Fraud: Burns v. Police

Two years and three months’ imprisonment for dishonesty was upheld on appeal to the High Court following three frauds by Nikita Burns including thirteen false claims for emergency Red Cross funding netting $18,000 after the Christchurch earthquakes.

Described as callous offending striking at the heart of a community in crisis, Burns made multiple applications for Red Cross funding using false names and other people’s addresses.  Her fraudulent applications hindered legitimate applications for support with confused Christchurch residents being asked why duplicate applications were coming from the same address.  Burns twice created false work documents from imaginary businesses to obtain some $28,000 from Social Welfare for relocation assistance.  She was also convicted in relation to a rental car hire, having abandoned the vehicle failing to return it.

The court was told Burns had not previously been sentenced to jail for dishonesty but has numerous previous convictions including twelve offences since January 2007 for dishonestly accessing a computer system.

Burns v. Police – High Court (7.09.16)

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Company: Hay v. Peregrine Estate

Peregrine Wines prides itself on award winning pinot noir wines from its central Otago vineyard but red stains on the floor came from blood-letting between directors after the High Court ordered majority shareholders buy out the minority at $2.62 million, one million dollars more than the majority thought the shares were worth.

Two directors of Peregrine Wines stood toe-to-toe in early 2013 arguing over the value of a 25.14 per cent minority interest held by Greg Hay’s family trust.  Mr Hay was looking to sell at $3.25 million.  Fellow director Fraser McLachlan countered offering to buy at $1.56 million.

The High Court was told each agreed to follow buy-out rules in the company constitution with Mr McLachlan agreeing majority shareholders would buy at “fair value” as fixed by a valuer appointed by the Institute of Chartered Accountants.  Associate judge Matthews said Mr McLachlan later became aware that Peregrine’s constitution would force him to buy at the valuer’s assessed fair value, even if he didn’t agree with this figure.  Mr McLachlan vigorously lobbied valuer Julie Millar from BDO’s Christchurch office arguing the minority interest’s value should be discounted since it did not give control of the company.  She refused, saying Peregrine shares should be valued as if the company were a quasi-partnership giving the 25.14 per cent minority interest a value of $2.62 million.

Mr Hay sued, requiring Mr McLachlan buy at the valuer’s assessed figure.  Judge Mathews ordered Mr McLachlan pay.  He could not challenge the merits of Ms Millar’s professional opinion.  The assessed fair value was her professional opinion even though she had taken legal advice before deciding there should be no minority interest discount.  Mr McLachlan protested he had a contrary legal opinion saying there should be a minority discount. 

Hay v. Peregrine Estate – High Court (5.09.16)

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Fraud: R. v. Love

Former professor at Victoria University’s School of Business and prominent kaumatua Ralph Heberley Ngatata Love was convicted of obtaining $1.38 million by deception in diverting funds from a central Wellington office development constructed for the benefit of Wellington and Taranaki Maori.  Authorities were alerted when Love’s name surfaced on the periphery of a tax fraud investigation.

Love was chairman of the Tenths Trust in late 2006 when it was negotiating with property developers over development of its commercial sites in Pipitea Street, central Wellington.  After purchasing neighbouring properties from government for one million dollars, Tenths was in a strong negotiating position.  It is now part owner of a completed office building on the combined sites worth some $80 million with a rent roll of about $6.5 million.

An Inland Revenue investigation during 2010 into a GST fraud being perpetrated by two Wellington accountants alerted authorities to Love having an unexpectedly large amount of spare cash.  Love and his partner Lorraine Skiffington passed $1.5 million through the two accountants tax fraud scheme on the advice of a Mr Shaan Stevens who himself was subsequently convicted as being a party to the GST fraud.

The High Court was told Love deceived the Tenths Trust during negotiations for the office development in Pipitea Street.  Love let the trustees think negotiations were still in progress when he had already agreed a deal with the developers, a deal which included a separate side arrangement requiring staged payments of three million dollars to a company called Pipitea Street Development Ltd.  Evidence were given that the developers were very cautious about this side deal and sought reassurance as to where the money was going.  They were told it was to meet prior Treaty settlement expenses.  A total of $1.35 million was paid under this side deal before original plans for the development were restructured.  The three million dollars had been promised as a premium to get leasing rights to the Pipitea site.  Plans to lease were canned when it was later decided the developers and the Tenths Trust would instead become joint owners of the completed development.

The court was told $1.385 million paid under the side deal was used to repay in part a $1.8 million mortgage taken out weeks previously by Ms Skiffington and Love to buy a house at Moana Road, Plimmerton.

In court, Love denied any knowledge of the side deal or use of the money to help finance the Moana Road purchase.  Justice Lang ruled the evidence indicated otherwise.  Love did not disclose to the Trustees the developers’ offer to pay a three million premium for a right to lease Pipitea Street.  A law firm acting on behalf of the Trust during negotiations was kept in the dark about the full extent of any side deal.  Emails made it clear Love was involved in negotiations over the side deal.  A draft copy of the side deal was found in waste paper picked up by a document destruction company from Love’s home in 2012.  Trustees of the Tenths Trust were not told of the side deal and the developers were asked to keep details confidential.  In 2008 Love contacted lawyers acting for the developers upset and annoyed that one of their staff inadvertently included a draft of the three million side deal when posting documents to lawyers acting for the Trust.            

R. v. Love – High Court (1.09.16)

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Copyright: Oraka Technologies v. Geostel

While pleading poverty in the face of a court order for payment of $4.1 million to Waikato inventors of an asparagus grading machine, Napier Tool and Die Ltd restructured its balance sheet saving Australian-controlled parent Tru-Test Corporation $4.11 million in advance of what proved to be an adverse court ruling.

Last June, the High Court awarded Tirau-based Schwarz family $4.1 million damages for breach of copyright after eleven years litigation.  Held liable, Napier Tool & Die is appealing.  It asked the High Court to put enforcement on hold pending an appeal, saying it had a net worth of only $327,000.  Enforcing judgment would lead to liquidation and any appeal would collapse, it said.

Justice Hinton said a stay of enforcement would have been refused but for the fact a priority Court of Appeal hearing date has been set.

The court was told Napier Tool & Die’s balance sheet was restructured immediately after the Supreme Court refused leave to appeal on preliminary issues raised during the protracted High Court litigation.  Napier Tool & Die declared a $2.25 million dividend in favour of Tru-Test.  There was no evidence of dividends being paid previously.  A loan of $1.86 million from Tru-Test was repaid by way of book entry, written off against money Napier Tool & Die was owed by another Tru-Test company. Tru-Test specializes in agri-technology.  The share register is dominated by Australian interests with Sydney venture capitalists holding a controlling 33 per cent stake through KTT Partnership Ltd.

Asked by Justice Hinton if Tru-Test might provide a guarantee for all or part of the $4.1 million judgment debt as a condition of granting a stay, lawyers for Tru-Test said the company would not and further it could not be forced to.

Oraka Technologies v. Geostel – High Court (26.08.16)

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Post Judgment Note: Following subsequent appeals, Court of Appeal ruled in June 2020 damages payable to Schwarz family and Oraka Technologies should be calculated as a notional licence fee: $47,000 only.  A low licence fee arose because a notional fee would assume a non-exclusive licence covering a limited territorial area.  

Tax: Henderson v. Inland Revenue

The High Court dismissed a tax appeal by David Henderson finding him personally liable for $1.7 million GST unpaid by companies he controlled.

In a money-go-round engineered by Mr Henderson in 2008, GST collected on the sale of property to Christchurch City was absorbed into a newly formed company leaving the vendor companies insolvent unable to pay GST due.

The High Court was told Mr Henderson’s Property Ventures Ltd together with related companies sold land to Christchurch City in August 2008 with $1.7 million GST included in the sale price.  Before any money was handed over, Mr Henderson formed a new shell company, ILR Holdings Ltd and had ILR purchase for a price of one dollar debts owed by the Property Ventures group totalling $14.9 million.  Once paid by Christchurch City, Property Ventures paid a net balance of $3.26 million across to ILR leaving Property Ventures with no assets to pay GST due of $1.7 million.  IRL used most of this $3.26 million to pay subsequent operational costs of Property Ventures.  Smaller sums were paid out for the personal benefit of Mr Henderson and his partner: $320,000 to companies associated with Mr Henderson and $55,000 to clear a debt he had personally guaranteed; $306,000 to a company associated with his partner and $235,900 for GST owed by her company.   

Justice Gendall ruled the Taxation Review Authority was correct in holding Mr Henderson personally liable for Property Venture’s unpaid GST liability.  As director of the Property Ventures group, Mr Henderson had entered into an arrangement having the effect of leaving the group insolvent. Mr Henderson was adjudicated bankrupt in November 2010.

Henderson v. Inland Revenue – High Court (24.08.16)

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