Estate: MacKintosh & Hall v. Thomas

Descendants of Norman Thomas are at arm’s length in a family stoush over entitlement to his $20 million dollar Canterbury farming estate with son pitted against his sister’s children.

The High Court was asked to intervene when son Philip gave notice to his nephews requiring them to vacate farms they are occupying.  This after an earlier family arrangement fell apart.  As a temporary measure, the High Court ordered the nephews start paying a market rental for farms they are occupying and further ordered that Norman’s son Philip is not to go on to the disputed land pending resolution of estate litigation as to who is entitled to what.

Prior to his death, Norman Thomas had been farming in partnership for 35 years with his son Philip.  The two fell out in Norman’s final years and in April 2012 Norman started court action to declare their partnership at end.  This was not resolved before his death.

At the time of Norman’s death, two of his grandsons (children of Philip’s sister) were farming various partnership properties.  Since 2010, grandson Mark Reed has been in possession of two farms known as Yaldhurst and Halkett and grandson Simon Reed has been in occupation of two others, Chesmars and Cridges.   Philip claims ownership of these farms as partnership assets from the partnership that existed with his father.  Family members, including other grandchildren, have made claims against Norman’s estate under the Family Protection Act.

A High Court hearing to resolve all these issues was put on hold in May 2014 following an agreement in principle between all family members on ways to settle their dispute.  Nothing came of this.

The High Court was told matters reached a head when Philip gave notice requiring his nephews to vacate their farms by early March 2015.  Evidence was given that the two grandsons have not paid for the last five years any rent or outgoings on the properties they are occupying.  Grandson Simon claims he has a valid claim against Norman’s estate for at least a half share of the property he is occupying.  Grandson Mark claims Norman promised him a ten year lease over the property he is occupying.  Justice Dunningham said this was a case of the two in occupation arguing that Philip had no right to possession of the land, despite Philip being a co-owner of the land and a co-owner who had never agreed to the rights of possession claimed by the grandsons.  A hearing date to resolve these claims is set down for 2016, she said.

Justice Dunningham ruled the two grandsons were to pay rent in the interim, with half payable to Norman’s estate and the other half to Philip as co-owner of the properties.

Annual rent payable from March 2015 was fixed at $49,000 for Simon and $46,000 for Mark, with the two to pay future outgoings on the properties they occupy including rates and insurance.  They are entitled to a refund of rentals paid should the 2016 court hearing determine they have a valid ownership claim over the disputed farms, Her Honour said.

Estate: MacKintosh & Hall v. Thomas – High Court (23.4.15)

15.036

Asset Forfeiture: Police v. He

Police got short shrift in the High Court criticised for some lazy detective work when seeking an asset forfeiture order claiming $1.5 million was the proceeds of tainted drug money.   Cash of only $61,000 was ordered forfeit with a tart comment from the bench that it is not the job of the courts to do the police’s work for them.

Assets believed to be the fruit of criminal activity can be seized following a court order under the Criminal Proceeds (Recovery) Act.  Police need to prove “on the balance of probabilities” that unexplained wealth is the proceeds of crime.  To avoid seizure, it is then for the offender to provide a legitimate explanation.

Justice Ellis was very critical of the Police approach to an asset forfeiture claim against convicted Auckland dealer Mr Le He.  In November 2013, Mr He pleaded guilty to one charge of possessing psuedoephedrine for supply.  ContacNT weighing 10.3 kg with a street value of $500,000 was found in a storage unit owned by Mr He.  The volume of ContacNT seized meant Mr He was deemed to be a dealer.  The then maximum penalty for deemed supply was eight years jail.  Evidence indicated Mr He was storing the drug for someone else.  He was sentenced to 12 months home detention and six months’ commmunity work.   

Police then applied for an asset forfeiture order looking to sell Mr He’s home at Murvale Drive in Buckland’s Beach, Auckland.  Police claimed he had made at least $1.5 million from his offending.  This figure of $1.5 million included cash found at the storage unit ($61,000), cash found at his home ($4,400) together with cash deposits and other deposits made through bank accounts operated by both Mr He and his wife.

Justice Ellis said it is all too easy for the the Police to simply go through an offender’s bank accounts and list every deposit made, claiming each is the proceeds of crime.  I would have expected, Her Honour said, that some attempt would be made to ascertain whether there were obvious and plausible explanations for some, if not all, the deposits.  She asked the Police to redraft their accounting evidence and was equally critical of their second effort when the asset forfeiture trial resumed after a two month delay.

Mr He conceded that the $61,000 cash found in the storage unit was the proceeds of crime.  This was ordered forfeit to the crown.

Justice Ellis said her analysis of the accounting information satisfied her that the various bank deposits are more likely than not to have a legitimate source: income from Mr He’s concrete flooring company; income from his wife’s employment as a machinist together with revenue from a retail store she later opened; rent collected for rooms they let from their home and funds progressively brought to New Zealand from China as part of their visa obligations as long-term business migrants.

Police v. He – High Court (21.4.15)

15.034

Maintenance: Clayton v. Clayton

Car manufacturers showcase their marquee brands as status symbols meaning loss of a status car can aggravate hurt feelings in a long running relationship property dispute.

The seventeen year marriage of Mark and Melanie Clayton came to an end in 2006.  Her $28.8 million claim to a share of her former husband’s timber milling business is working its way through the courts supplemented by repeated arguments about payments of interim maintenance pending resolution of their relationship property dispute.

In the High Court at Rotorua, Justice Courtney was asked to rule on the adequacy of existing maintenance.  In June 2014, Mr Clayton was ordered to pay his former wife $15,000 per month and to provide her with a late-model vehicle suitable to her needs.  She retained use of the family Mercedes SUV.  Mr Clayton met maintenance and running costs on the vehicle until it was written off in an accident one Christmas.  The court was told Melanie Clayton had been very unhappy with substitute vehicles provided; first a manual Kia Rio which broke down and then a 2008 Hyundai Sonata.  She pointed out that Mr Clayton has continued to drive a new Audi since their separation, updating it regularly.  She asked for a lump sum payment to buy a replacement vehicle.  Justice Courtney said the reasonable needs of a spouse seeking maintenance are to be measured against the standard of living enjoyed during the marriage and not read down to the bare necessities of life.  Her Honour said Melanie Clayton was aware that during the marriage her vehicle costs were met from business sources.  That could not continue and Mr Clayton was not in a position to pay for a late model car from his personal income, Her Honour said.  A prior Family Court ruling stood: the vehicle provided met her needs, if not her aspirations.   

Justice Courtney made adjustments to periodic maintenance payable.  Evidence was given that Melanie Clayton had incurred fees totalling $855,000 for legal and accounting services since separation.  The court was told she works as a legal secretary earning $46,000 a year.  The family home in Rotorua valued at $850,000 was transferred to Melanie Clayton in 2010 as an interim relationship property settlement.

Clayton v. Clayton – High Court (20.4.15)

15.032

Copyright: Copyright Licensing v. Auckland University

Arguing over the level of fees payable for copyright, it was incongruous that universities complained collectively that they should be treated separately. 

Copyright Licensing Ltd is a copyright collective acting as a licensing body for authors of books, journals, newspapers and magazines.  It is impracticable for teaching institutions like universities to negotiate with individual copyright holders for use of their written work.  Instead, each university pays a jointly negotiated fee to Copyright Licensing for permission to make limited copies of copyright material held by that institution.

Until 2013, universities had agreed to pay a fee based on the number of students enrolled, calculated at twenty dollars per year for each equivalent full time student.  The court was told matters reached a head with negotiations for renewal of the licensing agreement: Copyright Licensing wanted an increase to twenty-six dollars per student with that figure inflation adjusted.  The universities complained there was a growing level of cross-subsidisation: each paid the same per capita fee but the amount of material copied varied from university to university.  The Court of Appeal commented there was no evidence provided to support this claim, but presumed it might be true for purposes of hearing the dispute.

In court, the chosen battlefield was copyright law.  But in practice the fight is over the universities use of their joint muscle to force Copyright Licensing into accepting differential pricing for different institutions.

The legal issue was whether Copyright Licensing was offering a single licence on common terms available to anyone (a scheme) or each university was operating under a separate licence with each licence currently on the same terms.  Different rules in the Copyright Act apply when challenging the terms of a separate licence rather than challenging a scheme.

The Court of Appeal ruled that the existing licensing agreement between universities and Copyright Licensing is a scheme.  It operates as a “standing offer” also available to others.

Economic theory recognises that copyright collectives can exercise considerable market power and might exploit a monopoly position both by setting high prices and by refusing to distinguish between applicants on price or content when they seek a licensing agreement.  The Copyright Tribunal polices misuse of market power.

Copyright Licensing v. Auckland University – Court of Appeal (20.4.15)

15.033

Tax Avoidance: Russell v. Inland Revenue

The way is open for Inland Revenue to bankrupt John George Russell on a $367 million tax debt after the High Court struck out his demand that payment by instalments be accepted.

Mr Russell who claims to have no assets offered to pay $1,000 per week in reduction of the debt and then later offered $150,000 in full settlement of his tax debt, a figure amounting to 0.04 per cent of what is owed.

Mr Russell and Inland Revenue have a long history.  Decades of litigation has seen Mr Russell held liable for tax avoidance through use of an intricate scheme of companies, partnerships and trusts described as being of labyrinthine complexity.  He was assessed to owe tax of $5.69 million for the period 1985-2000.  Shortfall penalties for taking an “abusive tax position” together with interest for non-payment has pushed the tax bill up to $367.2 million.

In 2006, Mr Russell offered to pay off the debt at $1000 per week. That figure is less than the amount of interest accruing on the tax debt per week.  In 2013, Mr Russell offered $150,000 in full settlement of the amount owed.  Inland Revenue declined both offers.  With a court judgment against Mr Russell for $367 million owed, Inland Revenue was taking steps to bankrupt him when the High Court was asked to intervene.  Mr Russell said there were no valid reasons for declining his offers.

Inland Revenue alleged this was just a stalling tactic to delay bankruptcy, with the delay compromising Revenue’s ability to go back and unwind Mr Russell’s prior business transactions.  Bankruptcy law imposes time limits on how far back in time a bankruptcy investigation can go.

Inland Revenue produced an inter-office memo to explain why Mr Russell’s offers were rejected.  Revenue says Mr Russell’s use of circular corporate shareholdings and trust arrangements has allowed him to accumulate wealth in his trusts for the benefit of his family while at the same time declaring little personal income.  Companies he is personally asssociated with do not have a good history of filing tax returns.  And there are question marks over his wife’s tax affairs as well, Inland Revenue says.

Inland Revenue dismissed the proposed offers as unrealistic, particularly given Mr Russell’s age (he his now 78) and concerns about his true financial position.

Justice Asher struck out Mr Russell’s application for a judicial review of Inland Revenue’s decision not to accept his offers.    His Honour said the application was an abuse of process.     

Russell v. Inland Revenue – High Court (17.4.15)

15.030