Bankruptcy: Watson v. Attorney-General

After buying into a newly constructed apartment block plagued with building defects, Andrew Philip Watson was forced into bankruptcy in 2014.  Ownership passed to Insolvency Service.  High Court has now passed title to the apartment back to him as a ‘disclaimed’ asset.

On bankruptcy, ownership of Mr Watson’s apartment in Mountain Road, Mt Wellington, passed to Insolvency Service as an asset in his bankruptcy.  Insolvency Service ‘disclaimed’ the asset, taking the view bankruptcy creditors would not benefit from a forced sale given owners of flats in Mountain View apartments faced substantial costs in remediating the building.  As a legal consequence of the apartment being disclaimed, ownership passed by default to Treasury. 

The Insolvency Act allows any person affected by a disclaimer to have title to the property vested in them.  Justice Jagose ruled it is only fair that title be returned to Mr Watson.  He was discharged from bankruptcy in 2019.  Whilst bankrupt, he continued in employment and kept up payments due on the property, including mortgage payments.  The court was told that with ownership returned, Mr Watson plans to sell the apartment, now free of any claim by pre-bankruptcy unsecured creditors.

Watson v. Attorney-General – High Court (30.06.21)

21.110 

Relationship Property: Meo v. Meo

It was double counting to treat $75,500 retained earnings in a family company as relationship property when those same retained earnings are included in the company share valuation.

Jacqueline Meo challenged a Family Court ruling that she pay former husband David some $51,000 to settle a relationship property dispute after their twenty-one year marriage ended.

On appeal, two issues were in dispute: the value of Wellington shoe wholesaler Meo Imports New Zealand Ltd and family trust mortgage repayments.

Meo Imports Ltd was relationship property.  The company had declined in value since separation; first because of customers switching to online purchasing and secondly because of reduced sales during pandemic lockdowns.  The Family Court assessed Meo Imports’ value as being $84,000 at date of their 2014 separation and $76,800 at later date of the first court hearing.  Jacqueline had valued the company at $209,000 as at 2014.  Her accounting adviser treated profits retained within the company but available for distribution as a separate item of relationship property. Not correct, Justice Isac ruled.  Retained earnings are included in any share valuation; remove retained earnings in a notional distribution, then the share value drops proportionately.  Jacqueline’s half interest in Meo Imports as relationship property proved not to her net benefit; her personal drawings from the company, being a debt she owed the company, exceeded her half share of the company’s value.

The court rejected David’s claim that payments he made personally on loans secured over family trust properties were post-separation payments making a ‘contribution to the marriage.’  Post separation payments by one spouse can be taken into account as a relationship liability where payments protect or preserve a relationship asset.  Evidence was given that David personally paid some $73,800 principal and interest on loans secured over five properties owned by their family trust in the immediate period after separation and before four of the properties were sold.  These payments were not relationship liabilities, Justice Isac ruled.  The properties were not relationship assets; they were owned by a family trust.

Disallowing the $73,800 David claimed as a relationship liability reduced the amount Jacqueline was ordered to pay David to a total of $14,900. 

The court was told there is separate litigation underway between the two regarding entitlement to family trust assets.

Meo v. Meo – High Court (30.06.21)

21.109 

Property: Waimauri Ltd v. Mahon

Interests associated with property developer Tim Edney are pushing for bankruptcy of fellow property developer Neville Mahon on a $831,000 debt, just one of multiple disputes between the two currently working through the courts.  Bankruptcy will stop dead Mr Mahon’s ability to actively defend claims; Insolvency Service takes over.

Any trace of an amicable working relationship between the two foundered long ago.  There has been a sequence of court cases disputing their joint involvement in property transactions in Queenstown, south Auckland and now the Station Hotel on Beach Road in Auckland’s central business district.

In 2020, the High Court ordered Mr Mahon pay Mr Edney’s Waimauri Ltd some $395,000 plus accrued interest, then calculated at $437,000. This was well below the multi-million dollar sum claimed as arrears on the Mahon-guaranteed loan from Waimauri, a loan used for redevelopment of Station Hotel.  While ruling Waimauri was entitled to the sum ordered, Justice Muir was moved to comment on aspects of Mr Edney’s conduct as being ‘rapacious;’ such as requiring Station Hotel upgrades be financed with Waimauri money and then subsequently benefitting on sale from the increased capital value of the project.

Mr Mahon asked for time to pay the court-ordered amount. Mr Edney demanded full financial disclosure before agreeing to any concession.  Mr Mahon refused; Mr Edney would use this information against him in other ongoing litigation between the two, he said.  Mr Edney issued a bankruptcy notice; a legal precursor forcing Mr Mahon into bankruptcy if payment was not made.  Mr Mahon applied to have bankruptcy proceedings halted. Associate judge Sussock ordered a halt, continuing until such time as Mr Mahon’s appeal against the court-ordered $831.000 debt is decided.

Mr Edney alleges Mr Mahon is stalling.  An appeal was filed late and Mr Mahon has delayed getting a hearing date fixed, he said.

Waimuri Ltd v. Mahon – High Court (25.06.21)

21.108

Asset Forfeiture: Commissioner of Police v. Salter

Facing potential forfeiture of his waste oil recycling business as proceeds of crime and with restraining orders freezing his properties, Ron Salter went to the High Court for an order holding police liable for financial losses should their case fail.

For the first time, police have used the proceeds of crime regime against an ordinary commercial business convicted of health and safety offences.  Salter and his south Auckland business Salters Cartage Ltd were convicted of multiple offences after an explosion in 2015 at its Wiri site killed a contractor installing a catwalk next to a waste oil tank; petrol, kerosene and oil vapours in a tank containing about 3000 litres of liquid exploded, ignited by sparks either from a welding torch or a grinder.  Salter and Salters Cartage were collectively ordered to pay $128,000 compensation to the victim’s family and Salters Cartage fined $202,500.  Further prosecutions followed when Salter ignored ‘make safe’ demands by WorkSafe, continuing to operate the Wiri site in breach of health and safety rules.  Salters Cartage was fined a further $56,250 and Salter sentenced to four and half months’ home detention with a fine of $25,000.

Police say Salter systematically operated his business in breach of health and safety and hazardous substance laws for at least seven years.  Revenue earned was unlawfully derived, police allege, and should be forfeit under the Criminal Proceeds (Recovery) Act.  With a full court hearing years away, police obtained a restraining order over properties owned by Salter either personally or through family trusts: two houses in Paerata, a property on Waiheke Island and the business premises occupied by Salters Cartage in Wiri.  The court was told market value of all four properties is $9.675 million.  They are used as security for BNZ funding; working capital for Salters Cartage.

Salters Cartage has over 3000 customers.  Salter says the restraining orders are hampering business operations; they prevent debt being increased and currently none of the restrained properties can be sold as part of any business sale.  He demanded an indemnity from police; they should pay damages for Salter Cartage financial losses if the proceeds of crime case fails. It can be up to three or four years before a proceeds of crime case gets to court.  The Act gives to judges a discretion to order an indemnity.

Justice Palmer ordered police pay damages if unsuccessful.  The longer it takes to get to trial the greater the possibility of financial complications for Salter’s business.

Commissioner of Police v. Salter – High Court (25.06.21)

21.107

Environment: Rutherford v. Canterbury Region

Having invested time and money publicising resource management prosecutions, it can be difficult for local authorities to handle defeat; Canterbury Region resisted North Canterbury farmer Jan Scott Rutherford correcting an injustice after prosecution, conviction and a fine for supposedly unauthorised earthworks on the Waiau River.

Mr Rutherford’s farm is bounded by the Waiau, a braided river running through Hurunui District.  Canterbury Regional Council prosecuted for supposed breaches of the Resource Management Act when he levelled, seeded and fertilised a seventy hectare area bordering the river.  Mr Rutherford said this work was above the edge of the river: a well-defined gravel bank, he claimed.  Canterbury Region argued the river bed extended to an old river terrace, above the newly grassed pasture.  He was prosecuted for ‘unconsented work’ in the bed of the river.  The two disputed what was the river bed.

The High Court was told Mr Rutherford’s prosecution was underway at the same time as a similar prosecution against a Canterbury farmer on the Selwyn River.  When this case decided a ‘river bed’ encompassed all land underwater when the river was at full flood without overtopping its banks, Mr Rutherford threw in the towel, pleading guilty, and was fined $34,000.  The Selwyn case was subsequently appealed, leading to a new definition of river bed; land underwater during the usual flow of water as measured over a reasonable period of years.  Mr Rutherford was vindicated.  The land he bought into pasture was above the Wairau river bed.

Canterbury Region challenged his appeal against conviction.  The mere fact there has been a change of law since the conviction does not, of itself, justify setting aside a conviction, it said.

Mr Rutherford’s conviction for encroaching on the Waiau River bed was quashed by Justice Dunningham.  A substantial injustice would follow if the convictions remained, given Mr Rutherford argued the point from the outset and a criminal prosecution was forced on him when the District Court refused his request for an adjournment pending an appeal then underway in the Selwyn River case, an appeal which subsequently clarified the definition of a river bed for resource management purposes and determined Mr Rutherford was correct all along.

A single conviction against Mr Rutherford was upheld; allowing sediment to enter the river without resource consent whilst carrying out the disputed earthworks.

Rutherford v. Canterbury Region – High Court (24.06.21)

21.106

Partnership: Rathore v. Bhatti

Vinod Rathore claimed to be partner to a 2011 purchase of a rural property on Monk Road at South Head near Helensville.  Ilyas Bhatti claimed the property was his.  In the High Court, Justice Lang preferred an innocent email exchange as proof of ownership, dismissing much of the oral evidence put forward as describing events that were highly improbable.  

Deciding that the only evidence that could be relied on as accurate was an innocuous email exchange about further bank borrowing, Justice Lang ruled the two were in partnership and Mr Rathore was entitled to half the equity in Monk Road after repayment of cash contributions put in for the purchase.

The High Court was told the 35 acre Monk Road property was purchased in 2011 for $450,000.  Mr Rathore put in $57,000 cash; Mr Bhatti and his wife $101,000. Westpac funding completed the purchase. Title was taken in the name of a newly formed company: Fivestar Properties Ltd.  Richa Choubey, later to marry Mr Rathore, was sole director and shareholder of Fivestar.

Mr Rathore resigned from his job as a mortgage advisor and left to live in Australia shortly after the Monk Road purchase.  This was to escape a Serious Fraud Office investigation into mortgage fraud, Mr Bhatti alleged.  It came out in evidence at the mortgage fraud trial that Mr Rathore received several payments totalling some $6000 for his role in approving and recommending loans for those on trial.

Mr Bhatti claimed he was the beneficial owner of Monk Road; Fivestar held the property in trust for him, he said.  He had no contact with Mr Rathore for some seven years following purchase and had repaid the $57,000 ‘loan’ Mr Rathore put up for the purchase, he said.  He commonly put into the names of others properties he purchased; to protect his assets from creditors, he said.

Mr Bhatti put forward four supposedly independent witnesses supporting his claim that the $57,000 payment was a loan which had been repaid.  Justice Lang rejected their evidence.  These witnesses were variously financially dependent upon Mr Bhatti or hostile to Mr Rathore.  When pressed, witnesses were evasive about the manner and circumstances of the supposed repayment.  Reasons for why Mr Rathore may have needed the money were not plausible.  Mr Bhatti had no written receipt for any repayment. He could not produce a power of attorney he claimed Ms Choubey had signed giving him control of Fivestar. Mr Bhatti’s failure to properly disclose all his assets in a relationship property dispute with his wife added to questions over his credibility, Justice Lang said.

The critical evidence proved to be email exchanges between Mr Rathore and Ms Choubey in late 2011 where they discussed Mr Bhatti’s demand that bank borrowing on Monk Road be increased.  Mr Bhatti desperately needed cash to settle purchase of another property at Hayr Road in Mt Roskill.  The email chain relayed discussions between Ms Choubey and Mr Bhatti suggesting further bank finance be obtained to buy out Mr Rathore’s share or that alternatively Monk Road be sold.  Neither happened; the Hayr Road purchase fell over.     

This email chain was unambiguous evidence that Mr Bhatti regarded Monk Road as a partnership asset with profits to be shared on sale, Justice Lang ruled.

Rathore v. Bhatti – High Court (21.06.21)

21.105

Deadlock: Geerkins v. Sietec Wholesale

Asking the High Court to liquidate a joint venture company was a legitimate tactic when shareholders had fallen out but were still in negotiation to settle their dispute, the High Court ruled.

Dennis Geerkins and John McAdam are 50/50 owners of Auckland telecommunications equipment supplier, Sietec Wholesale Networks Ltd.  All is not well between the two.  Mr Geerkins complains that he is being squeezed by Mr McAdam with profits diverted through excess charges imposed on Sietec Wholesale.  Their joint venture company rents space from interests associated with Mr McAdam.  Mr Geerkins alleges unreasonable costs, management fees and operating expenses are being wrongly charged their joint venture.  Access to Sietec Wholesales’ database has been blocked, he says.

In September 2020, Mr Geerkins filed a High Court application to have Sietec Wholesale put into liquidation.  This prompted a quick response.  Both agreed the liquidation application would not be advertised, while Mr McAdam would not compete against Sietec Wholesale in bidding for work and that they would jointly work towards resolving their differences by having one buy out the other.

Some nine months on: Mr Geerkins alleges Mr McAdam has failed to honour his undertaking not to compete; Mr McAdam is in court asking for liquidation proceedings to be struck out.  It is an abuse of process to seek liquidation of Sietec Wholesale when both sides are in negotiation, he says.  A pending liquidation application is having an adverse effect on business, he says.  The threat of liquidation is being used to force up the buy-out price, he complains.

Liquidation proceedings remain on hold.  Associate judge Bell refused to strike out Mr Geerkins’ liquidation application.

Geerkins v. Sietec Wholesale Networks Ltd – High Court (21.06.21)

21.104

Xerox: Fuji Xerox NZ v. Whittaker et al

It is not just an employment law dispute requiring an Employment Relations Authority hearing; Fuji Xerox can continue with High Court action against three former executives in a multi-million dollar claim alleging overpayment of bonuses and commissions totalling $3.6 million and loss of business totalling $86.3 million after business customers abandoned Xerox service contracts when learning of accounting irregularities.   

Former managing director Neil Whittaker, former chief financial officer Mark Donald Allright and former general sales manager Gavin Pollard are alleged to have manipulated reporting of Xerox transactions to artificially boost revenue reported for the periods 2012-2015, with knock-on benefits for their bonuses and commissions.

Photocopier sales by Xerox are commonly structured as lease transactions.  Accounting rules differentiate between finance leases and operating leases. Xerox alleges the three former executives mis-categorised thousands of transactions, to their personal benefit.

Xerox demands repayment of $3.6 million allegedly overpaid for commissions and bonuses.

Xerox also claims Mr Whittaker and Mr Allright inappropriately structured a five million dollar receipt as being an inducement to surrender an existing office lease on Auckland’s College Hill when it was an inducement to lease new premises in Newmarket.  Different accounting treatments for lease surrenders as against inducements to rent lead to differing consequences for reported profits.

Separately, former chief financial officer for Xerox New Zealand Mr Allright is being sued by Xerox Singapore for deceit.  It is claimed intercompany advances of some $174.5 million would not have been made but for the alleged accounting deceit.

Attempts by all three to have the High Court case thrown out as an employment issue, where Employment Relations Authority has sole jurisdiction, did not succeed.  Xerox claim for restitution was a case properly for the High Court, Justice Jagose ruled.  Restitution does not seek to recover money paid under an employment contract; it seeks recovery of money allegedly paid in excess of the contract.  Companies Act claims for alleged breach of directors’ duties are also to continue in the High Court.

Xerox is also suing auditors Ernst & Young.

Fuji Xerox New Zealand Ltd v. Whittaker, Allright & Pollard – High Court (21.06.21)

21.103

Construction: Palmer v. Hewitt Building Ltd

Builder Mark Hewitt described her as obdurate, unreasonable and vindictive; Barbara Palmer described him as incompetent, unreliable and dishonest: the outcome of a Masterton home renovation that went seriously wrong.  He was ordered to pay $67,500 to remediate cladding and roofing.  A court order that his company pay $392,400 damages is likely to prove worthless.

The High Court was told Hewitt Building Ltd entered into a fixed price $526,300 contract in 2016 to renovate Ms Palmer’s recently purchased home on the outskirts of Masterton.  Five year’s later, no code of compliance certificate has been issued, Masterton District has issued a notice to fix deficiencies and Ms Palmer has sued.   

Hewitt Building Ltd did not defend.  It was ordered to pay $392 400 damages for failure to complete the job according to contract specifications.  Mr Hewitt told the court his company had no assets to meet any damages claim.

Ms Palmer also sued Mr Hewitt personally, alleging he was negligent in carrying out the work.  Evidence was given of multiple cases of cost cutting by Mr Hewitt ranging from use of sub-standard materials through variations in the construction envelope by reducing floor areas, wall heights and width of eaves plus failures to carry out some of the contracted work; each having the effect of saving money on the fixed price contract.  Mr Hewitt and Ms Palmer disagreed whether all variations had been approved.  Ms Palmer paid Hewitt Building Ltd some $543,000; paying an extra $18,000 on the original fixed price for agreed variations.  She later disputed performance of the building contract.

Mr Hewitt was not liable personally for breaches of contract by his company Hewitt Building Ltd, Justice Cooke said.  Mr Hewitt was not a signatory to the building contract.  But he was personally liable for workmanship failing to comply with the Building Code. Builders are personally liable for a failure to take reasonable care and in most cases that will be a failure to meet standards set by the Building Code, Justice Cooke ruled.

Mr Hewitt personally was ordered to pay $67,500 damages; the cost of ensuring items of cladding and roofing were fixed and made Code compliant.

Palmer v. Hewitt Building Ltd – High Court (18.06.21)

21.102 

Family Trust: Hawkins v. Hawkins

Payment of an $100,000 inheritance into a family trust by a Christchurch bankrupt will be of interest to Insolvency Service.  Any inheritance arising whilst bankrupt is ‘after-acquired’ property which goes to pay prior bankruptcy creditors.

Associate judge Lester indicated details of litigation between trustees of a Canterbury family trust should be copied to Insolvency Service.  The litigation revealed funding for purchase of a Picton Avenue property in Christchurch came in part from an inheritance that should have been disclosed to Insolvency Service.

Errol Hawkins together with his wife Denise were bankrupted in 2009.  The High Court was told they set up a family trust shortly after, with three named trustees: son Samuel, daughter Angela and a corporate trustee: St Martins Law Ltd. Samuel and Angela were to later disagree over whether a trust in fact existed and how it operated.  The evidence was that their parents subsequently used trust assets as if they were their own and the trustees were only called into action when legal documents had to be signed on behalf of the Trust.

The Trust’s first major transaction was to purchase a section in Timaru costing some $42,000.  This was funded with a $45,000 ACC payment received by mother Denise. She was bankrupt at the time, but the ACC payment did not have to be surrendered to Insolvency Service.  It is now disputed whether her $45,000 payment to the Trust was a loan or a gift.  On the death of Errol’s mother about a year later, Errol arranged for the Trust to purchase her Picton Avenue home as accommodation for himself and wife Denise. Errol was still bankrupt at the time. The purchase was funded by his estate inheritance and a bank loan taken in Samuel’s name with guarantees from all three trustees.  Picton Avenue was sold in 2016 to fund a planned purchase by Errol and Denise of South New Brighton Motor Camp.

The trustees fell out with arguments over how the motor camp purchase should be financed with proceeds from sale of Picton Avenue.  Two trustees, Angela and St Martins Law, wanted to see trust monies advanced as a loan; Samuel instead used the funds to capitalise a company owned by himself, his wife and his father with this company purchasing the camp ground. 

Samuel was sued for breach of trust.  In response, Samuel denied a trust ever existed; the Trust was a sham and did not represent the factual realties, he said.

At a preliminary High Court hearing, Judge Lester ruled detailed evidence in court was needed to determine circumstances surrounding the creation and the operation of the supposed Trust.  He suggested Insolvency Service be notified immediately of circumstances surrounding Errol’s inheritance from his mother’s estate at the time when he was bankrupt.

Hawkins v. Hawkins – High Court (17.06.21)

21.101

Receivership: Jackson v. Kerr

Receivers of George Kerr’s Pyne Holdings Ltd were entitled to see all the paper work relating to his negotiations with BNZ over a disputed debt, even though they were in fact appointed by BNZ as receivers of Pyne Holdings.  In a classic example of legal schizophrenia; receivers act independently of their appointing creditor while at the same time getting in cash for the benefit of that same creditor.

In April 2021, Bank of New Zealand put Mr Kerr’s Pyne Holdings Ltd into receivership claiming some $67.7 million.  Mr Kerr disputes how much is owed.  Receivers from Calibre Partners were rebuffed when they demanded access to all Pyne Holdings’ records.  It was wrong that BNZ-appointed receivers should see company documents and legal advice setting out negotiating strategies in Pyne’s dispute with BNZ, Mr Kerr said.

The courts recognise legal professional privilege over lawyer/client discussions arising in the course of a dispute.  Holding that advice confidential means a client is more likely to make frank admissions, putting legal advisers in the best position to give proper advice. 

Where loan documents create a security over all assets, company receivers have a statutory right of access to all company records under the Receiverships Act, Justice Walker ruled.  As outsiders, receivers need information to sort out a company’s financial position.  BNZ has security over all Pyne Holdings ‘personal property.’  That includes all written records and files, including legal advice received.         

While the receivers could have access to all company documents, BNZ had no absolute right to see this information, Justice Walker cautioned.  The receivers act independently.  It is their decision, while acting in the best interests of Pyne Holdings, to determine how otherwise legally privileged information is used: to settle, to sue or to abandon any claim against BNZ.

Calibre Partners told the High Court it would not disclose to BNZ any legally privileged documents it accessed.  The High Court was told Mr Kerr currently lives in the United Kingdom.

Jackson v. Kerr – High Court (15.06.21)

21.100

Fraud: Estate of Micheal Kidd v. van Heeren

For readers of Dickens, the litigation rivals Jarndyce v. Jarndyce. Michael Kidd sued business partner Alexander Pieter van Herren for fraud in 1996. Twenty five years later Mr Kidd is dead, the case unresolved and the sum of $US 25 million sits in court being run down in payment of legal expenses and expert witness fees.

It took nearly twenty years of litigation through both the South Africa and New Zealand courts for Mr Kidd to get a court ruling that he had been defrauded by Mr van Heeren in his operation of their international steel trading partnership.  The New Zealand High Court ordered an interim payment into court of $US 25 million pending a further court hearing over damages.  There was a six year delay before Mr van Heeren paid this money into court, a delay exacerbated by what the Court of Appeal called attempts by Mr van Heeren to wriggle and twist at every turn resisting liability being sheeted home and any accounting for his wrongdoing.  Mr Kidd died two weeks after payment into court.  Executors of Mr Kidd’s estate want access to this money. Mr van Heeren says $US 25 million is an extravagant assessment of how much is owed; it could be as little as $US 2.6 million, he says.  The final figure for damages has yet to be established.

Meanwhile, Mr Kidd’s estate is accruing huge liabilities. The Court of Appeal was told Mr Kidd had borrowed against his expected court winnings from a litigation funder: LCM Operations Pty Ltd.  Initial borrowings of $US 4.3 million had ballooned out to some $US 17.25 million.  LCM is charging interest at thirty per cent, compounding annually.

Back in the New Zealand courts, Mr Kidd’s executor asked for an early release of the funds held in court.  While sympathetic to the executor’s position, the Court of Appeal ruled there were too many unresolved issues to second-guess what might be the full damages payable to Mr Kidd’s estate.  The court likened the litigation to a game of musical chairs in which the participant with the greater stamina not only wins the game but also gets to take home all the chairs.

The money remains in court.

Estate of Michael Kidd v. van Heeren – Court of Appeal (11.06.21)

21.098 

Professional Negligence: CBL Insurance v. PwC

CBL Insurance liquidators’ $278 million claim against PwC was struck out by the High Court as being frivolous; PwC’s contract to provide actuarial services limited its potential liability to just over five million dollars: five times fees earned.

CBL Insurance Ltd was pushed into liquidation insolvent in February 2018.  Liquidators McGrathNicol filed a claim against fellow professional services firm PriceWaterhouseCoopers alleging negligence in PwC’s actuarial assessment of CBL’s long-tail liabilities.  In particular, liquidators allege CBL systematically under-priced premiums on cover offered for builders’ liability on French construction contracts and that it was unreasonably optimistic in reserving for potential claims.  Years of under-reserving resulted in CBL reporting inflated profits for the years 2013 – 2016.  In fact, no profits were earned, the liquidators allege.  PwC provided actuarial services to CBL, issuing solvency certificates in support of CBL’s continued registration as an insurer.

At a preliminary High Court hearing, PwC had the negligence claim struck out as being frivolous, vexatious and an abuse of process.  Justice Gault ruled the plain meaning of PwC’s contract with CBL Insurance limited potential liability to five times fees charged.  A claim for $278 million was ridiculous when PwC fees for the period in question totalled some $1.1 million.

Liquidators were given leave to re-formulated their claim for a lesser amount.

Also struck out was legal action taken against both a PwC partner and an employee who personally signed off on the allegedly negligent solvency certificates.  In the PwC contract, CBL Insurance had agreed in no circumstances would it sue either PwC staff personally or any contractors employed by PwC to carry out its work.

CBL Insurance Ltd v. PriceWaterhouseCoopers – High Court (11.06.21)

21.099

Harassment: Elliot v. Vandenberg

Self-proclaimed as the ‘best non-qualified legal bro in the biz’ and claiming to have never lost a case, Stephen Raniera Rangi Elliot was ordered to stop harassing Napier gym owner Kerri Vandenberg.

The High Court was told Ms Vandenberg obtained a Harrassment Act restraining order against Mr Elliot and his partner Kirsten Parcell after a falling out between the two women; Ms Parcell was previously employed at Ms Vandenberg’s gym.  Mr Elliot acted as her advocate in a personal grievance claim.

Ms Vandenberg’s harassment claim arose from a pattern of some 24 communications over a fifteen month period starting June 2018: most being email messages from Mr Elliot to Ms Vandenberg, her lawyers and her business associates; some being social media posts by Ms Parcell.  One email labelled her lawyer as ‘another greedy, lying lawyer.’  In another, Mr Elliot stated ‘the way I make money is through litigations.’ An email to Ms Vandenberg’s business associates described her as a ‘very nasty individual’ and ridiculed her physical appearance.  A social media post incorrectly stated Ms Vandenberg was wanted by Napier police for questioning

Mr Elliot appealed the restraining order.  A Human Rights Commission mediation had settled all claims, he said.  The High Court was told this mediation arose from a complaint by Mr Elliot about circumstances in which he was refused membership of Ms Vandenberg’s gym and threatened with trespass should he return.  Mediation led to a confidential settlement with Mr Elliot to receive an undisclosed amount.  This settlement was described as being ‘an absolute bar to any further or other claim.’

This full and final settlement applied only to circumstances surrounding Mr Elliot’s gym membership, Justice Osborne ruled.  The District Court ruling that Mr Elliot had harassed Ms Vandenberg stood, he said.  The court was told she now lives in Australia.

Elliot v. Vandenberg – High Court (10.06.21)

21.097

Defamation: Staples v. Freeman

Heavy-handed debt collecting led to a defamation action and a High Court order to pay $350,000 aggravated damages.

The story begins with Malcolm Gibson’s employment as a quantity surveyor in 2013 by Claims Resolution Service Ltd, a company set up by Bryan Staples to help Canterbury homeowners resolve earthquake insurance claims.  Mr Gibson misrepresented his qualifications.  When Mr Staples found out, he refused to pay Mr Gibson’s invoices totalling some $170,000 saying the work done was of no commercial value.  Mr Gibson responded by selling his alleged $170,000 debt to Ironclad Securities Ltd for the sum of one dollar.  Ironclad’s recovery methods involved confronting Mr Staples and threatening to kill him if he did not pay within seven days.  Justice Doogue described what followed as an extortion attempt with a publicity campaign alleging Mr Staples used his company to defraud, mislead and cheat people.  A Facebook page controlled by Richard Freeman published posts stating Mr Staples was a conman, ripping off innocent people while acting as a bully and threatening the media.  When sued for defamation, Mr Freeman sent documents repeating these allegations to member of parliament Winston Peters.  Justice Doogue said this was a deliberate attempt to have Mr Peters repeat the allegations in parliament under protection of parliamentary privilege.  Mr Peters repeated in parliament, almost word for word, the allegations made previously by Mr Freeman.

Statements made in parliament have absolute protection from defamation claims.  But the simple act of a private citizen forwarding defamatory material to a third party is at law a ‘publication’ creating liability in defamation.  Justice Doogue ruled Mr Freeman liable in defamation for ‘publishing’ the comments to Mr Peters. Mr Freeman was also liable in defamation for the Facebook posts.

Mr Freeman did not defend the court case.  Ironclad Securities was removed from the companies register in 2016.

Staples v. Freeman – High Court (4.06.21)

21.096

Property Sale: Angurala v. Fernandes

Evidence of a red hot property market; two purchasers each claiming to have purchased the same Auckland property.

Eugene Fernandes claimed she is the rightful purchaser of a Mt Roskill property with Keemati and Manpreet Angurala agreeing to sell for $1.53 million cash in a contract signed on 12 March 2021.  There was an existing contract in place; a conditional sale to a Mr Singh for $1.6 million.

Ms Fernandes was to tell the High Court that the Anguralas had made a $535,000 capital profit in little more than a year of ownership and that she in turn had plans to make at least a $300,000 profit redeveloping the site. 

The High Court was told Mr Singh’s prior $1.6 million contract was negotiated through real estate agent Harcourts.  He had three days to arrange finance.  This finance condition expired on 12 March.  On the evening of 12 March, an agent from Barfoot and Thompson told the Anguralas that the Singh contract was at an end; finance had not been arranged.  She presented a $1.53 million cash offer from Ms Fernanades which they signed. Barfoots had no listing agreement, leaving their commission at risk.  Barfoots had the Anguralas sign a listing agreement next day.

Several days later, Ms Fernandes registered a caveat against the Mt Roskill property to block any transfer to Mr Singh.

Justice Hinton approved transfer of title to Mr Singh.  His prior contract still stood.  While the finance condition was not satisfied until one day after the 12 March date specified in his $1.6 million contract, standard contract terms required written notice of cancellation before his contract was at an end.  No written notice had been given at the time of the second sale to Ms Fernandes.

Terms of the court order require the Fernandes caveat to be reinstated after transfer of title to Mr Singh, complicating Mr Singh’s plans for the property.  The Anguralas, Mr Singh, Ms Fernandes, Harcourts and Barfoot & Thompson all have an interest in how the double sale is resolved. 

Angurala v. Fernandes – High Court (4.06.21)

21.095 

Forestry: Nottingham Forest v. Unison

Unison Networks was awarded $195,000 damages from Hawkes Bay forestry companies following repeated power outages caused by trees falling across transmission lines running up Esk valley.

Unison’s network runs through some of the most heavily plantation-forested areas in New Zealand: Rotorua, through Taupo to Hawkes Bay. Its Esk feeder, running about 500 metres through a plantation of pinus radiata, suffered a series of outages from 2010 following tree strikes. Managing the forest, Forestry Management (NZ) Ltd refused to clear trees closest to transmission lines unless Unison paid.  Unison sued.

The Court of Appeal ruled forestry companies are liable in the tort of nuisance for outages caused by persistent tree strikes. In Esk valley, Unison’s transmission lines ran through the forest along a cleared thirty metre wide corridor. Planted out in 1994, the trees had grown to nearly forty metres in height.  Wind storms and snowfalls periodically pushed down trees.  Those trees planted on a slope had fallen over the transmission line, causing multiple outages over several years; the worst, a six day outage in 2016 affecting some 380 customers.

There was no need to prove Forestry Management was ‘at fault,’ the court ruled.  It was strictly liable.  The continuing occurrence of tree strikes amounted to a legal nuisance.

Nottingham Forest Trustee Ltd v. Unison Networks Ltd – Court of Appeal (3.06.21)

21.094

Construction: George Grant Engineering v. Fabrication & Pipe

Claiming poor welding on steel fabrication at a Bupa retirement village under construction in Hamilton cost it some $320,000, engineering firm George Grant Engineering sued Fabrication & Pipe Services, without success.  Fabrication’s standard terms excluded all liability and were enforceable despite the contract being signed after work started. 

The High Court was told South Auckland engineers George Grant Engineering Ltd contracted to supply and erect steel framework for a Bupa village at Te Rapa.  Its original welding contractor pulled out at the last minute.  Hamilton welder Fabrication & Pipe Services Ltd was called in as a late replacement.

It took time for paper work to catch up with the job. On 17 January, Grant Engineering offered by email to pay $65 per hour for a Fabrication welder.  One day later, Fabrication agreed, sending by email a ‘credit application’ for completion.  Included in the email was Fabrication’s terms of trade, including an extensive exclusion clause excluding all liability by Fabrication for any losses. The email narrative made no mention of these terms of trade.

By 21 January, a Fabrication welder was on the job. Only after follow-up by Fabrication office staff did Grant Engineering return a signed credit account application on 31 January with the terms of trade attached.  The signed credit application included a statement confirming Grant Engineering had read and agreed to the terms of trade.  When suing for remediation costs of some $320,000 Grant Engineering said the exclusion clause had never been brought to its attention and it did not form part of their contract.

Fabrication disputed whether its welder’s work was not up to agreed specifications, but said the exclusion clause blocked legal action by Grant Engineering in any event.

The exclusion clause was part of the contract, Associate judge Andrew ruled.  Grant Engineering did have notice of the exclusion clause when receiving the emailed request to complete a credit application.  This was confirmed when the signed credit application was later returned to Fabrication.

George Grant Engineering Ltd v. Fabrication & Pipe Services Ltd – High Court (2.06.21)

21.093

Right-of-Way: Cornes v. Village Residential

Arguments over an upgrade for a Havelock North residential right-of-way proved fruitless as David Cornes and Rei Jones attempted to block redevelopment of a two hectare block of land sitting between them and Lucknow Road.

Hawkes Bay developer Village Residential Ltd has Hastings District Council approval to redevelop the two hectare Lucknow Road property, with subdivision into five separate lots.  Council consent required the right-of-way shared with Cornes and Jones to be upgraded as part of the development; it was in a state of disrepair, primarily disintegrating seal and loose metal.  Cornes and Jones objected to the proposed Village development, annoyed it would affect their privacy.  The court was told Mr Cornes at times parked his car on the right-of-way, attempting to impede contractors’ access.

Legal challenge to the development centred on wording of the easement creating the right-of-way.  Cornes and Jones said standard rules in the Property Law Act create mutual obligations to ‘maintain and repair’ rights-of-way.  That does not extend to an upgrade, they said.  Attempts to upgrade should be treated as a trespass and blocked by the court, they claimed.

Upgrading an existing right-of-way was compatible with Property Law Act rules for maintenance and repair, the Court of Appeal ruled.  Village Residential was allowed to upgrade the Lucknow Road right-of-way as required by Hastings District.

Terms of the right-of-way require Cornes and Jones to pay half the upgrade cost.  This creates an unfair burden, the court said, given that three of the newly subdivided properties would become entitled to use it.  It would be wise for Village Residential to negotiate with Cornes and Jones for a modification of payment obligations, the Court of Appeal warned.

Cornes & Jones v. Village Residential Ltd – Court of Appeal (31.05.21)

21.092 

Environment: Gifford v. District Court

The High Court gave Blenheim waste dump operator Mike Gifford the green light to challenge resource management charges laid by Marlborough District Council before he fronts up to any criminal prosecution; part of growing judicial control over potential misuse by local authorities of their ever-increasing powers to prosecute.

Power to prosecute lies with the state, commonly exercised by police.  Police procedures see decisions to prosecute reviewed, minimising the chances of prosecutions in pursuit of personally motivated vendettas.  With increased regulatory controls on business being passed over to government departments and local authorities, all backed by the power to prosecute, courts have stepped in to regulate use of their discretions to prosecute, allowing pre-trial judicial review of prosecutions.   

Marlborough District’s allegations that Mr Gifford failed to properly manage a landfill site at Redwood Pass south of Blenheim were given extensive publicity.  It filed criminal charges under the Resource Management Act.  Specifically, Marlborough District alleges a failure to properly contain grape marc dumped as a residue from wine production.  It is alleged marc has leached into both ground water and nearby Pukapuka Stream.

Mr Gifford has elected trial by jury on the resource management criminal charges.  Before any criminal trial, he asked the High Court to review the decision to prosecute. Charges should never have been laid, he said.  Council inspectors did not do their job properly and he should not face criminal charges to prove otherwise, he claims.

As a general rule, courts will not review before trial any decision to prosecute.  Criminal law allows an appeal as of right, if convicted.  The Attorney-General applied to have Mr Gifford’s judicial review application struck out.  Justice Isac declined.  It is unattractive that a citizen should have to either plead guilty or be convicted of an offence, and all that goes with that, before they can challenge the lawfulness of a prosecution, he said.

A full review of Marlborough District’s decision to prosecute has yet to be heard.

Gifford v. District Court – High Court (31.05.21)

21.091

Forestry: Kauapepe Forest v. Scott

Murray Ferris’ company was entitled to $162,000 for the value of trees planted out on a Northland forestry site, after left waiting for over five years with Mangamuka owners failing to sign paperwork extending existing forestry rights.

Forestry company Kauapepe Forest Ltd, controlled by Mr Ferris, acquired forestry rights over 488 hectares in 2010, buying trees ready for harvest.  This forestry right was to expire in 2020.  Kauapepe Forest clear-felled the site over the next four years.  In anticipation of replanting, Mr Ferris discussed with landowner Peter Scott the possibility of extending the forestry right for twenty years beyond 2020; sufficient time for the next harvest cycle.  The two agreed with a handshake, leaving it to lawyers to finalise the paper work.

The High Court was told Mr Scott was at that time finalising a relationship property settlement after separation from his then spouse.  This resulted in land beneath the trees being transferred to a family trust.  Mr Scott was no longer sole owner of the land; he became co-owner with fellow trustee Thomas Cowlishaw.  As co-owners, both had to sign off on the forestry right extension. Mr Cowlishaw refused to sign.  He first required an investigation into Kauapepe Forest’s financial stability, Mr Scott told the court.

Meanwhile, Kauapepe Forest had upgraded forestry roads, sprayed the logging slash with herbicide and replanted; Mr Ferris presuming all along that the paper work would be finalised.  Lawyers acting for Mr Scott prepared the necessary forestry right extension, but Mr Cowlishaw refused to sign.  Mr Scott told the High Court he was considering a court application to have Mr Cowlishaw removed as trustee of his family trust.

Frustrated at lack of progress, Kauapepe Forest sued. Justice Woolford awarded damages. Mr Scott had represented that an extension beyond 2020 would be formalised and Kauapepe Forest had incurred considerable expense relying on a promise that was not honoured.  Damages of $162,000 were calculated on the current market value of the trees planted.  This was some $17,500 greater than the replanting costs.

Kauapepe Forest Ltd v. Scott – High Court (27.05.21)

21.090

Family Trust: Tunku Family Trust v. Ballantyne

Convicted murderer Anthony Ballantyne was removed as trustee of his family trust by court order, part of a deal awarding him a half share of trust assets.

Ballantyne was sentenced to life imprisonment for the 2015 murder of acquaintance Ivan Kapluggin after an evening socialising at Ballantyne’s Whangamata home.  The Achilles Avenue property in Whangamata is owned by a family trust: the Tunku Family Trust.  The Trust also owns a property at MacDonald Road in Hamilton, occupied by former spouse, Eugenia.  Ballantyne is one of three trustees; Eugenia Ballantyne is also a trustee, along with third trustee Wallace Jones.

The High Court was told rates on Achilles Avenue have not been paid since Ballantyne was convicted and local council is threatening a forced sale.  The property has been valued variously at between $1.05 and $1.5 million.  From prison, Ballantyne agreed to a sale, but the remaining trustees foresaw difficulties in getting legal documents signed while he is behind bars; current rules require detailed in person identification procedures when selling property.  Requests he resign as trustee have been refused.

Justice Davison approved Anthony Ballantyne’s removal as trustee.  Ballantyne’s inability to actively carry out duties as trustee meant trust property was ‘endangered.’  The two remaining trustees are free to complete a sale and deal with the proceeds. Along with sale of Achilles Avenue, the court approved a rearrangement of Trust assets with half the Trust's net value being paid to Mr Ballantyne. 

Ballantyne had told the court he was willing to ‘step down’ as trustee during the sale process, provided he was reinstated afterwards. He is a discretionary beneficiary of the Tunku Trust.  His removal as trustee means he has no say in future trust decisions.

Tunku Family Trust v. Ballantyne – High Court (26.05.21)

21.089

Fraud: Specialist Roofing v. Hollis

Katarina Cherie Hollis declared bankruptcy while in prison for theft of nearly one million dollars from Gisborne employer Specialist Roofing Solutions Ltd.  Since she had shared some of her ill-gotten gains with her partner and with her mother, a High Court case was needed to identify the amount Specialist Roofing could claim in her bankruptcy.

The High Court was told Hollis stole some $969,500 from Specialist Roofing while working as a part-time office administrator between March 2016 and August 2109.  Thefts started within six months of her going on the payroll.  The fraud was picked up by accountants preparing Specialist Roofing’s tax accounts.

In a subsequent High Court civil case, Justice Gault ruled Hollis was liable to pay damages totalling $969,513 for breach of duties as an employee; this amount to be reduced by an undisclosed out-of-court settlement with Hollis’ mother Anne Marie Hollis and any recoveries made from Hollis’ partner Jason Peach.  Specialist Roofing could trace only $7500 of its money as going to Peach, but suspected he had received more of the stolen funds than this amount.  Peach was ordered to pay Specialist Roofing $7500. Neither Katarina Hollis nor Jason Peach defended Specialist Roofing’s claim.

Hollis claims to have no assets.  Part of Insolvency Act bankruptcy procedures is intended to track down any assets available to meet creditor claims.

Specialist Roofing Solutions Ltd v. Hollis – High Court (26.05.21)

21.088

Estate: Comins v. Public Trust

Advancing $50,000 to one daughter to help purchase a home created confusion after father Ian Cameron died, leading to a dispute between sisters over whether this was a gift or a loan.

In 2003, parents put $50,000 towards daughter Brenda’s purchase of a Masterton home.  The transaction was not documented.

The High Court was told that her father Ian Cameron died in May 2019, ten days after the death of his spouse.  Ian’s will stated that the $50,000 given Brenda was a loan to be set off against her share of the estate.  If a loan, this would increase the amount going to Brenda’s sister, Sheryl; both were to share the estate balance 50/50.  Brenda denied there had ever been a loan; it was a gift, she said.

The High Court was told statements made by Ian some three years after the Masterton purchase indicated repayment was not required. There had never been a demand for interest, or for repayment of the money.  In contrast, Ian’s earlier 2010 will and final 2016 will both stated the $50,000 was a loan.

Justice Mallon ruled this evidence indicated Ian’s intention was to make a $50,000 interest-free loan, not repayable in his lifetime.  Specific wording in his 2016 will applied; the $50,000 loan fell due on his death and was to be taken into account when dividing up his estate.

This ruling increased the value of assets in Ian’s estate by $50,000 to about $227,000.

Comins v. Public Trust – High Court (25.05.21)

21.087

Class Action: Claims Resolution v. Pfisterer

Class action promoters promising ‘no win, no fee’ on insurance claims are always on to a winner; any increased payouts over insurers’ typical low-ball opening offers will count as a win ensuring they get paid.

Legal argument over ‘no win, no fee’ contracts was fought out in Lucia Pfisterer’s claim against Christchurch-based Claims Resolution Service Ltd when she challenged its work on a claim for her earthquake damaged Opawa property.

Like many insured Canterbury homeowners, she struggled in dealings with Earthquake Commission and Southern Response over insurance entitlements.  An initial 2013 assessment offered $117,000, later increased to $321,800.  A supposedly negotiated settlement two days before a scheduled 2016 court hearing saw Southern Response offer to pay $642,000 plus an extra $303,000 for enhanced foundations if a decision was made to rebuild.  After apparently agreeing to this offer, Ms Pfisterer backed out, saying she had been pressured into the pre-trial settlement. Southern Response left the file open. After hiring new lawyers, she later reached a final settlement with Southern Response on much the same terms as the aborted pre-trial agreement.

Ms Pfisterer refused to pay the $93,700 legal bill incurred by Claims Resolution for lawyers Grant Shand preparing for the cancelled High Court hearing and negotiating the aborted settlement.  She alleged Claims Resolution had misrepresented details of the ‘no win, no fee’ deal, had a sweetheart deal with lawyers Grant Shand which worked to her disadvantage and that she had never agreed to her insurance dispute going to court.

When signing up, Ms Pfisterer was aware Claims Resolution was offering a ‘one-stop shop’ from damage assessment through to claim settlement with the possibility of litigation, Justice Hinton said.  She paid, when asked, the court filing fee for her claim against Southern Response and received without complaint a copy of the claim filed in court.

Ms Pfisterer was not prejudiced by the close working relationship between Claims Resolution and Grant Shand, Justice Hinton ruled.  In return for the steady flow of work, Grant Shand agreed to reduce legal fees charged. Claims Resolution clients were free to engage their own lawyers; some did.

Grant Shand did breach professional obligations owed Ms Pfisterer as client when it continued dealing with Southern Response after suggesting her change of mind over the aborted settlement meant she should get new lawyers.  Grant Shand was not liable to pay damages, Justice Hinton ruled.  Grant Shand’s actions in wrongly continuing to negotiate did not cost Ms Pfisterer; her new lawyers finalised negotiations.

Ms Pfisterer was ordered to pay the $93,750 legal fees billed Claims Resolution by Grant Shand.  She did not challenge Claims Resolution’s entitlement to an eight per cent commission on her insurance recovery as being a ‘win.’

Claims Resolution Service Ltd v. Pfisterer – High Court (21.05.21)

21.086

Bankruptcy: re Burchell

Failing to recognise that neither Insolvency Service nor Inland Revenue had any intention of delaying his discharge from bankruptcy, Llewellyn William Burchell in court proceeded to accuse them of assault and harassment, all part of a conspiracy.  He accused the trial judge of bias.  Despite making it hard for himself, Burchell was discharged from a bankruptcy which had run for a decade; all his own fault.  

The High Court was told Burchell was bankrupted by Inland Revenue in 2011 on a $34,000 tax debt.  It was his second bankruptcy. As a general rule, bankrupts are automatically discharged from bankruptcy after three years.  The three years start running from the date a ‘statement of affairs’ is provided to Insolvency Service.  In the form of a checklist, this sets out a bankrupt’s financial circumstances: assets and debts.  Burchell never properly completed a statement of affairs following his 2011 bankruptcy. While acknowledging he owned property, he refused to provide details of what it was and where it was.  In answer to a question seeking to establish levels of household income he answered a question about his spouse’s income with the retort: ‘none of your business.’  Personal details like IRD number were left out.  He protested, without success, police seizure of motorcyles he owned, seized at Insolvency Service request.    

Evidence was given that Burchell chose to pursue unsuccessful legal actions against both Insolvency Service and Inland Revenue rather than provide the full information required in his statement of affairs. Ten years later, the three year time clock for automatic discharge had yet to start ticking.

Burchell applied to the High Court for his discharge from bankruptcy.  Associate judge Bell commented Burchell had failed to comply with Insolvency Act rules requiring public notice of any application for early discharge.  Burchell alleged Insolvency Service had conspired with media outlets to block advertising.

When approving the discharge from his second bankruptcy effective May 2021, Judge Bell described Burchell as being aggressive and rude, short on social skills and harbouring groundless conspiracy theories. Burchell is unlikely to be much of a credit risk for the public, Judge Bell said.  In insolvency law, the risk comes from beguiling rogues.  Burchell is not one of them, he said.

re Burchell – High Court (21.05.21)

21.085