Maori: NZ Maori Council v. Foulkes

The Court of Appeal has criticised huge legal bills totalling in excess of two million dollars clocked up in largely unproductive litigation by vested interests within Maoridom fighting to access accumulated forestry rentals of over $245 million.

Crown Forestry Trust was set up in 1990 as an interim measure to hold rents from crown owned forestry assets in the North Island and upper South Island.  It was expected Treaty claims by Maori to specific forestry blocks would be settled relatively quickly.  Many have not.  Twenty five years on, the Forestry Trust holds over $245 million of accumulated rentals in short term bank deposits.  Accumulated rentals that were expected to be handed over to successful Treaty claimants are being used to fund Treaty claims generally.  Last financial year, $14 million of Forestry Trust funds was used to assist Treaty claimants.  The Court of Appeal said ongoing unproductive litigation reflecting the state of chronic dysfunction by Maori in dealing with Forestry Trust rentals is diverting funds from deserving beneficiaries.   

The Court was told of a 2014 hui in Lower Hutt where personal and tribal differences spilled over into anger and insult.  The Court was asked to rule on a compromise designed to placate divergent views within Maoridom.

The 1990 Crown Forestry Trust has six trustees: three appointed by government representing the Crown; three appointed jointly by the NZ Maori Council and the Federation of Maori Authorities representing Maoridom.  In recent years there has been a deadlock between the Maori Council and the Federation over their choice of replacement trustees and alternate trustees.  Alternate trustees make Trust decisions where an appointed trustee has a personal or tribal interest in the matter being decided.

Evidence was given of a compromise formula devised for trustee appointments.  It created a ten member committee, called the Maori Appointer, with five delegates each from the Maori Council and the Federation.  This committee was to decide on joint trustee appointments to the Forestry Trust.  At its first meeting, existing trustee Alan Haronga was voted off the Forestry Trust on votes from eight of the committee: four from the Maori Council and four from the Federation.  Two existing trustees had their term of appointment extended.  Influential voices within the Federation challenged the decisions.

The Court of Appeal ruled use of the ten member Maori Appointer was invalid.  The Forestry Trust requires the executive members of the Maori Council and the Federation at separate meetings to agree on trustee appointments.  They cannot delegate that power to anyone else.  The Court said executive members can take advice and receive recommendations from others, but the final decision must lie with a joint decision of the executives of the Maori Council and the Federation.  The Federation’s constitution specifies an eleven member executive, with a quorum of six.

As a parting shot, the Court of Appeal said the litigants could recover only a nominal sum of $2500 each from trust funds for their legal expenses.  The amount of the Trust’s money spent to date on legal costs is unacceptable, diverting income from the Trust’s primary purpose, it said.    

NZ Maori Council v. Foulkes – Court of Appeal (18.11.15)

16.008

Bankruptcy: Stewart v. BNZ

Claiming not to be the individual named in court proceedings did not assist a Bank of New Zealand customer bankrupted on a $68,000 guarantee.

The Bank applied to have a Tauranga customer named as Frederick John McKay Stewart bankrupted on a guarantee given for a 2012 business loan to a company called Grey Street Television Studios Ltd.  Grey Street was put into receivership in September 2014.  Company assets fetched some $17,000.  Only about $1500 was paid off on the Bank loan after receivership fees and expenses.

The court was told Mr Stewart jointly guaranteed the bank loan.  He was served with court papers demanding payment.  After not paying, he was served with bankruptcy papers.  On the day of the bankruptcy hearing, a Mr Stewart turned up in court but denied he was the named defendant.  He claimed to be Lord Frederick Stewart of clan Stewart.  He produced what purported to be a royal warrant of appointment confirming this identity.  Associate judge Bell dismissed the claimed identity as no more than dissimulation.  After considering nine other reasons put forward by Mr Stewart as to why he should not be adjudged bankrupt, Judge Bell ordered the bankruptcy.  He described most of Mr Stewart’s arguments as being irrelevant, nonsense, or just plain wrong. 

Stewart v. BNZ – High Court (16.11.15)

16.006

Land: Body Corporate 207715 v. McNish

Tenants in a Santa Rosa apartment at Gulf Harbour near Auckland are currently living free of levies for maintenance and weathertightness repairs because their landlord no longer exists.

The Santa Rosa body corporate failed in legal action against a Mr and Mrs McNish as tenants for $79,550 unpaid by their insolvent landlord, LVO Ltd.  LVO as the registered owner of the apartment is primarily liable for body corporate levies.  But LVO Ltd no longer exists.

The court was told that when Santa Rosa was under construction in early 2000, apartment purchasers initially were given perpetually renewable 21 year leases.  It was intended purchasers would later freehold their apartment.  The McNishes showed no interest in freeholding and LVO Ltd was put in place as a nominal landlord owning the apartment freehold and listed as unit holder in the body corporate.  The McNishes lease was now from LVO.  The lease required the McNishes as tenants to pay levies invoiced by LVO Ltd as landlord. 

Evidence was given that the McNishes initially paid the body corporate levies re-invoiced from LVO Ltd, but later stopped payment.  The Body Corporate sued claiming the Contracts (Privity) Act entitled it to sue through the LVO/McNish lease to recover levies the McNishes were contractually obliged to pay LVO Ltd.  LVO Ltd had been put into liquidation in the interim.  No buyer could be found for its freehold interest in the Santa Rosa apartment.  Under insolvency law, interests in land with no owner default to the Crown as bona vacantia.  The Crown is not liable for the Santa Rosa body corporate levies due on the McNishes’ apartment.  No one is.

Justice Katz ruled that Santa Rosa body corporate could not use the Contracts (Privity) Act to enforce the LVO/McNish lease.  The Act does not allow an outsider to sue on someone else’s contract if this contract does not intend to allow an outsider to sue.  The lease between LVO Ltd and the McNishes did not contain a separate and independent promise of  the body corporate’s entitlement to levy payments.

Justice Katz warned the McNishes they could not expect continued occupation of their apartment free of body corporate levies.  It was suggested the body corporate, or a group of existing Santa Rosa apartment owners, would take over from the Crown LVO Ltd’s interest as landlord and then sue the McNishes to recover unpaid levies.

Body Corporate 207715 v. McNish – High Court (16.11.15)

16.007

Commerce Act: Commerce Commission v. Enviro Waste

Enviro Waste Services Ltd and its Nelson manager have been fined a total of $430,000 after trying to warn off competitor Transpacific Industries which had started poaching customers by offering a better deal for waste tallow collection.

The Commerce Act prohibits business behaviour having the effect of reducing competition.

The High Court was told that three businesses operate in the upper South Island collecting waste oils: Enviro Waste, Transpacific and Fulton Hogan.  Details of their respective market shares were supressed.  Up to September 2012, Enviro Waste and Transpacific had long-standing regular rounds for the collection of waste cooking oil and frying fat from restaurants and takeaway shops.  The pattern had been waste oils were picked up for no charge, and no payment was made for the waste taken.  This comfortable duopoly was shaken up in late 2012 when Transpacific started offering payment for pickup and several Enviro Waste customers indicated they would swap to Transpacific.  Evidence was given that Darrell Askew, Nelson manager for Bens Oil (the local trading name for Enviro Waste), rang Transpacific’s Christchurch office berating them for stealing customers.  In a later phone call, Mr Askew demanded Transpacific leave his customers alone.  He threatened a price war against Transpacific unless it backed off.  Unbeknown to Mr Askew, one of his telephone calls was recorded.

A complaint was laid with the Commerce Commission.  Enviro Waste admitted the phone calls breached the Commerce Act.  It was ordered to pay a fine of $425,000 and contribute $25,000 towards the Commission’s investigation costs.  Mr Askew personally was ordered to pay $5000.  The court was told Enviro Waste has been under new ownership and new management since April 2013.       

Commerce Commission v. Enviro Waste Services – High Court (13.11.15)

16.005

Land: Overton Holdings v. APN

Buyers of commercial property are becoming nervous about potential liability for buildings assessed as earthquake-prone.  Selling and becoming the tenant in a sale and leaseback leaves the new owner liable for structural repairs.

As commercial tenant following a sale and leaseback, publisher APN was not liable for costs of earthquake-strengthening in the Hawkes Bay office it previously owned.  Retaining possession as tenant in its existing office space created no implied representation when selling about the buildings’ structural integrity.  Further, APN stated in the information memorandum given to intending purchasers that no structural survey had been made and that no undertaking was being given regarding structural integrity.

Overton Holdings paid four million dollars in 2007 to buy seven buildings in Karamu Road, Hastings, occupied by APN’s newspaper publishing business.  APN remained in occupation, paying an annual rental of $340,000 on an eight year lease.

Four years into the lease, the local council advised Overton that four of the buildings were assessed as earthquake-prone, being below the threshold of 33 per cent of new building standards.  In a flurry of correspondence between Overton and APN, each claimed the other was liable to make good the structural improvements.

The court was told APN vacated the site progressively over the next three years, but paid full rental to the end of the eight year lease.  Overton sued for $1.6 million; the estimated cost of remediating the buildings to 67 per cent of new building standards.

The Court of Appeal ruled APN not liable.  As a general rule, there is no implied term or representation in commercial property deals that the property sold or leased is fit for the use intended.  Taking on a lease-back as part of the sale process does not amount to an implied representation by the tenant that the property is fit for use, the court ruled.  APN made no express representations about the buildings’ structural integrity.  Even if APN were liable, no damages would be payable the court ruled.  Overton purchased seven buildings fitted out for use by a newspaper publisher, buildings which would be functionally obselete and require demolition when APN vacated.  APN paid rentals due to the end of its eight year lease leaving Overton with assets it purchased in 2007: a group of buildings needing redevelopment at the end of the eight-year APN lease in order to attract new tenants.

Overton Holdings v. APN New Zealand – Court of Appeal (12.11.15)

16.004