Contract: Smith v. Jones

For him the alias is Smith; for her the alias is Jones: judicial disguises used in the High Court to discreetly hide identities of the successful businessman and the sex worker disputing ownership of a $500,000 advance.

Recently widowed, Mr Smith met Ms Jones at a massage parlour.  Over the subsequent four years their relationship moved from a purely commercial arrangement for sexual services to that of a sugar daddy and his mistress.  The court was told Mr Smith arranged for regular payments into her bank account of between $5000 and $2500 per month.  She accompanied him to social events, the theatre and concerts.  He met her son and paid for mother and son to travel overseas to visit their home country.  He bought her clothes, jewellery and an expensive car.  He paid $50,000 for renovations to her house and made a flat available for her son at a modest rental.  At Ms Jones suggestion, they began looking for a business investment. Ideas canvassed were a business or an investment property to rent out.  The intent was to provide a secure financial future for Ms Jones.  Nothing suitable was found.  Evidence was given that in December 2012 Mr Smith created a $500,000 term deposit in Ms Jones name.  Mr Smith was to describe this deposit as an expression of good faith, as a substitute for the purchase of investment assets originally planned.  Two months later their relationship ended with Ms Jones claiming the $500,000 deposit was a gift; Mr Jones claiming it was a loan.

Justice Andrews ruled that the term deposit was not a gift, it was a conditional loan.  There was an implicit agreement between the two that the loan was conditional on their relationship continuing and in the interim Ms Jones was entitled to interest accruing on the term deposit.  Her entitlement to the money ended when the relationship ended.  Ms Jones was ordered to repay the $500,000 advance together with all interest earned on the term deposit as from April 2013.

Smith v. Jones – High Court (30.10.14)

14.051

Real Estate: Maketu Estates v. Robb

An estate agent’s failure to tell his client that a second potential buyer was interested in a Maketu kiwifruit orchard cost PGG Wrightson $1.1 million; the extra amount the property could have sold for but for the misleading advice given the vendor by the agent.

Maketu Estates Ltd sold its Bay of Plenty 66 hectare kiwifruit orchard in November 2012 for $3.8 million.  It had been a tough two years for the industry and for local real estate agents: PSA bacterial disease had badly affected production, farm incomes and land values.  Kiwifruit packhouses were scrambling to get fruit for their production lines and were buying up orchards to ensure a guaranteed supply of fruit.

Maketu Estates sold to a local packhouse: DMS.  Maketu learnt days after the sale that a rival packhouse MPAC had also been interested.  The High Court was told that hours before DMS shook hands on the deal MPAC was still showing interest as a serious buyer, phoning the Wrightson agent for clarification of what was included in the sale.  MPAC was left with the impression there was no rush, while in fact the agent was at that time meeting with directors of Maketu prior to a final meeting with DMS.  The agent did not tell Maketu’s directors that another buyer was still keen.

Directors of Maketu Estates said at no time were they advised that MPAC was in the market and proposing to make a bid.  Having competing bidders would inevitably push up the price.

Justice Woolford said evidence indicated that Wrightson’s agent told Maketu’s directors DMS was the only buyer.  And not telling MPAC that negotiations were underway between Maketu and DMS was deceptive and misleading, he said.  His Honour surmised that the Wrightson agent held a subconscious bias in favour of DMS.  The agent had a very good relationship with the packhouse, having done a lot of work for the company over the years.  By contrast he had no previous working relationship with the MPAC staffer he spoke to on the phone, had not taken him on an earlier view of the property and did not recognise the significance of his interest in the orchard.

Wrightson and its agent were held liable for a breach of the Fair Trading Act and for a breach of the duties owed a client.  Damages of $1.1 million were the difference between the price paid by DMS and the amount that could have been obtained in a competitive market.  Wrightson’s claim for $88,000 commission on the sale to DMS was dismissed.  Its agent had failed to act in the best interests of Maketu Estates.

Maketu Estates v. Robb – High Court (29.10.14)

14.050

Lawyer/client: Torchlight Fund v. NZ Credit

He was one of law firm Buddle Finlay’s most valuable clients generating fee income in excess of ten million dollars over a fourteen year period.  The knowledge gained about George Kerr was so detailed that the High Court barred the firm from acting for financiers chasing him for $A33.6 million.

Around 2009, businessman George Kerr established the Torchlight Group.  It specialises in purchasing distressed assets.  In 2012, Torchlight borrowed $A37 million short term through Australian financier Mr John Grill to acquire debt from Bank of Scotland International.

The High Court was told this $A37 million loan was for 60 days only.  Repayment of principal was late, being paid progressively through 2012 and 2013.  The Australian financier is now demanding further payments for interest, fees and penalties accruing at the rate of $500,000 a week – a demand now in excess of $A30 million.  Torchlight has gone on the attack, saying late payment fees claimed are an unenforceable penalty.

Learning that Buddle Finlay was to act for the financier against Torchlight, Mr Kerr applied to have the law firm removed from the case.  He said Buddle Finlay knows all about his personal circumstances and business methods having worked for him for over a decade.  This is confidential information which the law firm should not be allowed to use against him.  Should Torchlight be held liable, it is likely the financier will chase him personally for money due, he said.

The law firm said any possible misuse of confidential information was “fanciful or theoretical”.  Justice Gilbert removed Buddle Finlay from the case.  Disqualification was the only effective way of avoiding any risk of the firm acting against Mr Kerr and his business interests, he said.  The financier argues Torchlight had the benefit of independent legal advice before taking up the short term loan.  This is legal advice provided earlier by Buddle Finlay itself.

Torchlight Fund v. NZ Credit – High Court (17.10.14)

14.049

Family trust: Harre v. Clark

It was the views of an 86 year old matriarch that won out in a dispute over the sale of eleven hectares of valuable land on the outskirts of west Auckland owned by a family trust.  The High Court ruled she did not act improperly when removing her daughter and a local solicitor as trustees following arguments over the method and timing of any sale.

The Harre family established a family trust in 1989 which took ownership of eleven hectares of farm land on Totara Road, Whenuapai.  The land is not economic as a farm, but has been used to run dry stock.  Now worth millions, its value is expected to increase as Auckland expands.

The Trust land is all that remains of a farm which has been in the Harre family since the 1860s.  At age 86, Lois Harre is the oldest living descendant.  Her descendants and their spouses are named as beneficiaries of the Trust.  The court was told there had been a family meeting in late 2009 with general support for a sale.  Dissension followed within the family about what should happen: one daughter looking for an immediate sale; a son looking to wait and subdivide later before selling.

Matters reached a head when two of the trustees, daughter Lynette Clark and solicitor Colin Lucas took steps to market the property and it was listed for auction in March 2012.  The auction was cancelled following objections by matriarch Lois and a son, Roderick.

Evidence was given that Lois then used her power of appointment in the Trust deed to appoint herself and son Roderick as trustees.  Colin Lucas was removed as trustee at the same time.   When daughter Lynette objected, she too was removed as trustee.

The High Court was asked to rule on who were now in charge of the Trust.  The two dismissed trustees claimed to still be trustees and they claimed the appointments of Lois and Roderick were made for improper reasons.  It was alleged that Roderick was attempting to misuse his position as trustee to buy some of the land cheaply.  It was also alleged Lois was angling to continue using the Trust land.  The court was told she lives on an adjoining property.

The power in a trust deed to appoint and remove trustees must be used for a proper purpose, consistent with the purpose of the trust and in the best interests of the beneficiaries as a whole.  Justice Brewer described Lois Harre as a determined and formidable person.  He said the dismissed trustees had failed to prove on the balance of probabilities that the two new trustees had been appointed for an improper purpose.

Harre v. Clark – High Court (16.10.14)

14.048

Sth Canterbury Finance: R. v. Sullivan, White & McLeod

While Allan Hubbard, the autocrat controlling South Canterbury Finance, developed a sainted reputation as benefactor for good causes his finance company was desperately hiding the extent of problem loans by window-dressing its balance sheet.  By moving problem loans off balance sheet prior to balance date and taking them back later, South Canterbury presented a healthier picture than justified.

Mr Hubbard died in September 2011 following a car crash.  He left behind a finance company under government control following a $1.6 billion bailout and criminal prosecutions against former directors of the company and its chief financial officer.  Poor lines of control within South Canterbury Finance and weak accountability caused evidentiary problems for prosecutors trying to sheet home criminal liability.  A single director, Edward Oral Sullivan, was convicted. On a charge of deception in relation to a 2006 transaction, he was held to have deliberately misrepresented who was the end purchaser of shares in a Hellaby Holdings subsidiary in order to defeat operation of the Takeovers Code.  He was also convicted of Securities Act offences for material non-disclosures of related party lending.

The most serious criminal charge faced by directors was an allegation that they used false financial statements to get a 2008 government guarantee of South Canterbury investors’ deposits.  This charge was dismissed when there was no proof that the government actually relied on the financial statements when admitting South Canterbury to the guarantee scheme.

The then Labour coalition in New Zealand was blindsided in October 2008 when the Australian government suddenly announced a federal guarantee of depositor’s funds.  This was designed to calm investors’ nerves in the face of worldwide banking instability and the threat of a run by depositors on banks.  Two days later, the Labour government announced a similar guarantee scheme for New Zealand deposits to prevent a flight of investor funds to Australia.  Within 48 hours South Canterbury applied to join the scheme.  Approval was given three weeks later.

The High Court was told South Canterbury provided copies of its most recent audited financial statements in support of its application.  It was alleged that the figures had been massaged.  There was evidence that South Canterbury management had a history of window-dressing its balance sheet to hide the extent of asset impairment.  The prosecution described methods used as being “purposefully structured to hide high risk lending” and moving “beyond the cavalier to the dishonest”.  One internal South Canterbury finance memo talked of “cheque-swapping at balance date” and the creation of a “façade”.

Evidence was given that South Canterbury’s parent company, Southbury Group, would acquire problem loans from South Canterbury shortly before balance date.  This removed any need to disclose the impaired loan which was now replaced in South Canterbury’s records with the injection of new funds to replace the non-performing debt.  After balance date the transaction would be reversed.  Asset impairments were understated as a result.  Management had no incentive to manage non-performing loans when they were being hidden from analysts and investors.  Any complaints within South Canterbury about the practice were waved away in autocratic fashion by Mr Hubbard.  Attempts by the auditor to keep tabs on what amounted to related party lending proved ineffective.

One example of window-dressing described in the High Court was false accounting entries made ten days before balance date in 2009 recording a fictitious transaction between Southbury, South Canterbury and Kelt Finance Ltd.  South Canterbury supposedly was advancing $10 million to Kelt Finance which in turn lent $10 million to Southbury which in turn paid $10 million to South Canterbury.  The effect of this fictitious money-go round was to misleadingly reduce related party indebtedness between Southbury and South Canterbury by $10 million and hide the fact that South Canterbury was in breach of loan limits with Southbury.

Justice Heath ruled that even if the financial statements used to obtain a government guarantee of investors’ funds were false, there was no evidence that the government relied on these financial statements before granting the guarantee.

There was evidence that in October 2008 there were such grave concerns about a total financial collapse that finance companies were being admitted to the scheme with minimal prior checks.  Government did not decide which financial organisations would be given a guarantee; that decision was delegated to the secretary of the Treasury.  The court was told applications were sent to the Reserve Bank for analysis.  Bank analysts gave a “negative assurance” in respect of South Canterbury’s application: they had no reason to believe it should not be approved.   The final decision remained with Treasury and was at the discretion of the secretary of the Treasury.  Evidence was given that there was no written record of reasons why the secretary of the Treasury gave approval for South Canterbury to be admitted.  He was not called to give evidence at the trial.

R. v Sullivan, White & McLeod – High Court (14.10.14)

14.047

Lease: Cornwall Park Trust v. Chen

Increased rents demanded by Cornwall Park Trust on its leased properties look to be too high when no bids were received for a Maungakiekie Avenue property abandoned after the annual rental increased 900 per cent.

Cornwall Park Trust Board in Auckland took a hard line against one leaseholder who abandoned her property after a twenty one year rent review raised the annual ground rent to $73,750.  She was liable to pay the cost of refurbishing the property up to standards demanded by the lease.

Young Xin Chen has been in dispute with Cornwall Park Trust after annual rent for her property jumped in 2009 from $8300 to $73,750.  She purchased the property at 21 Maungakiekie Avenue, Epsom in 2005 for $450,000 when the lease had four years to run before the next rent review.  Many properties in the area are owned by the Trust and leased on perpetually renewable, long-term ground leases known as “Glasgow” leases.  Leaseholders enjoy rights of occupation, while the Trust has residual ownership: in economic terms, the lessor’s interest is like a bond secured over the land with the value of the bond reset with each 21 year rent review.  Rentals are recalculated with each rent review at five per cent of the freehold property value excluding the value of improvements to the property.

The court was told Mrs Chen disputed the increased rental, retaining possession of the property for the next two years before surrendering the keys.

The Maungakiekie Avenue home was put up for auction by the Trust.  Terms of the lease entitled Mrs Chen to compensation for the value of the house and garage situated on the land if the property sold at auction.  No bids were received.

Evidence was given that the Trust subsequently refurbished the property to what it called “executive standard”, then rented out the property at a rate which is about two-thirds the $73,750 annual rental demanded of Mrs Chen.

The Trust Board sued Mrs Chen claiming lease payments at the new higher rate for the two years she remained in possession following the rent review and also claiming costs of repairs to the house.

Justice Ellis ruled that Mrs Chen was liable for two years rent at the old rate only.  Her Honour did not accept the Trust’s arguments that the lease required Mrs Chen to pay two year’s rental at the new higher rate and that she had lost her entitlement to compensation for the value of the house and garage.

Justice Ellis ruled that Mrs Chen was liable to pay some $119,000 for the Trust Board’s costs in getting the property to good order and condition.  Mrs Chen was in breach of lease terms requiring her to maintain the property in good condition and to repaint the house every five years.  The house was built in the 1920s.  It was no defence for Mrs Chen to say the house was in poor condition when she purchased it.  There was evidence that Mrs Chen had stripped from the house vanity units, doors and the stove before surrendering possession to the Trust Board.

The Trust Board did not seek to recover from Mrs Chen its cost in refurbishing the property above and beyond that required by the lease in order to have the house fitted out to an executive standard.

Cornwall Park Trust Board v. Chen – High Court (8.10.14)

14.046

Tax: Accountants First Ltd v. Inland Revenue

Wellington accounting firm Accountants First Ltd has been removed from the list of Inland Revenue approved tax agents after convictions for tax evasion.

Owned by Mr Imran Kamal and his wife, Accountants First has been in business since 2005.  The High Court was told that through 2006-2008 Mr Kamal was implicated in a tax scheme involving use of false invoices raised for non-existence IT services.  These invoices were used to support fraudulent GST claims.   The fraud came to light following criminal prosecutions against promoters of the false invoicing scheme: a Mr Anderson and a Mr Gilchrist.

In December 2011, ten months after Inland Revenue had commenced a tax investigation into both Accountants First and Mr Kamal, he elected to make a voluntary disclosure to Inland Revenue, arranging to repay tax due with interest and penalties.   Tax evaded by Accountants First totalled some $55,700.

In February 2013, Mr Kamal was sentenced to three months home detention and 150 hours community work after conviction on six counts of tax evasion.  Accountants First was convicted and discharged.

Accountants First challenged Inland Revenue’s decision to remove it from the list of approved tax agents.  Status as an approved tax agent gives considerable commercial advantages to tax accountants.  With client approval they have online access to client information at Inland Revenue.  This speeds up tax work, improving business efficiency. Evidence was given that Accountants First currently employs up to ten staff and handles about 1100 clients.

Justice Collins ruled that Inland Revenue followed the correct procedure: it had provided reasons and it had given Accountants First a chance to respond.

Inland Revenue said convictions for tax evasion were evidence of behaviour that undermined the integrity of the tax system.  Retaining Accountants First on the list of approved tax agents would undermine confidence in the system.

Pleas by Mr Kamal that he was remorseful and would be unlikely to offend again were prejudiced by his later behaviour when seeking name suppression on grounds that publicity would affect his wife’s health.  Evidence was given that Mr Kamal filed an affidavit stating that his wife was taken by ambulance to hospital following an overdose of sleeping pills.  Inquiries revealed there was no evidence of Mrs Kamal being at the hospital on the day in question.  When challenged, Mr Kamal stated he had taken his wife to the hospital, but they left without seeing anyone.

Accountants First Ltd v. Inland Revenue – High Court (6.10.14)

14.045

Zespri: Shanghai Neuhof v. Zespri International

The High Court dismissed claims by Chinese importer Shanghai Neudorf that Zespri was obliged to compensate it for fines totalling eight million dollars imposed by Chinese authorities for deliberate underpayment of kiwifruit import duties.  Shanghai Neudorf was the guilty party.  Courts will not support litigants where their claim is based on illegal or immoral behaviour.

Chinese authorities raided Shanghai Neudorf’s offices in June 2011 investigating underpayment of duty.  In China, evasion of duties is treated as a smuggling offence.   The company was convicted and fined.   Its managing director, Mr Liu, was also convicted and jailed.  Zespri suspended kiwifruit exports to China while the investigation was underway.  It later terminated its relationship with Shanghai Neudorf, appointing a new importer.

The court was told an assessment of duty payable is not straightforward because the final price is not known until product is sold in the Chinese market.  Zespri and Shanghai Neudorf fixed a value for imports, described as an Agreed Assessable Value.  It was for Shanghai Neudorf to pay customs duty based on this value.  Adjustments were made later on the basis of actual sales and a final liability for import duties determined.

The Shanghai People’s Court found that Shanghai Neudorf was liable for payment of import duties.  It was the purchaser of Zespri’s product.  Shanghai Neudorf was not selling on consignment as Zespri’s agent.

After conviction, Shanghai Neudorf sued without success in the New Zealand courts alleging Zespri was liable to indemnify it for the $8 million fine.  Justice Courtney said it could not recover.  The claim fell foul of the ex turpi causa rule: as a matter of public policy the courts will not enforce any claim based on a wrongful act.

The amount of unpaid duty totalled approximately $7.5 million.  Zespri is defending a separate claim by Shanghai Neudorf that Zespri is liable for this amount.

Shanghai Neuhof v. Zespri International – High Court (26.09.14)

14.044

EQC: Michalik v. Earthquake Commission

It was a dispute over repairs to only part of a small Wellington retaining wall but the Earthquake Commission poured a lot of resources into the case to entrench a rule that depreciated replacement cost not current replacement cost is the measure of compensation for wall collapses.

Mr Michalik took on the Earthquake Commission over compensation for damage following the partial collapse of a 1.5 metre high retaining wall at his Highbury home after heavy rain in July 2012.  The wall had been built in the 1970s from hollow triangular concrete blocks cemented in place.  It was not reinforced.  There is no drainage.  The wall does not comply with current Building Act requirements.

The Commission accepted liability as natural disaster damage.  Mr Michalik argued he was entitled to “new for old”: repair up to current building code requirements. 

Under the Earthquake Commission Act, retaining walls within 60 metres of a home are covered for indemnity value.  The Commission assessed the value of the land affected by the landslip at $4050 and the value of the damaged retaining wall at $3130 – collectively $7180.  Replacement cost for repair to current code requirements was estimated at over $18,000.

The High Court ruled that $3130 was the correct figure as compensation for damage to the wall .

It can be difficult to establish a value for a retaining wall alone.  Where a retaining wall is a substantial feature of a building construction, a separate value for the wall can be obtained by establishing a market value for the property with and without a wall in place.  In most cases a retaining wall is too small a part of an overall valuation to be separately valued.  In these instances, depreciated replacement cost is the appropriate methodology, Justice Williams said.

For Mr Michalik’s wall, determining depreciated replacement cost was a three step process.  First: the cost was estimated of building a retaining wall as close as possible to the damaged wall in materials and design (even though such a wall would not comply with current code requirements).  Secondly: depreciation was deducted.  A retaining wall has an assumed life of 80 years.  Mr Michalik’s wall was built in the 1970s.  Depreciation at 46% was deducted.   Thirdly: GST was added to the depreciated value.

On the figures before the court, it will cost Mr Michalik at least an extra $15,000 above the $3000 received from the Commission  to reinstate his damaged retaining wall.

Michalik v. Earthquake Commission – High Court (17.09.14)

14.043

Feltex: Houghton v. Saunders

The over three thousand disgruntled Feltex investors who joined a class action demanding compensation after the 2004 public float were left bereft after a High Court ruling that the float prospectus was not materially misleading as to content or omissions and that even if it were no compensation would have been payable since the share price did not drop noticeably immediately after the float.

Shareholders buying into Feltex in 2004 saw the share price drop by two-thirds over the next two years, with Feltex then going into liquidation.  A class action followed, claiming investors were misled when investing.

The 2004 public float enabled Credit Suisse First Boston to sell down its interest in carpet manufacturer Feltex.  While the prospectus identified numerous risks facing the business it generally portrayed an improving financial position for the company.  The issue price at $1.70 per share implied a gross dividend yield of 9.6%.  Six months after the float, directors reported trading results that were up on the previous period, announcing an interim dividend 15% higher than the interim dividend projected in the prospectus.  Then two months later, directors warned of a profit downgrade.  The quoted share price all but halved over the next two days trading.

Not surprisingly, investors considered they had been stung: the company’s prospects had been oversold in the float prospectus.  The Securities Commission investigated.  In a 2007 report, it concluded that the Feltex prospectus was not misleading in any material respect.

Justice Dobson reached the same conclusion after an eleven week hearing in the High Court.  In their class action, investors alleged the prospectus was misleading under a number of broad headings: undisclosed adverse trading trends; misstatements or omissions as to business risks; misleading or unreasonable assumptions as to future financial performance; misleading presentation of financial data; misstatements regarding management’s equity incentive plan; discrepancies between descriptions of how the final price would be set and how the book build did take place; and misrepresenting share value by painting Feltex in a more positive light than was justified.

Justice Dobson said the test as to whether a prospectus is misleading is through the eyes of a prudent non-expert who at least has a basic understanding of the narrative.  A prudent non-expert who does not understand a material part of any prospectus is obliged to get clarification before proceeding.  Content does not have to be “dumbed down” for less sophisticated readers.  The Feltex prospectus was 148 pages long.

There is some sympathy for investors where cautionary signals and descriptions of risk are buried near the end of a long document, His Honour said, but this was not such a case.  The Feltex prospectus signalled potential risks upfront.

In the investment statement headed “What are my risks?” Feltex included an extensive disclaimer cautioning potential investors not to place undue reliance on forward-looking statements.  Justice Dobson said this disclaimer removed the basis for any claim that investors were entitled to rely on prospectus projections.

While there were justifiable criticisms of some content in the prospectus, he said, none of the criticised content was material.

Relying on expert evidence regarding efficient market theory, Justice Dobson said no damages would be payable even if there had been material misstatements or omissions in the prospectus.  Efficient market theory stipulates that the market price for publically traded shares will quickly assimilate the price effect of new information.  Once a less than fully informed market becomes fully informed, the impact of new information is very quickly reflected in the share price.

Feltex said since the share price exhibited no significant drop post-float until nine months after the prospectus was issued then any misstatement or omission in the prospectus was, nine months later, no longer relevant to the market price.

Investors had the opportunity to sell into the market at any time, rather than waiting until Feltex went into liquidation and then attempt to recover the price paid.

Houghton v. Saunders – High Court (15.09.14)

14.042

Belgrave Finance: Belgrave Finance v. Schofield & Buckley

Masterminds behind a commercial fraud against investors in Belgrave Finance have been ordered to pay $8.6 million dollars damages following action taken by insolvency specialists KordaMentha.

Belgrave Finance went into receivership in 2008.  Subsequent investigations found at least thirty per cent of the finance company’s loans were advanced to parties associated with Belgrave, a lending policy grossly in breach of the finance company’s trust deed which limited related party lending to two per cent.  Two Belgrave directors and Belgrave’s legal adviser were jailed for their part in the fraud.  Criminal penalties might give some satisfaction to investors, but that alone does not put money back in their pocket.

KordaMentha, acting as both receiver and liquidator of Belgrave Finance took civil action to recover compensation for funds lost.  A detailed investigation by KordaMentha identified that a Mr Raymond Schofield was the driving force behind Belgrave Finance.  Whilst not a director, he “pulled the strings” controlling company management.  Through a web of companies and a discretionary trust, Mr Schofield was the ultimate owner of Belgrave.  Over thirty per cent of Belgrave loans went to Mr Schofield and businesses associated with him.  The court was told many of these loans had unclear or inadequate documentation, and in some cases no documentation at all.  Accounting records were fudged to hide the fact that Mr Schofield was the borrower.

Justice Fogarty ruled that Mr Schofield was personally liable to pay damages for his part in dishonestly assisting Belgrave directors with the improper transactions.

Belgrave director, Mr Shane Buckley was also ordered to pay damages.  Justice Fogarty said Mr Buckley was in breach of his duties to the company by making the Schofield loans and actively concealing them.

Mr Schofield and Mr Buckley were held jointly liable to pay $8.6 million.  The court was told Mr Buckley was adjudicated bankrupt just after the High Court hearing.

Legal action by KordaMentha against Mr Stephen Smith, another Belgrave director, was suspended because Mr Smith became bankrupt prior to the hearing.

Belgrave Finance Ltd v. Schofield & Buckley – High Court (12.09.14)

14.041

Insurance: QBE Insurance v. Wild South

Where an insurance policy provides for automatic reinstatement of cover following loss then cover does continue without a break.  If an insurance company subsequently gives notice cancelling cover, it must pay for any losses arising in the interim prior to cancellation.

The Court of Appeal has definitively settled the effect of automatic reinstatement clauses in insurance contracts.   Operation of these clauses was at issue after successive earthquakes in Christchurch during 2010 and 2011.  Insurance companies argued they had an unspecified time within which to decide whether there had been “automatic” reinstatement of cover and that they could retrospectively cancel cover after a later earthquake had caused further loss to insured buildings.

The Court of Appeal ruling followed consolidated appeals by three different insurance companies: QBE Insurance, Vero Insurance and Lloyds.

The Court ruled that where there is an “automatic reinstatement” clause, cover resumes immediately following an insured loss.  Where cover is subsequently cancelled, notice of cancellation operates prospectively, not retrospectively.  A further or increased premium can be levied following automatic reinstatement.

QBE Insurance v. Wild South – Court of Appeal (10.09.14)

14.038

Ports of Auckland: Ziegler v. Ports of Auckland

A High Court challenge failed to overturn a trespass notice issued by Ports of Auckland against a former employee it alleges was disrupting port operations.  In addition, notice barring a union delegate from Port premises was upheld. 

In recent years, industrial unrest on the Auckland waterfront has received considerable media attention.  Ports of Auckland management say productivity must improve.

In November 2013, a trespass notice was given to former employee Kenneth Ziegler warning him to stay out of the Port.  He had been dismissed two months previously after allegations he had threatened to kill Port of Auckland’s general manger (operations).  He said a trespass notice prevented him from working for a private stevedoring company operating at the Port.

Ports of Auckland conceded that the waterfront area is a “quasi public space”.  Several thousand people access the Port daily: employees of the Port, staff from government departments and private contractors, as well as seamen crewing vessels docked in port.  Justice Woolford ruled there were no grounds for the court to review this trespass notice.  Issuing a trespass notice was not a public issue justifying judicial review; it was a private matter between Mr Ziegler and his former employer.  The fact that Mr Ziegler now cannot access the port to work for a private stevedoring company or to crew a vessel is an unfortunate but inevitable consequence of his previous behaviour, His Honour said.

In January 2014, Ports of Auckland advised union delegate David Phillips that he was barred from the Port.  He previously enjoyed unfettered port access assisting members of the Maritime Union and inspecting vessels on behalf of the International Transport Federation.  Two months later, Mr Phillips resigned as union delegate with the intention of working on the waterfront part-time as a stevedore.  The court was told access was denied following blog posts written by Mr Phillips labelling non-union labour as scabs, saying they should “live every day fearing a backlash and looking over their shoulders”.  Mr Phillips said refusal of access was in breach of his Bill of Rights entitlement to freedom of movement.  Justice Woolford said the Bill of Rights does not apply to commercial operations run by Ports of Auckland.  He ruled Ports of Auckland acted within the law by taking steps to protect both its commercial operations and the interests of its employees.

Ziegler v. Ports of Auckland – High Court (10.09.14)

14.039

Tax: ASB Bank v. Inland Revenue

ASB Bank is under investigation for tax avoidance over investments in Japanese bonds.  Following a preliminary court hearing, the High Court refused ASB access to Inland Revenue internal files about the investigation.

Inland Revenue alleges tax avoidance in respect of foreign exchange losses arising on ASB investments in Japanese government bonds.  In particular, the Revenue is looking closely at the purpose and effect of hedging arrangements used by ASB.  The Bank denies any wrongdoing.

ASB told the High Court there was no tax avoidance, but if there was then no penalties should be imposed because it did not take an “unacceptable tax position” when filing its tax returns.  The Bank was seeking Inland Revenue internal documents to find departmental views which might support its argument that no penalties should be imposed.

The extent of tax avoidance alleged by Inland Revenue was not made public at the preliminary High Court hearing. 

There can be genuine differences of opinion between tax specialists as to the tax effect of a particular transaction.  Even if later found to be in the wrong, a taxpayer can be excused penalties if the tax position taken was “likely or not to be correct”.  This requires evidence that there was objective support for the tax position taken, even if it later proved wrong.

ASB Bank wanted Inland Revenue to hand over all emails, meeting notes and minutes relating to the investigation.  This would include the musings and debates of all staff: senior and junior.

Inland Revenue said there are strong public interest arguments against making disclosure.  Fair and frank exchanges of view between staff would be discouraged if they knew their comments would be disclosed.

Justice Asher ruled against the Bank.  Informal internal expressions of view can only be understood in context.  There may be a myriad of qualifying factors.  Comments may have been based on a lack of knowledge about the subject, or made with a misunderstanding of the background facts, or a particular internal document may be drafted as a contrary view taking the stance of a devil’s advocate.

ASB Bank Ltd v. Inland Revenue – High Court (10.09.14)

14.040

Maori: Paki v. Attorney-General

Recognising that its ruling might open future political claims by Maori for resource rents on water used to generate hydroelectric power, the Supreme Court has tip-toed around questions of riverbed ownership.  Judges are signalling that there is no general rule that Maori land ownership extends to rights over an adjoining river. To claim ownership, iwi and individual hapu need to prove rights over a river arising by custom and usage which have not been lost either by sale of adjoining land or by passage of time.

Mighty River Power has been a nervous bystander to claims for government compensation by Pouakanui hapu at Mangakino in the central North Island for alleged Treaty of Waitangi breaches in nineteenth century purchases of land.  Mighty River generates power from neighbouring dams at Maraetai and Whakamaru.

Pouakanui alleges a loss of mana in sales of hapu land to the Crown in 1887 and 1899 because the Crown did not tell them that the land sale included rights to the adjoining Waikato River.  It claims compensation for this loss of mana.  While Pouakanui has presumed all along that rights to the riverbed were sold in the nineteenth century, this might not be the case.  Following a landmark preliminary hearing in 2012 on the general principles applying to riverbed ownership (which depend upon whether or not a particular stretch of river is “navigable”) the Supreme Court left open the question of who owned the bed of the Waikato river at Mangakino in the 1880s.  The river at Mangakino was then a series of rapids passing through a steep gorge.

Revisiting the general question of river ownership in the Supreme Court, Chief Justice Elias  said there is no universal custom within Maoridom linking riverside ownership with riverbed ownership.  Any general rule is subject to proof of custom and usage drawn from the local history of a particular Maori community.   Land conveyancing rules applied by colonial settlers adopting English law do not apply to questions about Maori customary ownership of riverbeds.

Pouakanui did not provide evidence in court of any customary rights over the Waikato river at Mangakino; it simply claimed damages on the presumption that riverbed rights had been lost on sale.

The Supreme Court dismissed the Pouakanui claim for damages, regardless of whether the hapu had retained ownership of the Waikato river at Mangakino or not.  If Pouakanui enjoyed customary rights of ownership over the riverbed, then ancestors of the hapu would have been aware that selling the land would include a sale of riverbed rights, the court ruled.  Conversely, if the hapu did not enjoy customary rights it did nor suffer any loss in a sale of the riverbed and there is no basis for any claim.

Evidence was given that in 2002 and 2003 certificates of title were issued in the name of the Crown for the riverbed beneath both the Maraetai and Whakamaru dams.

Paki v. Attorney-General – Supreme Court (29.08.14)

14.037

Insurance: Ridgecrest v. IAG

Policy wording enabled a Christchurch building owner with an underinsured property recover more than the amount nominally insured because a reset clause in the policy meant the amount insured was reset after each of a successive series of earthquakes.  While multiple payouts resulted, the owner was not entitled to more than the replacement cost of the building.

IAG Insurance disputed the amount payable to Ridgecrest NZ Ltd following damage to Ridgecrest’s Gloucester Street building during a series of four earthquakes in 2010 and 2011.  IAG’s liability under the policy was stated as a maximum of $1.984 million in respect of each single “happening”.   This figure was less than the replacement cost of the building.

During the period of insurance, the Gloucester Street building was partially damaged in a series of earthquakes before being written off as a total loss following severe quakes in February and June 2011.  Taking a lead from marine insurance, IAG argued the earlier damage had “merged” into the total loss claim and it was liable to pay only the maximum sum fixed under the policy at $1.984 million.  The Supreme Court disagreed.  IAG’s policy wording entitled Ridgecrest to recover separately for losses arising from each separate earthquake.  A marine insurance “merger” argument could not apply when the policy reset after each of the separate events.  Ridgecrest could recover damage caused by each of the three initial earthquakes (up to the policy limit of $1.984 million for each quake) as well as $1.984 million for the total loss following the June 2011 quake.

But, as a general principle of insurance law, any insured cannot be placed in a better position than existed before the loss.  This meant Ridgecrest could recover more than the nominal sum insured of $1.984 million but could not receive compensation in excess of the replacement value of the building.   The court was not asked to rule on the amount actually payable.

Ridgecrest v. IAG – Supreme Court (27.08.14)

14.036

Fair Trading: Godfrey Hirst (NZ) v. Cavalier Bremworth

The dominant headline message in any advertisement must not be misleading the Court of Appeal ruled.  It is a breach of the Fair Trading Act to bait advertising with misleading headlines to attract custom and then heavily qualify in the fine print what is on offer.

Budget airlines and car hire companies have been notorious for advertising cheap deals which on closer examination prove to be anything but cheap.  The Court of Appeal set out rules governing headline messages when considering a legal challenge to Cavalier Bremworth’s 2013 launch of its new Habitat range of synthetic carpets.  Its advertising highlighted the resistance of this new carpet to wear and to stains, emphasising what it called “superb warranties” offered in support of the new product.  The fine print qualified these warranties out of existence.

The Court of Appeal said media campaigns must be judged from the perspective of all those targeted by an advertisement, excepting those consumers who are unusually stupid or whose reactions to the advertisement are extreme or fanciful.  In reading an advertisement, consumers are expected to take some reasonable care in interpreting the message.  But advertisers are still required to pitch an advertisement at the level expected of their target market bearing in mind the knowledge and acumen of customers they seek to attract.

The Court of Appeal was heavily critical of Cavalier’s 2013 advertising campaign.  The dominant message promised stains would wipe off easily, the carpet would not soil in its lifetime, the carpet would hold its colour for 25 years, the carpet would not crush under heavy foot traffic but would spring back and through its lifetime the carpet would be anti-static.  This dominant message was heavily qualified in a separate 23 page warranties booklet: the warranty was provided by a third party, not Cavalier; the warranties did not apply to carpet supplied for time-share properties or rental properties; the warranty did not extend for 25 years but reduced after 15 years; the warranty lapsed if the purchaser did not regularly vacuum the carpet and have it professionally steam cleaned every two years.  Excluded from the warranty against staining was virtually everything that conceivably could cause a stain, with that stain exclusion itself incorrectly cross-referenced to the wrong page of the warranty booklet.

In deciding whether a particular advertisement is misleading, it is the “dominant message” or “general thrust” which is critical, the Court of Appeal said.  It is not a case of separately analysing each individual statement; it is the overall impression which counts.  Any significant qualification from the headline message must be sufficiently prominent to come to the attention of targeted customers.  The greater the disparity between the headline message and the qualifying information, the greater is the requirement to draw customers’ attention to the true position in the clearest way possible.

Given that advertisements are designed to attract custom, it is no defence to a complaint about a misleading advertisement to say any customer would be made aware of all qualifications and exclusions by the point of sale; it is a breach of the Fair Trading Act to use a misleading headline message to draw a customer into a website or physical store and then later disclose the true position.

Godfrey Hirst (NZ) Ltd v. Cavalier Bremworth – Court of Appeal (27.08.14)

14.034

Joint Venture: Worldwide v. NZ Venue & Event Management

After gaining total management control in 2006 of the 12,000 seat Vector Arena in Auckland, the Australian-based Jacobsen family has cheerfully neglected to pay in full the $2.69 million compensation due to its former joint venture partner, Florida-based Worldwide Entertainment Group.  The Supreme Court imposed court-ordered interest to run from 2006 to such time as final payment is made.

Worldwide, together with the Jacobsen family, were parties to a joint venture for the construction and operation of the Vector Arena.  Worldwide held a 25% stake.  This joint venture came to an end in January 2006 when a US Federal Court in Florida put Worldwide Entertainment into receivership.  Appointment of receiver amounted to a “change of control” which triggered pre-emption rights in the joint venture agreement.  Jacobsen interests immediately assumed full management control of Vector Arena’s operations.  Convoluted litigation followed over what compensation was payable to Worldwide for its former 25% stake.  It was not until a court ruling in November 2011 that Jacobsen interests were ordered to pay Worldwide $2.69 million within 28 days, with interest running on any delayed payment.  Rather than making payment, Jacobsen argued court-ordered interest can be awarded only on the “recovery of debt or damages” and this was neither. It was a declaration as to the value of an interest in a business.

The Supreme Court ruled that the phrase “debt or damages” is not to be read too narrowly. It covers all cases where a claim is made for money.  In this case the appointment of a receiver triggered an immediate transfer of Worldwide’s stake in the joint venture to Jacobsen.  The joint venture agreement was silent on when payment was to be made, so the assumption is that payment and transfer were simultaneous, the Supreme Court said.  Worldwide was entitled to payment from early 2006, even though the amount to be paid was not finalised until late 2011.  Interest was payable from when notice of pre-emption was given in 2006.

The rates for court-ordered interest are set by government regulation.  They vary depending on inflation.  In this case, Jacobsen interests were ordered to pay 7.5% on the amount outstanding for the period 2006 to mid-2011, and 5.0% from mid-2011 to full payment.

Worldwide NZ LLC v. NZ Venue & Event Management – High Court (24.11.11) & Supreme Court (11.08.14)

14.035

Asset freeze: Twentieth Century Fox v. Dotcom

Kim Dotcom has been forced to disclose the extent and value of his worldwide assets to Hollywood film companies who allege he profited from the piracy of movies through his Megaupload file sharing site.  His extravagant lifestyle together with promises to fund the Internet political party in New Zealand and further promises to pay a US$5 million “bounty” to any whistleblower dishing the dirt on US government behaviour and Hollywood business practices raised suspicions that Mr Dotcom was not complying with an existing court order which was presumed to have frozen all his assets.

The US government is seeking to extradite Mr Dotcom who faces criminal prosecution in the United States for alleged copyright infringement.  As part of those proceedings, assets held in Germany, Hong Kong, the Netherlands, the Philippines, the United Kingdom, Australia and New Zealand were frozen with Mr Dotcom permitted to draw down a monthly allowance for living costs and legal expenses.

Collectively, Hollywood film studios suspect the Megaupload site earned profits of about US$175 million.  At its peak, the Megaupload site was the thirteenth most visited site on the internet with an average of fifty million visits a day.   Site visitors who uploaded copyrighted material received rewards, including payments in cash, calculated by reference to how often their files were downloaded by others.

A consortium of Hollywood studios is claiming over $US100 million against Mr Dotcom alleging copyright infringement.  They fear Mr Dotcom might be running down his assets when they saw him splashing around cash at a time when they thought all his assets had been frozen.  He resisted their court application for a list of all his assets.  In the High Court, Justice Courtney ruled that disclosure is required.  She said the Hollywood studios have a good arguable case for damages in excess of the $11.8 million dollars in New Zealand assets currently subject to a freezing order.  The Motion Picture Association of America provided over 190 pages of evidence summarising a FBI investigation into the operations of Megaupload as tenable evidence of copyright infringement. 

Twentieth Century Fox v. Dotcom – High Court (30.07.14)

14.032

Belgrave Finance: R. v. Hamilton

While not directly involved in management of failed finance company Belgrave Finance, Hawkes Bay lawyer Hugh Edward Staples Hamilton received a longer jail sentence at four years and nine months imprisonment than two Belgrave directors also convicted of fraud related offences.

Hamilton was convicted in May 2014 on fourteen charges of being party to theft by a person in a special relationship.  This followed legal advice and assistance provided to a Mr Raymond Schofield who acted behind the scenes at Belgrave Finance extracting funds for his own personal business ventures in breach of related party lending rules in Belgrave’s debenture trust deed.

The 1200 investors in Belgrave Finance, most retired and on fixed incomes, have received just under ten cents in the dollar since Belgrave went into receivership in May 2008.  Estimates of the amounts lost in lending to Schofield range from $12.5 million to $14.4 million.

The High Court was told Schofield was a valuable client for Hamilton.  He provided legal assistance for Schofield’s plans from 2005 to buy into Belgrave Finance while hiding his involvement in the company.  Hamilton set up a “clean” trust for Schofield, with Schofield’s mother-in-law as the settlor and named beneficiaries being the husband of each of her children – which would include Schofield.  Through this trust, an intermediary company, and compliant directors of Belgrave, Schofield controlled Belgrave Finance.  Hamilton, while notionally acting as legal adviser to Belgrave Finance, treated Schofield as his primary client.  Hamilton was convicted for his role in helping Schofield milk funds from Belgrave Finance.  Through his law firm, Hamilton prepared documentation for Schofield loans, backdating some documents at Schofield’s request and processed loan advances through his firm’s trust account.  Justice Faire said one of the aggravating features of Hamilton’s offending was the fact it arose through his role as a lawyer.  

Hamilton was sentenced to four years nine months imprisonment.  Belgrave directors Shane Buckley and Stephen Smith were earlier sentenced to three years and four years imprisonment respectively.

R. v. Hamilton – High Court (04.07.14)

14.030

Maori: NZ Steel v. Butcher

Stalled Treaty negotiations between government and Waikato iwi are hampering operations at the Glenbrook steel mill owned by Australian listed company Bluescope Steel.  Further areas for mining were opened up after the High Court released Bluescope from a 25 year old court undertaking not to mine ironsand from four identified culturally sensitive sites.

Government granted NZ Steel, now a Bluescope subsidiary, a one hundred year licence in 1966 to mine ironsands on the coast near Waiuku.  Under New Zealand law, the crown owns oil and mineral resources regardless of who owns the land on which it is found.  About twenty per cent of the NZ Steel licence area is described by Ngati Te Ata as wahi tapu: sacred ground where human remains are buried.  The original mining licence did exclude one area where there is a known burial ground.  Local sensitivities were engaged in 1990 when mining exposed parts of a human skeleton.

The High Court was told tripartite discussions started in 1990 between government, NZ Steel and representatives of Ngati Te Ata over how best to protect local interests.  Fearing that its mining concession would be unilaterally reduced by government, NZ Steel filed High Court proceedings to protect its position.  As a temporary measure, NZ Steel gave a court undertaking that it would not start mining in the affected areas until a court hearing took place.  A hearing date was set for early the following year, but no trial ever eventuated.  Instead prolonged and protracted negotiations have continued.

Evidence was given that over the ensuing twenty-five years, various governments have faced an ever-changing queue of claimants and an ever-changing list of demands.  Initially, Ngati Te Ata indicated it would accept mining in the wahi tapu areas, provided mining royalties were paid direct to Ngati Te Ata rather than the crown.  Nothing eventuated after neighbouring iwi claimed customary rights over the same land, claiming a share of any royalties.  Further negotiations stalled completely in 1998 when Ngati Te Ata decided to merge its wahi tapu claim with an overall Treaty settlement claim, stating its bottom line demand is a $170 million settlement.

The court was told NZ Steel has all but exhausted mining in the southern part of its licence area bar the wahi tapu areas.  It asked to be released from the earlier court undertaking since the wahi tapu areas provide the most economic prospects for continued mining.

The High Court released NZ Steel from its undertaking.  The undertaking was intended to be temporary; it was never intended to extend beyond the proposed trial date.  Justice Fogarty said ongoing arguments about royalty entitlements are a dispute between Ngati Te Ata and government.   NZ Steel is entitled to have the 1990 litigation brought to an end, he said.  Ngati Te Ata has not seen any need to push on with the 1990 litigation.  Instead it filed substitute court proceedings in 2013 under a different name.

NZ Steel v. Butcher – High Court (04.07.14)

14.031

Real Estate: Hokitika Property Ltd . Hurt

An immediate paper profit of some $217,000 was at stake when a company controlled by two chartered accountants with Gilligan Rowe and Associates failed in its High Court claim that there was a binding contract for its quick-fire purchase of an inner-city Auckland property from a cash-strapped family. 

Living at the O’Neill Street property in Ponsonby were Maria Hurt (who is on a benefit) and her daughter Wendy (who is separated and sole breadwinner for her four children).  The court was told they were in financial difficulty.  They were $3000 in arears on mortgage repayments.  Selling the O’Neill Street property and buying a cheaper property was being considered. 

Evidence was given that Wendy Hurt approached a Mr Toilolo, a South Auckland accountant and financial adviser who presents a radio programme on financial issues.  By coincidence, they discovered they were related.  Mr Toilolo offered to help and arranged to meet the family to discuss options.  He arrived late at O’Neill Street for their meeting, at a time when Wendy Hurt was leaving for work.  Mr Toilolo had with him a pre-prepared offer for sale of the property at $790,000 to a company called Hokitika Property Ltd: a company controlled by two chartered accountants with Gilligan Rowe, Mr Mathew Gilligan and Mr Salesh Chand.  Their valuer had earlier estimated the property’s value to be $872,000.  The court was told the then government valuation was approximately $900,000.  An independent valuation was to later assess the value as being $1.05 million at the time the sale was being negotiated.

Pressed as she was in a hurry to get to work, Wendy Hurt signed at $790,000 but asked Mr Toilolo not to tell the purchasers she had signed before he tried to get the price increased.  Wendy left and her mother Maria also signed after further discussions with Mr Toilolo.  He told Mr Chand the Hurts were looking for a better price.  Mr Chand authorised a $5000 increase and Mr Toilolo amended the agreement to $795,000.  Hokitika Properties thought it had a binding contract, but the Hurts refused to initial the amended price at $795,000.

In the High Court, Hokitika Properties said there was an agreed deal at $790,000 which had been varied by agreement to $795,000.

Judge Doogue ruled there had never been any binding contract in the first place.  The Hurts signed at $790,000 but the existence of their agreement was never communicated to Mr Chand at Hokitika Property.  He had been told only they were looking for a better price.  Hokitika Property had responded by offering $795,000 but this was never accepted by the Hurts.  There was no sale.

Hokitika Property Ltd v. Hurt – High Court (03.07.14)

14.029

Defamation: Rafiq v. Meredith Connell

The legal profession is placed in a special position when it comes to defamation: anything said in court and everything said or written when preparing for a court hearing enjoys an absolute protection from actions for defamation.  Mr Razdan Rafiq faced a high hurdle in a claim for five million dollars against Auckland law firm, Meredith Connell, for alleged defamation.

As Crown Solicitor for Auckland, Meredith Connell appears in court on behalf of many government departments.  Like all good legal firms, its job is to represent its clients’ position without fear or favour.  The High Court was told Meredith Connell acted for the Immigration Service in 2013 defending a defamation action brought by Mr Rafiq against the Service.  Mr Rafiq subsequently sued Meredith Connell alleging he was defamed by unnecessary and damaging statements made about him in the written and oral submissions made by the law firm while acting for the Immigration Service.  

Judge Bell struck out the claim against Meredith Connell.  The Defamation Act grants an absolute privilege to lawyers in respect of what is done in the course of preparing for trial and conducting a trial.  Even if Meredith Connell had made defamatory comments during the trial, or in the course of discussions with their client about the trial, the firm could not be sued for defamation.  The policy behind the rule is that lawyers and judges should not be hindered in their work by the threat of defamation actions being used as a tactic to silence them.

Mr Rafiq also alleged he had been defamed in a December 2013 email sent by Meredith Connell’s IT manager to the Police.  Absolute privilege under the Defamation Act did not apply to this email.  It was an administrative response to a request for information.  Attached to the email was a string of prior emails containing comments which reflected badly on Mr Rafiq.  Judge Bell was moved to say this was a case of self-inflicted defamation in that many of the comments in the email string presenting Mr Rafiq in an unflattering light were made by Mr Rafiq himself.  Judge Bell said the IT manager’s publication of the emails was protected at common law by a qualified privilege.  This privilege factored in the identity of the publisher (a law firm), the readership (the NZ Police and not the wider public), the context (ongoing concern by both Meredith Connell and the Police about Mr Rafiq’s behaviour) and the subject matter (the element of harassment in some of Mr Rafiq’s emails).

Mr Rafiq also sought to have Meredith Connell held liable for an allegedly defamatory news report published on a commercial website: lawfuel.co.nz.  This report summarised his 2013 defamation action brought against the Immigration Service.  Meredith Connell denied that any of its staff wrote the report.  Judge Bell said this claim would be struck out also.  The Defamation Act gives a qualified privilege to any fair and accurate report of court proceedings.  Mr Rafiq criticised the report as not being fair or accurate, but Judge Bell disagreed.  There was comment in the lawfuel report on the fact that the High Court judge had referred to Mr Rafiq’s use of insulting and contentious language and to Mr Rafiq’s attacks on the integrity of the court and his scurrilous allegations against judicial officers but these references were not highlighted or unfairly reported, Judge Bell said.

Rafiq v. Meredith Connell – High Court (02.07.14)

14.028