal?  Or in legal terminology: what was the scope of the duty undertaken by the person now liable for negligence?

This issue was front and centre in a dispute by Phil Routhan’s family trust following its 2010 purchase of a 105 hectare dairy unit near Hokitika, where Mr Routhan was misled as to the farm’s carrying capacity.

The Court of Appeal ruled he was entitled to no more than the excessive price paid, this amount itself being disputed.  His claim for damages was capped.

Wrightson real estate agent Greg Daly helped broker the purchase and complete paper work, assisting in Mr Routhan’s Rabobank financing.

In both marketing material promoting the sale and the Rabobank application, the farm’s carrying capacity and past milk production levels were overstated.

Mr Routhan sued, claiming he overpaid for his purchase and then wasted expenditure on farm improvements in a forlorn and hopeless attempt to match the supposedly possible milk production levels he had been told were achievable.

Of the five judges sitting in the Supreme Court, three ruled the ‘scope of duty’ accepted by Wrightson’s agent was verification of past milk production figures.

Wrightson was not liable because it passed on incorrect information, they said.  Wrightson was liable because it carelessly led Mr Routhan to believe the vendor had verified milk production figures, when it knew he had declined to do so, saying they needed checking.  

Breach of this scope of duty left Wrightson liable for both Mr Routhan’s $480,500 overpayment when buying the dairy unit in 2010, plus $300,000 spent subsequently on additional fertiliser and re-pasturing in his failed attempt to replicate supposedly potential milk production.

The court was told the vendor is an uncle of Mrs Routhan.  Rabobank forced a sale of the dairy unit in 2020, under threats of a possible mortgagee sale.

Routhan v. PCG Wrightson Real Estate Ltd – Supreme Court (26.06.25)

25.148

Director's Duties: Classic Flights v. Li

 

Part of a carefully camouflaged plot, a Cessna 172 aircraft registration was changed from ZK-DXP to ZK-LIT.  Junjie Li was ordered to pay $126,000 damages for his part in a deceptive scheme having his company take on lease of a light aircraft on terms favouring a second company he secretly controlled, then trying to cover his tracks with misleading and evasive answers denying any personal benefit from the deal.

Wanaka-based Classic Flights Ltd is in liquidation, owing creditors some $189,000.

Liquidators were perplexed by a so-called licensing deal which saw a Cessna aircraft leased on uncommercial terms from a business called Apex Aviation.  Classic Flights was bearing the costs whilst Apex appeared to be enjoying the benefits.

Ownership and management of Apex was proving opaque.

Liquidators had little more than Companies Office records to work with.  They showed Junjie Li as director of Classic Flights for some two years before resignation in 2019.

Mr Li is also known as Fox Li.

A Wanaka address was given as a residential address for two replacement directors.  This address was Classic Flights’ hanger at Wanaka airport.  These new directors in fact live in China, leaving Classic Flights in breach of Companies Act rules requiring at least one director live in New Zealand.  

A contract set up earlier by Mr Li saw Cessna registered ZK-DXP leased by Classic Flights from Apex on unusual terms.  Classic was liable for all maintenance costs.  The aircraft was only twenty hours short of a major mandatory commercial overhaul, due after 1800 hours operation.

Classic Flights paid $126,000 for a full engine overhaul, upgraded avionics and an engine upgrade from 150 hp to 180 hp.

Classic saw limited benefit from its lease; Apex had first claim on the aircraft’s use.

Unable to get clear answers from Mr Li about circumstances of the lease, he was summoned for examination on oath by Classic Flights’ liquidators.  His answers on oath proved equally evasive.

He could not identify who were the accountants supposedly holding Classic Flights accounting records.

He would not identify his relationship with one Lin Shi who was apparently in control of a company called U-Fly New Zealand Ltd which by then had possession of ZK-DXP, re-registered since late 2019 as ZK-LIT.

Mr Li implied Lin Shi is male.  Later enquiries identified she is Mr Li’s spouse.  Their relationship was disguised in Companies Office registrations by having the two recorded as living at separate addresses.

The High Court was told Mr Li is senior flying instructor at U-Fly. Through family nominees, he controls the company.  

In the High Court, Mr Li was held liable for breach of directors’ duties as director of Classic Flights for not acting in good faith and for abusing his power as director by arranging a ridiculously uncommercial deal for lease of the Cessna aircraft by Classic on terms benefitting his family through its ownership of rival business U-Fly.

He was ordered to pay $126,600 damages to Classic Flights, being Classic’s maintenance costs overhauling the aircraft.

At a later court hearing, Mr Li was ordered to pay, in addition, liquidators’ full costs of nearly $100,000 incurred taking legal against him.  Mr Li’s evasive behaviour had frustrated liquidation enquiries and subsequent litigation, Justice Churchman ruled.

Classic Flights Ltd v. Li – High Court (6.05.25 & 26.06.25))

25.147

CBL: FMA v. Mulholland

 

Chief financial officer of failed insurer CBL Corporation, Carden Mulholland, was hit with a double whammy: ordered to pay $641,000 as penalty for failure to prod CBL’s board into making earlier disclosure of insolvency, while also being lumbered with FMA costs of another $606,000 with the High Court noting no costs claim was made against CBL directors similarly held liable.

When approving the order against Mr Mulholland for payment of some $1.2 million, Justice Gault commented some of the costs order imposed on Mr Mulholland could have been shared amongst directors.

In 2023, independent CBL directors Sir John Wells, Paul Donaldson and Ian Marsh were held liable to pay one million dollars each for breaches of the Financial Markets Conduct Act.  Anthony Hannon, chair of CBL’s audit and financial risk committee, was ordered to pay $1.1 million.   

Their liability followed failure to keep the market fully informed of off-shore risks ultimately leaving CBL insolvent.  The insurer collapsed in 2018.

In a court approved deal with the Financial Markets Authority, Mr Mulholland agreed to pay a $641,250 penalty.  He faced a maximum penalty of three million dollars.

He had been with CBL for ten years prior to its collapse.

In his role as chief financial officer he had intimate knowledge of CBL’s worsening financial position.  Liability followed from what was described as his failure to keep CBL’s board fully informed.

Within CBL, he was designated ‘Regulatory Public Disclosure Officer.’

First claim on this $641,250 penalty is Financial Market Authority itself.

Securities market regulation is partly self-funded; sinners pay.  Financial Markets Conduct Act requires penalties be applied in payment of Financial Markets Authority investigation and prosecution costs.

This may lead to the Authority being over-compensated, with the amount of a penalty resulting from any particular investigation exceeding costs, Justice Gault commented.

The High Court was told the Authority has a memorandum of understanding with the Crown covering the interplay between central government funding and receipt of penalty payments.  Details of this memorandum were not disclosed.

Agreeing to accept the Authority’s demand for recovery of $606,200 costs, Mr Mulholland said he acknowledged the all-up figure of $1.2 million he has to pay is less than actual costs incurred by the Authority in its CBL investigations and litigation.

Financial Markets Authority v. Mulholland – High Court (25.06.25)

25.145

Asset Forfeiture: Commssioner of Police v. Le

 

It was guilt by association, with police alleging Ut Don Le and Hai Thi Thu Le had profited from cannabis dealing by reason of the volume of cash washing through their bank accounts and their close association with convicted dealers.  Assets valued at a few hundred thousand dollars were surrendered as part of a court-approved deal, in full satisfaction of police claims some $1.2 million was generated by cannabis dealing.

The two were never charged with cannabis offences.

Action was taken under the Criminal Proceeds (Recovery) Act after a forensic examination of their bank accounts identified over $1.1 million in unexplained deposits passed through their accounts over a seven year period ending September 2022.  Over that period, Mr Le declared taxable income of just over $77,000; Ms Le just under $170,000.

Police interest was piqued by the fact that two businesses each had worked for (Mr Le a flooring company and Ms Le a nail salon) were run by individuals later convicted of cultivating cannabis.

Mr Le’s fingerprints were found on items at one of the cultivation plots.  Their home was listed as bail address for a work colleague bailed on criminal charges for cannabis cultivation.

In a criminal proceeds settlement approved by the High Court, they each agreed to surrender assets in full settlement of the police proceeds of crime claim.

They handed over a property on Titchmarsh Crescent at Flat Bush in South Auckland, plus a late model Mercedes Benz, a jet ski and a trailer.

The court was told there is limited equity available from a sale of Titchmarsh Crescent.  It carries a Westpac mortgage, securing a loan of approximately $745,000.

Commissioner of Police v. Le – High Court (16.06.25)

25.143

Radio Spectrum: Cayman Spectrum v. Spark NZ

 

Market dynamics a decade ago set the scene for a High Court order that Cayman Spectrum pay Spark around $2.3 million for temporary transmission tower access.  In late 2015, Cayman was days away from losing its spectrum allocation because of delays in setting up network coverage; Spark could see the strategic benefit of potentially getting its hands on more spectrum coverage than then allowed, by temporarily sharing towers with Cayman.

Auction of radio spectrum was carefully managed by Business, Innovation and Employment, accelerating internet coverage within New Zealand.  Bidding rules prevented winners from sitting on their spectrum rights in the hope of simply selling later to another buyer.

By end of November 2015, successful bidders had to be operating a commercial wireless broadband service covering at least fifteen of New Zealand’s seventy-five territorial local authorities.

Six days short of this deadline, Canada-controlled Cayman Spectrum was at risk of losing its 2.5 spectrum licence.  It did not have sufficient transmission coverage.

Vodafone could not help.  It did not have enough compatible equipment.

Spark had its network in place.  It could accommodate Cayman’s need for temporary use of some thirteen specific transmission sites.

Haggling commenced, with Spark angling for an option to later buy Cayman’s spectrum rights.

Failing that, Spark was open to deferred payment; fifty per cent of sale proceeds, if Cayman sold to a third party.  Cayman countered with an offer of fifteen per cent.  They settled at twenty per cent.

Cayman later sold its spectrum rights for USD 10 million.  Spark claimed it was owed USD two million.

Last year, the High Court ruled that then Cayman director, Boyd Craig, had no authority to unilaterally commit Cayman to the Spark deal.

With no contractual right to twenty per cent of the USD 10 million sale, the High Court ruled Spark was entitled to payment as quantum meruit: legal jargon for payment at reasonable value for services provided, where remuneration has not been agreed.  

The two sides could not agree on a figure.

There was no market price to use as a benchmark.

As Justice Lang commented, this was case of one buyer and one seller and a service agreement arising in unusual circumstances which are unlikely to ever happen again.

The agreement to pay twenty per cent of sale price from any subsequent Cayman sale served as proxy for the value provided, Justice Lang ruled. 

Justice Lang ruled Cayman owed as a quantum meruit payment the sum of USD two million, less NZD 600,000.

This deduction is the amount Cayman, now under control of entrepreneur Malcolm Dick, was willing to pay in 2016, being an unsuccessful bid to have Spark’s transmission hosting agreement run for its final five months.  Spark had exercised its right to cancel when guarantor Woosh Wireless collapsed.

In New Zealand dollars, the court order against Cayman equates to $2.3 million, using the exchange rate applying at time of Cayman’s sale.

That may not be the final figure.  Either side can still argue over what date should count when calculating the USD two million exchange rate.

Cayman Spectrum (NZ) Ltd v. Spark New Zealand Trading Ltd – High Court (16.06.25)

25.141

Leaky Home: Vanifatova v. Wang

 

With her father living in China, daughter Crystal Wang and husband Wilson disguised weathertightness issues for her father’s Auckland property, resulting in them both liable to pay damages for deceit following a 2021 sale for $773,000.

Angelina Vanifatova sued after spending nearly half a million dollars on remediation to her newly purchased Onehunga, Selwyn Street, property.  It is one of sixteen similar townhouses, constructed in 2001 with monolithic cladding.

The High Court was told Mr Wang senior purchased in 2014.  He never lived there. The property was tenanted.

A catalogue of tenant complaints followed, with water ingress to downstairs bedrooms below an upstairs balcony.

Evidence was given of successive patchwork repairs carried out, primarily new sealant applied to exterior joints, but also one instance of rotting structural framing replaced.

Photographs taken by the then tenant greatly assisted Ms Vanifatova’s case.  This tenant had used a rent-strike to force remedial work.

The contract signed by Ms Vanifatova explicitly stated the vendor had no knowledge of any weathertightness issues.  A further clause in the contract stated the vendor disclaimed any expertise in assessing weathertightness issues.

Justice Andrew ruled Mr Wang senior, in China, was liable for misrepresentation.  He was liable for comments made on his behalf by his daughter and her husband which misrepresented the building’s weathertightness.

This included ‘half-truths’ which misrepresented the true position.

In response to a request for information about remedial work carried out, Ms Vanifatova was shown a copy of a contractor’s invoice which excluded the extent of the work done.  Whether this non-disclosure was accidental, or deliberate, it amounted to misrepresentation by omission, Justice Andrew ruled.

Crystal Wang and her husband were not signatories to the contract.  They were personally liable in the tort of deceit; making false representations about weathertightness, knowing these statements to be untrue, with the intent Ms Vanifatova would act on them.

Evidence was given of them failing to give a full and accurate picture of the remedial work done, describing the work as routine maintenance when they were aware there was an ongoing problem.

They were also aware of an adverse building report which caused an earlier purchaser to withdraw.

Damages awarded totalling about $550,000 were reduced by $64,000, being damages paid earlier to Ms Vanifatova by the contractor who carried out a pre-purchase inspection on her behalf.

Vanifatova v. Wang – High Court (16.06.25)

25.144

Family Trust: White v. White

 

It took a court order to remove Gregory White as trustee of a Hawkes Bay family trust after he refused to implement plans to distribute assets, winding up the trust.  He was ordered to pay legal costs incurred.

The High Court was told he and his brother are the trustees and final beneficiaries of a family trust set up in 2015, owning a farm and adjacent lifestyle block on Pirau Road, near Hastings.

The two agreed to wind up the trust, splitting the proceeds equally.

A proposed auction in late 2022 did not go ahead after Gregory refused to sign a listing agreement.  After Cyclone Gabrielle swept through the region three months later, Gregory refused to liaise with his brother over necessary repairs.

He did not agree to a $1.35 million offer for the land made over a year later by their neighbour.  Gregory held out for at least $1.5 million. No sale eventuated.

With Gregory living in Australia, his brother became increasingly frustrated with his sibling’s lack of co-operation; queries from bankers, the trust’s lawyers, and himself were left unanswered.  

Justice Churchman removed Gregory as trustee on grounds he had failed to act in good faith, had failed to deal with trust property and had failed to act for the benefit of beneficiaries.

Gregory did not file a statement of defence.  He did not appear in court.

White v. White – High Court (16.06.25)

25.142

Loan: Jia v. Yang

 

With fourteen million dollars already committed to an Auckland North Shore property development, Yuling Yang and Sen Gao were approached by fellow investor Victor Jia for a further $1.5 million to bail him out of a problematic personal debt.  Repayment of what eventually became a three million dollar personal loan was in dispute after China Construction Bank called up its loan over the six-storey residential development.

Mr Jia, also known as Xinhong Jia, said this personal loan was in fact a limited-recourse loan tied to their joint project, with his benefactors only entitled to payment out of what might remain from the wash-up on liquidation.

The Court of Appeal was told Mr Jia’s plea for a personal loan followed difficulties in repaying a debt owed another member of the Chinese community.  Non-payment would be a severe loss of face.

Ms Yang and Mr Goa came to the rescue with an agreement recording what became an unsecured non-interest bearing three million dollar personal loan with repayment deferred until the North Shore project at Browns Bay was complete and ‘shareholder dividends payable and paid [to them as] shareholders.’

This agreement was concluded at a time when prospects of their property development being profitable looked good.

Three years later, Ms Yang and Mr Goa were demanding repayment of their three million dollars.  Twelve months on, China Construction Bank forced a sale of Browns Bay, recovering $21 million dollars owed.

Mr Jia alleges China Construction sold at an undervalue.  Action against the bank is threatened.

Fending off claims by Ms Yang and Mr Goa for return of their three million dollars, Mr Jia said they had to wait for the outcome of litigation against China Construction.  Any surplus would be paid as a ‘shareholder dividend,’ amounting to final repayment in terms of their loan agreement, he said.

The Court of Appeal ruled ‘dividends’ as envisaged by their agreement applied to payments made by a solvent company to its equity investors.  It cannot be likened to a payment made on liquidation, the Court said.  Use of the word dividend was not to be confused with payments to creditors in a liquidation, which also get labelled as dividends, the court said.

Their contract made no provision for what might happen if the project failed; this prospect was never considered when the loan was set up.

The Court ruled it was an implied term in their loan contract that if the project failed, Mr Jia’s obligation to repay his personal loan fell due immediately.

Jia v. Yang – Court of Appeal (13.06.25)

25.140

Property Management: Millar v. First NZ Properties

 

When a commercial contract ‘runs on’ beyond its scheduled end, all contract terms continue to apply, ruled the Court of Appeal, critical of a trial judge’s selective choice as to which terms still applied when holding directors Michael Millar and son-in-law Paul Mephan liable for benefits extracted from First NZ Properties. 

Result: Mr Millar’s liability to pay some $2.4 million damages was reduced; Mr Mephan’s liability to pay $450,000 overturned.

The earlier 2024 High Court ruling covered over two decades of property management by Mr Millar, primarily through his Nelson-based company Investment Services Ltd, and his role as director of commercial properties held under the umbrella of First NZ Properties Ltd.

In the High Court, he was found liable for failing to properly disclose excess management fees charged and of taking a share of capital gain on property sales without authority.

One critical issue was: what were the terms of Investment Services ongoing management contract?

The original management contract was signed in 1995, covering three Foodtown supermarkets in Auckland.  Over time, First NZ sold these investments, purchasing replacement properties.

New management contracts were not drawn up to specifically cover these replacements.

Mr Millar, and Investment Services, said the original management contracts simply ran-on, carrying over to the replacement properties.

The High Court ruled terms covering calculation of management fees did carry over (with both Mr Millar and Investment Services liable for padding these fees) but a term entitling a share in any capital gain on sale did not carry over (ordering repayment).

The Court of Appeal ruled the original 1995 contract envisaged further properties might be purchased.  This meant all terms of the 1995 contract applied to subsequent purchases; not only the formula for calculating management fees, but also the right to five per cent of capital gain on sale.

On appeal, Mr Millar’s and Investment Services’ liability for padding fees remained.  Investment Services had developed a policy of subcontracting to others management of specific properties, charging this cost to First NZ investors, and then continuing to pocket for itself a full management fee.

Court of Appeal ruled payment of $450,000 being a share of capital gain on the 2018 sale of a First NZ property in Symonds Street, Auckland, was permitted by terms of the run-on management contract.

Millar v. First NZ Properties Ltd – Court of Appeal (11.06.25)

25.139

Will: Mabbett v. Llewellyn

 

William Llewellyn, previously known as William Biggs, was surprised to learn 35 years after dating Sue Mabbett that she had named him as sole beneficiary of her estate in a 1988 will.  Her sisters claimed a handwritten note found amongst Sue’s belongings after her 2023 death should instead stand as her final will.

This note set out cash gifts for her nieces and nephews, with the rest of her property going to two of her six siblings.  Her major asset was a small studio unit in Whangarei.  She had no spouse or children.

Forensic evidence identified the note was in her handwriting.  Being a page torn out of a diary, it contained multiple crossings-out and additions, written over time with three different pens.  It was signed and dated.  There were no witnesses to her signature, as required by the Wills Act.

Mr Llewellyn said the note was no more than preliminary thoughts about a possible new will.  The two had parted amicably some thirty five years ago, with Mr Llewellyn remaining to work in New Zealand whilst Sue wanted to travel.

After learning of the 1988 will, and having never heard of a Mr Llewellyn, nor a Mr Biggs, in their sister’s life, Sue’s sisters tracked him down through Facebook.

The earlier 1988 will naming him a sole beneficiary should stand, Mr Llewellyn said.

The High Court may validate, as a will, documents not complying with strict Wills Act requirements if the document records ‘a settled testamentary intention.’

Justice Gardiner validated the note as her final will.

It was headed: ‘my will.’

In the years prior to her death, several of her siblings had prompted her to ensure she made a will.  In reply, she had told them details were on a piece of paper with her belongings.  She also told them who would inherit.

The note, matching her earlier description was found by her sisters when sorting her belongings after her death.  She had carried the note with her when shifting to a new studio unit in the year prior to her death.

The fact she signed the note with the same pen used to make the final crossing-out, indicated she had reached a final conclusion about disposal of her assets, Justice Gardiner said.

Mabbett v. Llewellyn – High Court (5.06.25)

25.137

Voluntary Adminstration: Rahman v. Shephard

 

Struggling financially, Wellington Combined Taxis was sold to Auckland Co-op Taxis for two million dollars, only after a fiercely fought battle between Wellington drivers which saw the High Court making novel use of Companies Act administration procedures effectively putting Wellington Combined on the block: giving drivers a choice between an Auckland takeover, or refinancing by current Wellington owners.

Wellington’s traditional taxi services have been in decline for nearly a decade, accelerated by covid-19 lockdowns, a downturn in the regional economy and the rise of online competitors such as Uber.  In the last five years, annual patronage fell fifty per cent from 1.2 million rides to less than 600,000.

Wellington Combined is asset rich, holding property with a market value of more than one million dollars; but suffers ongoing operating losses with accumulated losses for the five years ending 2024 totalling nearly three million dollars.

About one-third of taxi licences held by Wellington Combined drivers sit unused, non-operational because driving is not profitable.  Taxi licences which changed hands for $50,000 ten years ago, now struggle to find a buyer at $2000.

It was a 2020 decision by Wellington Combined directors to reduce monthly levies charged non-operational members that blew open the dispute.  A number of active drivers alleged this reduction was made primarily to benefit directors personally, an allegation they deny.

When Companies Act court approval was given a ginger group of active drivers to challenge directors’ selective levy reduction, with the company to bear all litigation costs, directors promptly put Wellington Combined Taxis Ltd into administration.

Companies Act administration is intended to allow an insolvent or ‘near-insolvent’ company to take stock, blocking ongoing legal claims, while future prospects are considered.

Administration envisages creditors voting on possible future action: restructuring or liquidation.

The legal novelty facing Justice Boldt was that Wellington Combined Taxis creditors were at no immediate risk of being left unpaid.  In fact, during the court hearing, Bank of New Zealand was sufficiently encouraged about Wellington Taxis’ financial prospects that it extended the company’s overdraft limit by a further $200,000.

In the High Court, Justice Boldt imposed a two-step process: first, a vote by Wellington Taxis driver/shareholders on two rival proposals put forward; then second, a vote by creditors on whatever option shareholders approved.

One proposal would see Auckland Co-op Taxis buying out Wellington Combined Taxis’ assets, offering franchise opportunities to Wellington drivers.

The other proposal envisaged a promised $1.5 million injection of cash from a new investor, election of a new board, and operating revenue improved with an increase in monthly levies charged drivers.

Recognising that the vagaries of voting, having some shareholders holding multiple taxi licences, might see both proposals getting more than fifty per cent support, Justice Boldt ruled that the proposal getting the greater level of support was to be put to creditors for further approval.

Companies Office records show a sale to Auckland Co-op at two million dollars was approved, with payment to be made in twelve monthly instalments.

Rahman v. Shephard – High Court (5.06.25)

25.136

Mortgagee Sale: Golden Touch Investment v. Zhu

 

Ordered to pay $1.9 million shortfall on a mortgagee sale of her failed Auckland property development, Jian Tan was also ordered to pay $111,900 as an occupation rent for the period taken to evict her from the Massey property.  The High Court ruled out her negligence claim against a real estate agent marketing the property; in a mortgagee sale, real estate agents are acting on behalf of the unpaid creditor, not the defaulting owner.

Ms Tan’s five unit development on Massey’s Don Buck Road collapsed into a welter of claims and counter claims when her company Golden Touch Investment and Trade Co Ltd defaulted in late 2023 on a $3.8 million loan.

The loan was advanced by Jianzhong Zhu.  Ms Tan guaranteed repayment.

The High Court was told Ms Zhu’s loan was used to refinance existing lending at a time when the project was already in difficulty.  By the time repayment of Ms Zhu’s loan was due, the development was still not complete.  No code compliance certificate had been issued.

Following a later High Court hearing, Associate Judge Cogswell said Ms Tan did little more than raise vague and unsubstantiated allegations about the mortgagee sale process.

At heart of Ms Tan’s allegations was a complaint that Ms Zhu was party to a fraud, intended to get control of her Don Buck property at a cheap price.

Ms Tan alleged purchaser at the mortgagee sale, Cypress Investment Holding Ltd, was a front for Ms Zhu.  She claimed Cypress Investment was controlled by Ms Zhu’s spouse.  She had private investigators attempt to track down who was running Cypress; to no avail.

Legal costs mounted with multiple unsuccessful attempts by Ms Tan to block any mortgagee sale.

Ms Tan claimed Ms Zhu wrongly dismissed attempts to refinance.  The deal she offered would have seen part-payment to Ms Zhu, with her then first ranking mortgage reduced to a second-ranking security for the unpaid balance.

Ms Zhu was not obliged to enter into arrangements that increased the risk of further losses, Judge Cogswell said.  Golden Touch was in breach of its loan; Ms Zhu was entitled to enforce her mortgage, he said.

Ms Tan claimed Ms Zhu did not properly advertise the property when selling.  She also claimed damages for negligence from Harcourts Three Kings.

Photographs included in an information pack provided to potential bidders did not show the current state of the property to best advantage, she said.  They were taken at an earlier point in construction.

The court was told Ms Tan had refused access during the marketing period.  There was no opportunity to get better photographs.

Even if inadequate photographs were a defect in marketing the property, it was a defect caused by Ms Tan, Judge Cogswell said.  In any event, they correctly illustrated that the project was incomplete at time of sale, he said.

After purchasing at mortgagee sale, Cypress discovered the property was occupied and tenanted.

It was awarded mesne profits totalling $111,900 against both Golden Touch and Ms Tan for the seven month period from date of the mortgagee sale to the date of the court hearing.  Akin to the law of trespass, these damages are compensation for the wrongful occupation of property owned by someone else.

Both Golden Touch and Ms Tan were ordered to surrender possession.

Ms Tan’s claims against Harcourts Three Kings were dismissed.

Real estate agents acting on a mortgagee sale owe legal duties to their client, the secured creditor enforcing its security.  A defaulting debtor is not the client.

Any claims for losses arising from poor marketing of a property in a mortgagee sale are made against the secured creditor forcing the sale, not the real estate company acting as agent for the creditor.

Golden Touch Investment and Trade Company Ltd v. Zhu – High Court (5.06.25)

25.138

Fraud: Parata v. R

 

High Court confirmed two years’ imprisonment for Lance Parata, convicted of a $57,500 invoicing fraud where he altered invoices for work done by his employer’s Helensville vehicle workshop, with payment diverted to his personal Westpac account. 

What stung for employer NP Dobbie Maintenance Ltd was that much of this offending took place during covid lockdowns at a time when Parata manipulated staff, denigrating Dobbie management.

The High Court was told that Parata, on a $80,000 plus salary package, altered customer invoices on over thirty occasions through a period of at least two years.

He subsequently disputed the amount taken, eventually pleading guilty to charges amounting to $57,400.

He appealed his two year sentence, claiming insufficient credit was given for both his guilty plea and his history of drug and alcohol abuse.

His guilty plea came eleven months after being charged and after multiple preliminary court appearances.  Further credit would have required an earlier guilty plea, Justice Downs said.

Justice Downs questioned the direct relevance of Parata’s substance abuse on the sentence imposed.  Money stolen was not spent solely on drugs and alcohol; it was spent variously on food, tools, and equipment, plus drugs and alcohol.

No further credit, beyond three months already allowed by the trial judge, was granted.  There was no evidence that substance abuse ‘caused’ the offending.

Parata has a criminal record.  The trial judge added two months to her sentence calculation for this prior criminal history.

Parata v. R – High Court (5.06.25)

25.135

Rating: Marsden City Partnership v. Whangarei District

 

Struggling to capitalise on its $8.6 million purchase of a stalled Marsden Point subdivision, John and James Sax’s Marsden City Ltd Partnership placed temporary fences and water troughs across the 82 hectare property, then stocked the land with cattle, claiming the subdivided land should be rated as farmland.

Whangarei Distict Council said no.  The High Court agreed.

Subdivided into 87 separate land titles with infrastructure vested in the local council, all roading, lighting and drainage are in place.

Sax investors bought the project from Westpac receivers in 2017 for $8.6 million.  Original developers defaulted on a $56 million Westpac loan.

The subdivision formed part of Whangarei District’s anticipated satellite city of some 40,000 people north of Ruakaka, near Marsden Point.  It was previously farmland.

Subdivided lots proved difficult to sell.

Sax’s Marsden City Partnership also found sales slow.

They claimed the land, reworked into nine paddocks, now operated as a farm and should be rated as such.

The court learnt that farming operations did not cover costs, and were unlikely to ever do so.

Between 75 and 150 head of cattle grazed on site.  Pasture cover was not ideal for livestock.

High Court stated the Sax’s arrangement was no more than an attempt to achieve de facto postponement of rates as a farm, while awaiting a rise in market interest before resuming marketing of individual subdivided lots.

Land Valuation Tribunal ruled previously that it was very unlikely the reworked subdivision would ever be on-sold as a single farming unit.

Marsden City Limited Partnership v. Whangarei District Council – High Court (5.06.25)

25.134