Companies Register: Singh v. Patel

Shareholdings listed on the companies office public register do not promise legal ownership; each company’s own register is primary evidence of ownership.  Roopa Patel was not liable for damages after unilaterally removing fellow shareholder Jasvinder Singh from the public register, facilitating their company’s bank borrowing during summer holidays.   

The High Court was told Mr Singh bought into Ms Patel’s Auckland accounting business in early 2015.  The deal saw him paying $300,000 for an expected one third stake in Steve Taylor & Associates North Shore Ltd.  While the investment was in his name, it was for the benefit of his spouse Pam Sandhu, a qualified accountant.  The balance of the shares in Taylor & Associates was held by Ms Patel, through her company Elite Business Service NZ Ltd.

With Taylor & Associates short of working capital in early 2016, Ms Patel looked to get overdraft accommodation from BNZ.  The Bank was looking to take security over company assets and have personal guarantees from all shareholders.  Ms Patel then removed Mr Singh as a shareholder from Taylor & Associates companies office records, representing herself to the Bank as now sole shareholder.  She was later to tell the High Court she knew Mr Singh would not sign a bank guarantee.

Taylor & Associates subsequently went into liquidation, insolvent.  Mr Singh sued, alleging Ms Patel was liable in conversion after taking control of his shares in early 2016; shares then worth $300,000, he said.

Justice Lang ruled an unauthorised change of shareholding on the public register does not amount to conversion.  Ownership is proved by looking first at company records, and second at any evidence of sales.  There was no evidence that Ms Patel kept a share register for Taylor & Associates.  The evidence was that Mr Singh had purchased the shares in 2015 and remained a shareholder at the time of the BNZ transaction.  The court was told Mr Singh subsequently negotiated with Ms Patel to have Elite Business Services buy his shares.  He has not been paid.  His shares in Taylor & Associates are worthless.  Mr Singh’s claim that Ms Patel had promised personally to repay him was dismissed by Justice Lang.

Singh v. Patel – High Court (31.08.20)

20.148 

Director: Alala International Ltd v. Chen

Leaving taxes unpaid after clearing all assets out of his cashed-up company cost Peng Chih Chen $590,200.  It was a breach of director’s duties to ignore tax liabilities, leaving his company as an empty shell.

Mr Chen was sole director and shareholder of Alala International Ltd.  The company initially operated a golf course at Bucklands Beach in Auckland, operating then under the name BlueSky Golf Management Ltd.  After a brief foray into selling souvenirs, Alala International got into the property business.  In 2016, it purchased real estate in Queenstown.  This was sold just on a year later.  Net proceeds of $1.8 million were banked, after repayment of a Southern Cross Finance mortgage.

The High Court was told this $1.8 million was quickly disbursed over the next four months.  When questioned by Alala International liquidators, Mr Chen was unable to clearly identify all the recipients of various payments made or provide reasons why they might have received payment.  Alala was put into liquidation in 2019 by Inland Revenue for unpaid tax debts. Inland Revenue claimed $503,400, including $330,000 GST arising on the Queenstown sale.

Associate judge Fitzgerald ruled Mr Chen breached Companies Act duties owed as director to Alala International: failing to act in good faith; failing to act with due care; and trading recklessly.  He was ordered to pay damages totalling $580,200 to Alala International.  He did not appear in court to defend the claim.

Mr Chen was also ordered to pay ten thousand dollars to Alala’s liquidators; compensation for time spent reconstructing Alala’s poor accounting records.

Alala International Ltd v. Chen – High Court (28.08.20)

20.147

Autoterminal: Hemi v. Tyler

With tens of millions at stake in the world-wide fight over control of used car importer Autoterminal, Hohua Hemi has narrowed the focus in his dispute with business partner Robert Stone seeking details of alleged backdoor deals between Hamilton-based Mike Tyler and Mr Stone intended to shut him out.

Hemi and Stone built a lucrative business importing used cars from Japan for over fifteen years.  Their business empire resides in companies spread across Japan, the Philippines, New Zealand and the Cayman Islands.Their business relationship is in disarray; there are currently four separate High Court actions underway.

Mr Hemi alleges Mr Stone is in cahoots with Mike Tyler. The High Court was told Mr Tyler came to have titular control of Autoterminal’s business empire following a 2009 restructuring. Mr Tyler took control of a key Autoterminal company holding shares as trustee for Mr Stone and him, Mr Hemi said. Mr Tyler subsequently acted only on joint instructions from both him and Mr Stone, he said.  Since Hemi and Stone fell out, Mr Tyler has sided with Mr Stone, refusing to provide information, Mr Hemi complains.

The New Zealand High Court ordered Mr Tyler to disclose details of his Autoterminal employment contract together with evidence of all payments and benefits received plus all communications with Mr Stone evidencing any agreement or promised reward for Mr Tyler to side with Mr Stone against Mr Hemi.           

Mr Stone told the court he is not in any business relationship with Mr Hemi.  This statement does not fit well with documents Mr Stone filed in a Cayman Island court in June 2020 stating the two were business partners, Associate judge Lester said.

Hemi v. Tyler – High Court (26.08.20)

20.146

Asset Forfeiture: Commissioner of Police v. Wishart

One day before sentencing on cannabis supply charges, Richard Wishart saw the High Court confirm an agreed deal forfeiting $210,000 as proceeds of crime: $200,000 paid across from his family trust together with some $10,000 cash seized in a police raid.

Police allege purchase of a residential property on Nagpur Crescent in Wellington suburb Broadmeadows was tainted, funded with the proceeds of crime.  Nagpur is held in the name of the Wishart Family Trust.  Nearly ten thousand dollars in cash was seized from the property in a 2019 drug bust.  The High Court approved a Criminal Proceeds (Recovery) Act settlement between Wishart and police.  The cash is forfeit.  Nagpur Terrace remains in Trust ownership, provided the Trust pays across $200,000 within ten working days.  Failing that, Nagpur is sold.

Commissioner of Police v. Wishart – High Court (25.08.20)

20.145

Family Company: Drummond v. O'Rorke

 For Christine Drummond it was death by a thousand cuts.  Sister Julie O’Rorke would only agree to terms for sale of their Taranaki dairy farm when dragged to the court door, subsequently raising new objections only settled again at the last minute before yet another court hearing. 

The High Court was told five sisters initially farmed at Opunake in partnership before Mooncoin Farm Ltd, controlled by Christine and Julie, took ownership in 2002.  Some fifteen years later, Christine was looking to sell up.  The farm was valued at $8.2 million.  Julie offered $6.6 million.  One year on, with no agreement reached, Julie faced the possibility of a court-appointed liquidator forcing a sale when Christine took action under the Companies Act.  Before a court hearing, the two sisters agreed terms.  The High Court was told Julie subsequently failed to pay the agreed deposit and failed to settle on settlement date.  With further court action looming, a substantial part of the agreed price was paid, with money held back as part of the ‘wash up.’

Julie then haggled over compensation for diseased cows, empty heifers and livestock she claimed were hers but wrongly counted as part of Mooncoin’s herd.  These issues were settled in the face of yet another scheduled court hearing.  There was more.  The High Court was told Julie subsequently demanded an agreed eight per cent interest calculation on the difference between Christine’s drawings from Mooncoin and her drawings should be calculated with interest compounding. Their latest ‘court-door’ agreement had been silent on whether interest payable meant simple interest or compound interest. This dispute did get a court hearing. Justice Clark ruled simple interest applied; accounting calculations reviewed by all sides during the sisters’ earlier negotiations expressly excluded compound interest.  The two sisters difference in drawings was not disclosed in the published court judgment, but Christine had threatened earlier to demand a management fee of some $208,000 to counter Julie’s demand for compound interest on compensation for the difference between their two loan accounts.

Drummond v. O’Rorke – High Court (21.08.20)

20.144

Ngati Tama: Ngati Tama Trust v. White

Threats to damage Ngati Tama’s commercial interests led to kaumatua Allen Potete White’s bankruptcy after he failed to pay a $13,800 court costs order.

Mr White was incensed by Taranaki iwi Ngati Tama’s performance in losing a 2001 $14.5 million Treaty settlement following a series of improvident investments.  He had returned home in 2014 after working in Australia for nearly four decades. Demanding accountability, he threatened to disrupt ongoing commercial operations unless he was provided with detailed accounting information.  Ngati Tama Custodian Trustee Ltd, the commercial vehicle holding iwi assets, sued. It said Mr White had improperly obtained a 2016 confidential report setting out sales revenue and sales projections for Homesoft, a business part-owned by Ngati Tama.  The report was labelled ‘strictly confidential’ and stated it was not to be distributed.  Mr White threatened to contact existing and potential customers with evidence of what he called ‘abysmal management’ within Homesoft unless he was provided with the financial information demanded.  In the High Court, Ngati Tama obtained an injunction blocking contact with any Homesoft customers. Mr White did not appear in court to defend the application.  He was ordered to pay $13,800 of Ngati Tama’s legal costs.

When Ngati Tama applied to bankrupt Mr White for non-payment, he challenged the need for an injunction.  Associate judge Smith ruled there was no evidence that the injunction should be overturned.  Mr White said bankrupting him was designed to silence him, blocking his plans to be voted into office as a Ngati Tama trustee.  Judge Smith said it was commercially proper for Ngati Tama to take legal action to get what it is owed. The court was told Mr White was not elected as trustee in the most recent iwi elections.

With his behaviour, Mr White brought bankruptcy on himself, Judge Smith said; bankruptcy does not stop him continuing his forceful criticism of Ngati Tama’s financial performance.  Evidence was given that Ngati Tama’s investment performance is currently being questioned in both the High Court and the Maori Land Court. 

Ngati Tama Trust v. White – High Court (20.08.20)

20.143 

Insurance Fraud: Taylor v. Asteron Life

 Cancelling insurance cover following a fraudulent claim does not permit insurers to recover prior payments on claims validly made, the Court of Appeal ruled.

Dunedin insurance broker Peter Taylor was entitled to keep initial income protection payments made for partial disability totalling $51,830 while required to repay some $320,000 for ongoing monthly claims proved to be fraudulent.

Mr Taylor claimed on an Asteron policy after being diagnosed with bone cancer in 2009, receiving regular payments of about $6000 monthly.  Required to provide ongoing evidence of his loss of income to justify continued payments, Mr Taylor did not disclose income generated by staff or trailing commissions on cover written in earlier years.  Asteron cancelled the policy in 2016, claiming repayment of all benefits paid.

The Court of Appeal was asked to rule on how the recently enacted Contract and Commercial Law Act applied to fraudulent insurance claims. Cancellation for fraud operates prospectively, not retrospectively, the court ruled.  Any current fraudulent claim can be refused; this includes a refusal to pay anything on a ‘padded claim’ where an otherwise valid claim has been fraudulently misrepresented by overvaluing the value of a loss or including as a loss items which never existed or were never lost.  Allowing any recovery at all on padded claims would encourage fraud, said the court.  Otherwise: if the padded claim is successful, I gain; if not, I suffer no loss since the valid part of the claim is paid.

A fraudulent claim does not cancel an insurance contract retrospectively, the court ruled.  Claims properly made previously under the policy still stand.

Evidence did not establish that Mr Taylor was deliberately dishonest with initial claims under his Asteron income protection policy, the court said.  Rather, the information provided was confusing and contradictory.

Taylor v. Asteron Life Ltd – Court of Appeal (19.08.20)

20.142

Maori Land: Nicholls v. WT Nicholls Trust

 George Nicholls appeal to tikanga when occupying Oamaru Bay Holiday Park near Coromandel was described by the Maori Land Court as cover for his selfish behaviour which together with intimidation saw him grabbing land properly belonging to whanau.  He was ordered to pay $834,400 compensation; revenue received from campground fees with no deduction for business expenses.

The 23 hectare Oamaru Bay campground together with farms at Paeora and Coromandel plus land at Koputuaki Bay formed part of substantial Maori land holdings inherited by ten children of Wiremu Tawhia Nicholls.  Under Maori customary law, they collectively inherited as co-owners.  In 2008, George Nicholls, together with his brother, took control of Oamaru Bay, without other co-owners’ consent, using the land to run a holiday park.  Attempts to trespass George were unsuccessful; a person cannot be trespassed from land they co-own.

At Maori Land Court suggestion, Wiremu’s land was transferred to an ahu whenua trust: the WT Nicholls Trust.  This overcame the common difficulties of multiple-owned Maori land where there is no management structure in place.  Elected trustees of the ahu whenua trust take control.  The Nicholls Trust then sued George to recover revenue for his use of Trust land at Oamaru Bay to run a business.  He was ordered to pay $834,400; identified gross revenue generated by the business.  A deduction of $44,000 was allowed; one-tenth of the gross revenue received before the ahu whenua trust was established when the land was held in co-ownership, this being George’s and his siblings’ then share of gross revenue as co-owners.

The Trust also got an injunction ordering George and his supporters off the land.

George appealed without success to the Court of Appeal.  He should be allowed to deduct business expenses from the gross revenue used to calculate damages, he claimed.  The court said he had been given ample opportunity before the Maori Land Court to detail his expenses but had chosen not to.

Nicholls v. W.T. Nicholls Trust – Court of Appeal (13.08.20)

20.141

Asset Forfeiture: Commissioner of Police v. Snowden

Real estate owned by convicted drug dealer Paul Andrew Snowden’s family trust was ordered sold as part of $743,300 criminal profits order.

Snowden was convicted in 2010 on charges of supplying cannabis and in 2014 and then 2015 on charges relating to methamphetamine supply. The most recent convictions resulted in cumulative prison sentences of six years three months.  Police took action under Criminal Proceeds (Recovery) Act to recover drug profits.

The High Court was told Snowden paid $460,000 in 2001 for a 1.6 hectare property on Karaka Road in south Auckland.  Title was registered in name of Karaka Farmlets Ltd with Karaka Farmlets later coming to be owned by Snowden’s family trust.  Snowden had absolute control over his family trust. He was trustee and a beneficiary. He held power to appoint and remove trustees.  He was also sole director and a shareholder of Karaka Farmlets.

In the High Court, Justice Gault determined Snowden generated profits totalling $743,300 from drug dealing.  While illicit profits did not fund the initial 2001 purchase of Karaka Road, subsequent mortgage payments funded from drug profits meant Karaka Road was ‘tainted property,’ Justice Gault ruled.  Illicit profits invested in ‘tainted property’ plus any capital gain are liable to forfeiture.

Sale of Karaka Road was ordered with up to $743,300 from proceeds of sale forfeit.  Since the cash component of the trust’s original purchase was not tainted by criminal activity, it is only tainted mortgage repayments and that proportionate share of Karaka Road’s capital gain which can be seized on sale.

Commissioner of Police v. Snowden – High Court (12.08.20)

20.140

Bankruptcy: Singh v. Official Assignee

 As a bankrupt, Cheryl Sitara Singh no longer controls her assets and cannot direct Insolvency Service as to how and when these assets can be sold, the High Court ruled.

Ms Singh was forced into bankruptcy in July 2019 by the body corporate of Richmond Terraces, a thirty-apartment complex in Flat Bush, south Auckland.  It was a leaky building.  She had refused to pay levies imposed for remedial work.  Insolvency Service identified debts of some $374,000; unpaid levies plus legal costs resulting from a series of unsuccessful court cases challenging the levies and against both the body corporate and its members.  Ms Singh owned two properties: her apartment at Richmond Terraces and a second apartment at Avenue Road in Otahuhu.

She challenged attempts by Insolvency Service to sell Avenue Road during Auckland’s covid-19 pandemic restrictions.  The property was passed in at auction; the highest bid was $47,000 short of reserve.  Ms Singh’s claim to have a buyer willing to pay a price close to reserve came to nothing. This potential buyer said he was no longer interested when contacted by Insolvency Service.  A buyer has since been found, Insolvency Service told the court. The net return on settlement will not be enough to clear Ms Singh’s bankruptcy debts.  Sale of Richmond Terrace is next.  It has potential net equity of about $265,000 after payment of a mortgage debt and sale expenses.

Ms Singh’s persistent and repetitive attempts to frustrate Insolvency Service’s sale of assets is raising bankruptcy costs, Justice Moore said.  He refused Ms Singh’s request for a court order blocking any sale.  To regain control of her assets she must apply for annulment of her 2019 bankruptcy, he said.

Singh v. Officlal Assignee – High Court (11.08.20)

20.137

Residential Restrictions: Jackson v. Small

What to one is thing of beauty, to a neighbour can be an eyesore.  Geoff and Aria Small will be forced to demolish an equestrian barn on a south Auckland lifestyle block unless they convert it into an architect-designed home complying with subdivision building covenants.

In 2013, the Smalls bought into a lifestyle subdivision on Ingrams Road, Ramarama.  Covenants over the land restrict owners to construction of a single dwelling together with a farm outbuilding ‘usual and reasonable for … rural use [and of] a pleasing and aesthetically compatible appearance’ in keeping with neighbouring properties.  Neighbours complain the Smalls have developed a commercial operation; a utility shed, stables and a barn which has been converted into living accommodation.  A horse walking area, arena and yards complete what they describe as an equestrian facility.  Legal argument over what was, or was not, permitted on site was first aired in the High Court back in 2018, with all sides appealing to the Court of Appeal.

Back in the High Court, Justice Gordon ruled either remediation or demolition of the Smalls barn was needed; it did not comply with subdivision rules.

Neighbours do not have a right of veto over what is built, Justice Gordon said, but the Smalls took no steps to ensure their existing building complied with subdivision rules.  The Smalls were given three months to supply neighbours with architect designed plans for a new or remediated building.  If neighbours agree with the plans, the new build must be completed within fourteen months, she said.

If no agreement is reached, court-ordered demolition is a possibility.

Jackson v. Small – High Court (11.08.20)

20.139

David Henderson: Gower & Tubbs v. FTG Securities Ltd

Interests associated with property developer David Henderson paid $100,000 to buy a South Canterbury second mortgage security over Tuam Ventures Ltd, one of his former Christchurch property developments.  They get nothing in return after a High Court ruling that they cannot enforce the South Canterbury mortgage and they cannot share in some $3.5 million held by Tuam receivers.  

Receivers took control of South Canterbury Finance Ltd assets in 2010 after a $1.6 billion government-funded payout to depositors.  They took over South Canterbury’s $1.1 billion loan book, looking to sell these loans and repay government.    FTG Securities Ltd, with David Henderson’s wife Kristine Buxton as director, paid $100,000 to buy up a South Canterbury second mortgage over Tuam Ventures Ltd, a Christchurch property company formerly controlled by Mr Henderson.  He is currently barred by court order from managing any business until December 2022.

FTG’s rights to enforce this mortgage were challenged by Bank of New Zealand; a 2007 refinancing of Tuam Ventures when Mr Henderson was in control saw Canterbury Finance agree it could not sell its second mortgage without approval from first mortgagee BNZ.  The High Court was told receivers of Tuam Ventures are currently holding cash of about $3.5 million for distribution to mortgagees.   FTG Securities is not entitled to any of this money; a series of cases through the High Court and the Court of Appeal ruled South Canterbury’s agreement not to sell the mortgage was enforceable.

Government interests through Crown Asset Management Ltd alone are allowed to collect on South Canterbury’s second mortgage, Justice Osborne ruled.  Evidence was given that FTG Securities borrowed $105,000 in 2015 from Christchurch-based Secured Finance Ltd to fund purchase of the currently uncollectable South Canterbury second mortgage.

Gower & Tubbs v. FTG Securities Ltd – High Court (10.08.20)

20.138

 

Post judgment note: BNZ is seeking to wind up FTG Securities Ltd alleging it is insolvent following non-payment of $43,133 legal costs awarded in favour of the Bank.

Charities Registration: Greenpeace v. Charities Registration Board

 Allowing Greenpeace registration as a charity creates a seismic shift in charities law. Political lobbyists can gain the tax benefits of charities registration; no longer is there any need for registered charities to directly carry out tangible good works.

Since 2008, Greenpeace has been fighting a legal battle to gain registration as a charity allowing donors to get a tax rebate for donations and Greenpeace itself to earn income tax free.  The Charities Board refused registration; Greenpeace was a lobby group, often acting illegally though acts of civil disobedience promoting its causes, it said.  On appeal to the Supreme Court, charities law was re-interpreted; advocacy on ‘public benefit’ issues through participation in the political and legal process could amount to a charitable purpose, it said.  Acting against slavery and negotiation of Waitangi Tribunal claims were two past examples of activities given charitable status, the Supreme Court pointed out.

Armed with this Supreme Court ruling, Greenpeace again fronted up to the Charities Board.  Again, it was refused registration.  Greenpeace did not satisfy the legal definition of a charity, it said.  Greenpeace was a lobby group advocating for political change, most recently promoting sustainable fishing, protesting dirty dairying and calling for fossil fuels to be phased out, the Board said.  Supporters were encouraged to lobby members of parliament directly.

Back in the High Court, Justice Mallon ruled protection of the environment may be a charitable purpose in itself.  As a global issue, success requires ‘broad-based support and effort,’ she said.  Ruling that Greenpeace is eligible to register as a charity, Justice Mallon said there is a public benefit in advocating for environmental issues.

Greenpeace of New Zealand v. Charities Registration Board – High Court (10.08.20)

20.136

GST: Ward v. Official Assignee

 That wheel-clamping companies do not pay GST is akin to kidnappers not being liable for GST on ransom payments, Judge Bell mused when refusing Gordon Ward’s application to reverse a 2015 bankruptcy.

Mr Ward’s company, NZ Wheel Clamping Co Ltd, was pushed into liquidation by Inland Revenue in 2014 for unpaid taxes totalling some $300,000 including $115,712 claimed due for GST.  Wheel Clamping liquidators chased Mr Ward for just over $712,000, money they claimed he had taken from the company plus damages due for alleged breaches of the Companies Act.  Legal action was halted when Mr Ward filed for bankruptcy.  He was automatically discharged from bankruptcy in July 2018.  His bankruptcy creditors received nothing.

During his bankruptcy, Mr Ward learnt of a GST tax case successfully argued by another wheel-clamping company; no GST was payable on wheel-clamping revenue because motorists payments are a fine, there was no reciprocity of services creating a taxable supply.

Mr Ward sought to annul his bankruptcy, allowing him to resume control NZ Wheel Clamping.  Back in control, he would have his company sue Inland Revenue for overpaid GST, pay off all company debts and have money left over for company shareholders, he told the High Court.  Evidence was given that Inland Revenue had already repaid $190,000 GST to NZ Wheel Clamping liquidators.  Mr Ward says his company is owed more than this.

Associate judge Bell refused the annulment.  The post-bankruptcy speculative possibility of Mr Ward’s company recovering further GST did not justify annulment of a bankruptcy appropriately ordered six years previously, he ruled.  Even if further GST could be recovered, payment first goes to NZ Wheel Clamping creditors before anything passes to Mr Ward personally, Judge Bell said.

Companies Office records show NZ Wheel Clamping creditors received nothing on liquidation; the $190,000 GST repaid by Inland Revenue was swallowed up by liquidators’ remuneration and expenses. 

Ward v. Officlal Assignee – High Court (7.08.20)

20.135

Will: re Estate Joseph Grbavac

 Joseph Grbavac arrived in New Zealand as a teenager in 1938, emigrating with his family from Dalmatia.  Like many in west Auckland’s Croatian community he prospered, dying aged 94 with assets valued at some $10.5 million.  His actions when amending a 2004 will prior to death led to two weeks of evidence in the High Court; the amendment was ruled invalid, Joseph did not understand what he signed. 

Married with no children, Joseph named close relatives as beneficiaries of his estate.  The most valuable assets were commercial properties together with rural land in west Auckland including Sunnyview Orchard at Huapai.  Joseph died in 2015.  His last will, dated 2004, left his estate to a sister, nieces, nephews and a grandnephew.  This will was not challenged in court.  What was challenged was a 2013 codicil, amending the 2004 will, cutting out as residuary beneficiaries two nieces and a grandnephew; for one niece and the grandnephew this was a loss of $1.06 million each.

The central legal issue was Joseph’s testamentary capacity at the time he signed the 2013 codicil.  Evidence was given that he was then under palliative care for end stage renal failure.  Some relatives gave evidence that while frail, Joseph was alert to what he was doing. Others said he had lost interest in life, at times muddled and confused.  Lawyers had spent several years drafting and redrafting changes to his will.  Nothing was signed; lawyers felt Joseph was just going around in circles, unable to make up his mind.  They did not keep detailed notes of reasons for proposed changes. At one stage his lawyer rang Joseph’s family doctor asking generally about their mutual client’s mental competency given the various drastic changes being mooted for a new will.  The doctor did not keep any detailed file notes either.  Lawyers acting for Joseph were unaware when he signed a 2013 codicil put in front of him that he had cataracts and was unable to properly read the contents.

Justice Duffy ruled the 2013 amendment invalid.

Re Estate Joseph Grbavac – High Court (6.08.20)

20.134

Fraud: Kumar v. R.

 Desperate to avoid deportation for fraud offences, Manoj Kumar’s appeal against conviction fell over when he admitted offences of deception and theft when seeking leave to appeal.

In 2017, Kumar pleaded guilty at a District Court trial for his part in an employment scam engineered through 2 Cheap Computers Ltd and for his theft of hired camera equipment.  When Cheap Computers advertised a staff vacancy, nine applicants paid across a total of $59,250 after being told this money would help their visa applications.  The money was then stolen.  Film equipment hired by Kumar valued at $95,100 was also stolen.  The day after flying out for India, he sent a brief email to the hire company saying the equipment had been lost, expressing the hope it was insured.  Kumar was arrested when he returned to New Zealand five months later.

At his trial, Kumar accepted a prosecution offer of six months community detention plus payment of reparations in return for a guilty plea.  Later learning that conviction meant deportation, Kumar sought to appeal, asking the Court of Appeal to allow his appeal nearly one year out of time. Kumar appeared in person. Approval for a retrial was refused. There was no miscarriage of justice. Kumar admitted the offences when explaining why he should be allowed to appeal, the Court said.

Kumar v. R. – Court of Appeal (3.08.20)

20.133

Insurance: Moore v. IAG Insurance

 IAG Insurance and Graeme Moore were nearly two million dollars apart in agreeing the insurance payout on a Christchurch home damaged twice in earthquakes four months apart.  The Court of Appeal ruled against IAG.

Graeme Moore lived in an architect designed home on Scarborough Hill, above Sumner.  It was undamaged in Christchurch’s first major earthquake: September 2010.  Subsequently, it suffered $2.08 million damage in the February 2011 Port Hills earthquake; followed four months later by $2.77 million damage in a further earthquake.  Insured under IAG’s Supersurance House cover, Mr Moore was told his payout could not exceed $2.5 million.  The policy limit applied to a ‘series of events which have the same cause.’  IAG said the two earthquakes had the same cause, being part of the series of earthquakes in Christchurch following its initial September 2010 quake.

An earthquake specialist told the court that in a broad sense all earthquakes in New Zealand have a common cause; relative movement between the Pacific and Australian tectonic plates.  More narrowly: the February 2011 earthquake was caused by a rupture of the Port Hills fault; the quake four months later by the rupture of two faults east of Christchurch.  These two quakes were quite separate events, the Court of Appeal ruled.  IAG’s $2.5 million policy limit applied separately to each claim.

Damage spread over several days following a tropical storm would be a typical example of a series of events with a common cause attracting a capped payout, it said.  Day one: high winds might topple trees on to a house causing structural damage.  Day two: lightning causes electrical damage and a fire.  Day three: heavy rain floods the house.  All these events have an underlying common cause: the one tropical storm.

Moore v. IAG New Zealand Ltd – Court of Appeal  (31.07.20)

20.128

Restaurant: Il Forno Ltd v. Kleine

 Long-standing family bakery and café Il Forno in Auckland’s trendy Ponsonby has seen legal fisticuffs behind the scenes; Andrew Kleine fended off older brother Jim’s claims to a half share in the business.  In turn, Jim was ordered to pay $14,100 damages; tax fines racked up following Jim’s failure to properly action Il Forno’s tax filings.

The High Court was told Andrew Kleine gained full control of Il Forno in 2006, after buying the other half interest then held by fellow restauranteur Antonio Crisci; a buy-out funded with cash from both Andrew and other family members.  Andrew ran the bakery; brother Jim provided ill-defined administrative support. Nearly a decade on, tensions between the two were ratcheting up.  Evidence was given that the final trigger was a difference of opinion over food deliveries: Andrew preferred an in-house driver; Jim, use of couriers.

In court, Jim claimed he owned fifty per cent of Il Forno; the result of him contributing $10,000 towards the $135,000 paid Mr Crisci on the 2006 buy-out.  Justice Jagose ruled the $10,000 was not an equity contribution; it was a loan.  In all his dealings with suppliers, Inland Revenue and lawyers Jim had not once claimed to be a part owner.  He had always represented brother Andrew as ‘proprietor’ and as ‘sole shareholder and director.’

Jim’s claim to $650,000 compensation for unpaid services provided to Il Forno was dismissed.  Jim provided no evidence of what his actual duties were, Justice Jagose ruled.

Il Forno in turn sued Jim for negligence.  There was evidence of Jim being paid a retainer to look after Il Forno’s accounting functions and tax filings.  The High Court was told inadequate accounting records were kept.  In addition, Jim failed to file Inland Revenue returns on behalf of Il Forno for income tax, PAYE and GST on a range of dates from 2007.  Il Forno was convicted and fined some $14,100.  Jim was ordered to compensate Il Forno for this negligence.

Il Forno Ltd v. Kleine – High Court (31.07.20)

20.132

Cannabis: re Medicann NZ Holdings Ltd

 Medicann touted plans to develop and commercialise medical cannabis when seeking two million dollars private investment capital in 2018.  In the High Court twelve months later, co-founder Ross Smith said his plans were for a quick ‘pump and dump’ operation, getting out quickly with a few million in his pocket.  Now he has been shut out by a court ruling over entitlement to a projected $152,000, all that is left on Medicann’s liquidation.

An information memorandum made available to potential Medicann investors described Mr Smith as a ‘cannabis visionary’ and a ‘global cannabis consultant.’  About $1.5 million was raised from outside investors.  He was credited with a twenty per cent shareholding in Medicann.

The High Court was told of subsequent disagreement between Mr Smith and Medicann’s chief executive officer Brendon Ogilvy over Medicann’s strategic objectives.  Smith told the High Court he viewed himself as an investment banker, putting together early stage companies, then getting out; making his millions tax free, he said.

Attempts to settle differences through mediation came to nothing.  Medicann management then chopped Mr Smith’s holding from the share register, leaving him with no equity interest in Medicann and no entitlement to share in the $152,000 expected to remain on current liquidation of Medicann.

Associate judge Andrew ruled Medicann management was justified in removing him from the share register.  Documents created on the formation of Medicann required shareholders to sign a subscription and shareholders agreement within one month of their share issue; a provision designed to keep Medicann under tight control. Mr Smith and interests associated with him never signed.  Their shareholding was void, Judge Andrew ruled.

Mr Smith cried foul, claiming to be dyslexic and unaware of the company’s legal requirements.  Mr Smith had a far greater awareness and understanding of the company’s requirements than he was prepared to acknowledge, Judge Andrew said.

re Medicann NZ Holdings Ltd – High Court (31.07.20)

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Fair Trading: Ballance Agri-Nutrients v. Quin Environmentals

 Outdated technical standards for farm fertiliser were the weapon of choice between competitors Ballance and Quin disputing the validity of industry qualmarks applied to the other’s product in a fight over market share.

Farming in New Zealand has profited from imported phosphate fertilisers being applied to farmland: by hand, by spreader truck and topdressed from the air.  To assist farmers, a quality mark system operates signalling solubility, and hence effectiveness. RPR (reactive phosphate rock for direct application) Fertmark branded fertiliser must satisfy a specified solubility test: the Citsol test.  The lesser the solubility, the slower the fertiliser breaks down with a resulting reduced loss through leaching and run-off.  Fertmark-branded RPR products can demand a premium price.  It is generally accepted within the industry that the Citsol test is outdated.  Because it is tied to the RPR Fertmark qualmark, Citsol became the relevant test in a fight over market share between Ballance Agri-Nutrients Ltd and Quin Environmentals (NZ) Ltd.  

Ballance imports its phosphate rock from Peru.  It objected when Quin advertised its Algeria import as ‘true’ RPR and ‘the best all-round RPR in the world.’  The product did not satisfy the Citsol solubility test, it said. Ballance sued.  No damages were sought.  It simply wanted the courts to uphold the integrity of the Fertmark qualmark, it said.

Justice Venning ruled Quin Environmentals in breach of the Fair Trading Act.  Quin was ordered not to advertise its Algerian rock as RPR without further explaining it did not comply with the Fertmark Code.  The product was not banned.  Quin is free to compete in the market, provided it is made clear that it does not satisfy the Fertmark test when branded as RPR, Justice Venning said.

Quin in turn sued Ballance, claiming its Hi P RPR product was a non-compliant blend.  Ballance blends waste phosphate rock into its Peruvian rock to reduce cadmium levels which would otherwise disqualify its Peru product from using the RPR qualmark.  Justice Venning ruled Balance was not in breach; mixing phosphate rock with phosphate rock was not a ‘blend’ under the Fertmark rules.

The court was told Quin Environmentals new V2 product line does satisfy RPR test protocols; reducing levels of dolomite in its Algerian imports enabled V2 to pass the Citsol solubility test.

Ballance Agri-Nutrients Ltd v. Quin Environmentals (NZ) Ltd – High Court (31.7.20)

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Economic Duress: Dold v. Murphy

 Complaining that fellow investor Peter Murphy held a pistol to their heads to extract an extra four million dollars on sale of their Queensland tourism business was to no avail.  It is not unlawful for private individuals to act in their own self-interest, refusing to sign a contract, the Court of Appeal ruled.

Refusals to deal are a matter for competition law, governed by statute, the court said.  Competition law governs misuse of market power, to the detriment of consumers; not private contract law disputes.

Roger Dold’s dispute with Peter Murphy was about sale of their joint Queensland tourism business.  Their relationship went back nearly three decades, starting with operation of Fullers Cruises in Northland.  Nearing the end of their business careers, they were looking to sell their company Cruise Whitsundays Pty Ltd for some $A75 million.  Dold and fellow investor Chris Jacobs each held a 46.9 per cent stake; Murphy 6.2 per cent.  They were astonished to find a buyer offering $A112 million.  Clinching the deal required all three to sign.  Murphy refused.  He demanded a bigger slice of the pie; compensation for the extra work he had done in recent years, particularly during Mr Jacob’s illness, he said.  The court was told Dold and Jacobs grudgingly agreed to Murphy receiving an extra four million dollars; in economic terms raising his interest in Cruise Whitsundays to 9.8 per cent.  Dold then sued Murphy alleging economic duress, demanding back his two million dollar contribution.

Mr Murphy’s opportunistic behaviour in withholding his signature at the eleventh hour was not unlawful, the Court of Appeal said. At law, he was entitled to act in his own self-interest, even if his actions were both unexpected and ungenerous, it said.

Dold v. Murphy – Court of Appeal (31.07.20)

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Fua'amotu Hotel: Commercial Factors v. Scenic Hotel Group

 Auckland financier Commercial Factors, owned by the Haydon family, stuck with a Tongan hotel it does not want failed in High Court legal arguments that Scenic Hotels had taken the problem off its hands.  Scenic pulled out of Tonga’s Fua’amotu Hotel in March 2019.  The two are also arguing over control of insurance payouts due following damage by cyclone Gita in 2018. 

Terry Haydon’s Commercial Factors Ltd financed construction of Fua’amotu by entrepreneur Sam Wong.  The High Court was told repayments fell into arrears almost immediately.  Owed $5.7 million, Commercial Factors took steps in 2011 to recover its money.  It planned to buy the hotel, join forces with a hotel management company and then sell the business as a package deal. Negotiations commenced with Christchurch-based Scenic Hotel Group Ltd, controlled by Hagaman family interests. The High Court was told of extensive discussions between Commercial Factors and Scenic.  Commercial Factors was under tight time constraints; it needed to line up its ducks before submitting a bid for Fua’amotu.  The hotel’s forced sale was under control of a Tongan court-appointed receiver.  Scenic was cautious; the level of Commercial Factor’s interest rates was critical to Fua’amotu’s future profitability.  An interim hotel management agreement was concluded, part of negotiations for formation of a joint venture company.  Commercial Factor’s bid to buy Fua’amotu for the value of its outstanding debt was successful.  Pacific Hotels Ltd was subsequently set up with Commercial Factors and Scenic each holding a fifty per cent stake.  Fua’amotu proved to be a big drain on cash.  By March 2015, Pacific Hotels had an estimated negative equity of $2.8 million. With Commercial Factors refusing to provide further financial support, Scenic subsequently demanded Pacific Hotels repay $2.43 million it had poured into the company.  Plans to liquidate Pacific Hotels stalled with Commercial Factors and Scenic at loggerheads over how tax losses would be used.  With no resolution in sight, Scenic packed up and left, clearing its property out of Fua’amotu and telling guests to move.

In the New Zealand High Court, Commercial Factors argued Scenic had agreed to buy Fua’amotu.  Justice Osborne ruled there had been no agreement for either Scenic or Pacific Hotels to buy the hotel.  There was no concluded joint venture either at the time Commercial Factors purchased Fua’amotu, or subsequently.  Their relationship was one of mutual co-operation; working together, until they fell out.

The High Court was told insurance payouts for cyclone Gita damage are being withheld; Commercial Factors and Scenic dispute who gets payment.  An interim insurance payout of one million dollars sits in a Tongan trust account.

Commercial Factors Ltd v. Scenic Hotel Group Ltd – High Court (19.09.19 & 30.07.20)

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Erceg: Sain v. Millie Erceg Trustee Ltd

 More evidence that having too much money can bring misery; Erceg family members are in court arguing over their late mother’s former home on Withiel Drive in the leafy Auckland suburb Epsom: daughter Vinka and son Ivan both claim ownership.

Vinka says Withiel Drive was purchased using family money with the intent she would inherit following their mother’s death; Ivan says their mother was absolute owner and she bequeathed the property to him on her death.

The fount of Erceg family wealth was son Michael’s ownership of Independent Liquor, rumoured to be worth in excess of one billion dollars after his 2005 death in a helicopter crash.  Lawyers have been kept very busy with litigation over Michael’s wealth, primarily claims by brother Ivan to a greater share.  Ivan was bankrupted in 2010.  Their mother Millie died in October 2019.      

The High Court was told Withiel Drive was purchased at auction in late 2004 for $1.7 million.  Michael put up the money.  Millie Erceg’s name went on the title.  On Millie’s death, family dynamics played out in the High Court.  Vinka said brother Michael made it clear at the time of purchase their mother had only a life interest in the property; it was hers on their mother’s death.  Whilst alive, Millie transferred ownership to a family trust, over which Ivan ultimately had control.  There was evidence of family steps taken in 2007 to protect their mother from what was viewed as inappropriate behaviour by Ivan.  Vinka said their mother was concerned Ivan was placing heavy financial demands on her; Ivan had already taken some two million dollars from their mother’s bank account, she said.  Millie signed a ‘dummy’ mortgage in favour of Vinka, enabling Vinka to lodge a caveat against title to Withiel Drive preventing any further registration against the title without Vinka’s approval.  This was later removed, at her mother’s request said Vinka.  Her mother appeared to have forgotten the original reason for setting up the ‘dummy’ mortgage, she said.

In the years prior to her mother’s death, Vinka lodged a series of caveats against title to Withiel Drive to protect her claimed rights to ownership.  This was done at times when their mother fell ill, with the caveat later lifted.  After their mother’s death in 2019, Ivan disputed Vinka’s right to ownership.

Justice Downs ruled Vinka’s current caveat over title to Withiel Drive remain, pending a full court hearing over the two siblings disputed claims.  There is no documentary evidence supporting Michael’s statements about ultimate ownership of Withiel Drive.  Vinka said other family members and an independent witness support her claim of conversations with Michael promising her eventual ownership.

Sain v. Millie Erceg Trustee Ltd – High Court (16.07.20)

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Joint Ownership: Minehan v. McGuigan

 Family ties are strong on the West Coast, but not between cousins the Minehans and the McGuigans with ongoing disputes over operation of a dry stock farm in Mikonui River Valley, near Ross. To break their deadlock, Justice Doogue ordered Bede McGuigan’s quarter interest in the farm be bought out and McGuigan pay an increased share of his cousins legal costs because of his uncompromising and unhelpful behaviour.

Farming in Mikonui Valley has been in Minehan hands for three generations.  After the deaths of second generation owners, Jim in 1994 and Martin in 2014, ownership came to be split between Martin’s two daughters Dea and Julie (jointly holding a 75 per cent stake) and a distant relative of Jim, Bede McGuigan (with a 25 per cent stake).

The High Court was told Dea has been actively managing farming operations since 1998.  Julie helps out as required.  Bede has been obstructive.  He refused permission to build a new homestead on the property.  His refusal to sign mortgages has hampered attempts to raise loan finance for further development of the farm.

Justice Doogue ruled the best remedy was to make a Property Law Act order forcing Bede McGuigan to sell his share to Dea and Julie. The alternative of subdividing one quarter of the land for Bede was not practicable; farming operations are split across three separate properties.  Justice Doogue called for an updated property valuation.  In 2019, the farm was valued at $1.6 million.

Justice Doogue signalled increased legal costs would be imposed on Bede because of his unreasonable behaviour.  After leaving his cousins with no alternative but going to court, he did not attend at court to challenge their Property Law Act application. 

Minehan v. McGuigan – High Court (14.07.20)

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Relationship Property: O'Brien v. Parkinson

 Working from a shed at the back of his Auckland property, Kevin Parkinson manufactured Namuru GPS receivers and provided electrical engineering consultancy services, trading as General Dynamics Corporation Ltd.  The High Court upheld Companies Act rights for estranged spouse Louisa O’Brien to challenge her former husband’s actions; unilaterally transferring General Dynamics’ assets across to a new company, allegedly shutting her out of a relationship property claim over their former business.  

The High Court was told the two were in a relationship for nearly thirty years, before separating in 2013.  A dispute over what assets are relationship property is before the Family Court.  Ms O’Brien lays claim to a share of General Dynamics’ business; she is a director and 50/50 shareholder.  Also in dispute is a property in Wanaka, allegedly purchased with assets spirited out of General Dynamics.  

Evidence was given of Mr Parkinson shutting down General Dynamics business operations immediately following their 2013 separation. In a lawyer’s letter, he said the company was a ‘one man’ operation; he was free to take his expertise elsewhere and set up a new business.  Ms O’Brien said General Dynamics was more than a mere consultancy; it also manufactured and sold GPS receivers.  Mr Parkinson took away four truckloads of plant and equipment when he left, she said. There was evidence of sales revenue totalling $228,000 booked by Mr Parkinson in the nine months after separation.

Associate judge Andrew ruled there was evidence Mr Parkinson breached Companies Act fiduciary duties, taking company assets when setting up his new business.  Judge Andrew gave permission for Ms O’Brien to sue her former husband in General Dynamic’s name for his alleged breach of fiduciary duty.  Whether Mr Parkinson did in fact convert General Dynamic assets to his own use requires a full court hearing.

O’Brien v. Parkinson – High Court (14.07.20)

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Relationship Property: Annan v. Douglas

 Mihiteria King’s film company Blacklime Ltd used a circuitous route to pay wages for her son, allegedly part of scheme allowing him to escape child support liability but later leading to a relationship property argument whether $21,600 was relationship money or a loan.

Ms King’s son Scott James Douglas lived with Rebecca Annan for over three years.  Ms Annan alleged the ‘money-go-round’ was set up by Mr Douglas in 2013 to cheat on child support payments arising from an earlier relationship.  Reducing declared wages reduced his personal liability for child support.

The High Court was told Mr Douglas and Ms Annan purchased a house at Browns Bay on Auckland’s North Shore in late 2013. Title was taken in the name of their family trust: Fresh Start Trust.  From that date, weekly payments of $600 were paid by Mr Douglas’ father into the Fresh Trust bank account.  This money was used to pay down bank borrowings.  When the two later separated, Mr Douglas and his parents claimed the weekly payments were a loan; demanding repayment of $21,600 from sale of the Browns Bay house.

Evidence was given that Mr Douglas’ parents resisted disclosing source of the weekly payments.  Only after concerted legal pressure was it identified that the payments came from Ms King’s film company, being first paid into her husband’s bank account and then transferred to Fresh Start Trust.  Justice Lang ruled the weekly payments were from Blacklime and intended to supplement Mr Douglas’ reduced wages as a Blacklime employee.  The payments were never intended to be a loan, he said.  The $21,600 was not to be deducted as a debt before splitting 50/50 the net proceeds from selling Browns Bay, he ruled.

Annan v. Douglas – High Court (13.07.20)

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Mainzeal: Mainzeal Property v. Yan

 Attempts to bankrupt Mainzeal director Richard Yan are on hold while he appeals a High Court order to pay $18 million damages for his role in Mainzeal losses exceeding $110 million.

In 2019, liquidators of Mainzeal Property & Construction Ltd successfully sued the company’s directors for insolvent trading having found $26 million of Mainzeal’s funds were transferred offshore between 2004 and 2005 in purchase of assets in China, replaced by promises to repay which proved worthless.  Directors collectively were ordered to pay damages totalling $36 million.  Mr Yan individually, is liable for $18 million.  All directors have appealed.

Liquidators took action to bankrupt Mr Yan.  The High Court was told he has provided no meaningful offers of payment.   Professional indemnity insurers for the other directors have provided security, to ensure payment of damages should their appeal fail.

Mr Yan said he cannot pay anything.  He has no economic interest in Chinese companies controlled by him, he said.  There are two properties in Auckland with a combined market value of some ten million dollars registered in his name.  He holds these assets as trustee of family trusts, he said.  One Auckland property is occupied by his spouse and their son, who attends school in Auckland.  Mr Yan spends most of his time in China.

Associate Judge Andrew ruled Mr Yan’s Mainzeal appeal was not frivolous; there were concrete legal issues to be aired before the Court of Appeal.  If bankrupted, Mr Yan’s rights of appeal would pass out of his hands; any decision to further his appeal would be at the discretion of Insolvency Service.

The High Court was told any bankruptcy order against Mr Yan made in New Zealand would not be recognised by China’s courts and would not be enforceable in China.

Mainzeal Property & Construction Ltd v. Yan – High Court (10.07.20)

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Money Laundering: Internal Affairs v. Ott Trading Group

 Multiple breaches of money-laundering legislation coupled with efforts to frustrate Internal Affairs investigations resulted in fines totalling $7.58 million for money remitters OTT Trading and related business MSI Group. 

OTT Trading Group Ltd was controlled by Tonghui Qi; MSI by Ye Duan.  According to Companies Office records, OTT will soon be struck off for failing to file annual returns.

The High Court was told of Internal Affairs inspectors given the run around when they attempted to audit money remittance businesses controlled by Qi and Duan.  An August 2014 visit at MSI’s Auckland office to audit compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act was met with a quick response; MSI was closing down operations, it said.  Further investigation into MSI was then closed.  An April 2015 audit of OTT’s Auckland operations discovered that OTT was acting as a conduit for MSI and that MSI was still in business. Neither OTT nor MSI could provide evidence of compliance with money-laundering protocols required by the Act.

Internal Affairs investigations identified that MSI had actioned money remittances totalling $213 million over a five year period, failing to complete customer due diligence on some 750 transactions valued at over $50,000.  MSI said the larger the amount being transferred the less willing customers were to provide detailed information.  It did not press for required information about source of funds and customer identity for fear of losing custom.  Trading separately on its own account, OTT transferred funds totalling at least $196 million, also without proper due diligence required by the Act.

Tonghui Qi and Ye Duan each agreed to a three year ban. OTT employee Lee Chon Woon agreed to an indeterminate ban from all work as a money-laundering ‘compliance officer.’

Internal Affairs v. OTT Trading Group Ltd – High Court (15.05.20 & 10.07.20)

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Mortgagee Sale: Heartland Bank v. Haines

 Otago farmer Tony Haines was ordered to pay Heartland Bank $754,200 after a bank loan was called up because Mr Haines failed to pay stock sale proceeds into the farm’s Heartland account. His claim that Heartland failed to properly handle its forced sale of farm stock was dismissed.  

Hillend Station Ltd ran dry stock on farmland near Milton.  Tony Haines was majority shareholder, with a sixty per cent stake.  Heartland Bank provided working capital.  Mr Haines guaranteed Hillend’s borrowing.  Its loan agreement contained a common banking provision that proceeds of all stock sales were to be banked with Heartland.  When Heartland learnt in December 2017 that sales of $85,740 were diverted by Mr Haines to a BNZ account, it moved swiftly. The balance of the Heartland loan was called up.  Several weeks later, Heartland took control of all cattle and sheep on Hillend’s two farm properties.

It was to come out in High Court evidence that Heartland did not maintain an accurate count when mustering into Hillend’s stock yards. Heartland said it was intended that Mr Haines’ father would assume control of Hillend’s debt and resume farming at Hillend.  There was no commercial urgency to get an accurate count.  As it turned out, Tony Haines’ father lost interest in the proposal. Heartland cleared the farm, selling some stock at auction, sending others to the freezing works and selling some cattle diseased with ‘pink eye’ to a neighbouring farmer.

Hartland sued Tony Haines, claiming its shortfall on sale of farm stock plus legal expenses.

Mr Haines complained Heartland Bank had not accounted for all stock on the property.  In return, Heartland alleged Mr Haines had been using his own transport company to rustle Hillend stock, selling it privately.  Justice Osborne ruled the tally figures provided by Heartland may have understated stock levels on the property, but it was for Mr Haines to provide evidence as to any shortfall.  He did not do so.  Justice Osborne also ruled Heartland did not have adequate arrangements in place to care and manage the stock after taking possession.  Just leaving animal husbandry in the hands of Mr Haines’ father was not sufficient.  Mr Haines failed to provide evidence of stock values dropping because of poor management.  

Even if Mr Haines could substantiate his claims that Heartland did not get a reasonable price for stock covered by its mortgage, Heartland was protected by provisions in its loan documents exempting it from liability for acting carelessly or negligently, Justice Osborne said.

Heartland Bank Ltd v. Haines – High Court (10.07.20)

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