Bankruptcy: Police v. Prescott

It began with a speed camera fine. It ended with Peter Richard Prescott’s bankruptcy.

In July 2016, a car registered to Mr Prescott’s name triggered a speed camera infringement notice.  He denied the charge.  He did not attend court and was fined $80 plus costs for the speeding infringement.  A rehearing was not successful.  A long and fruitless legal pursuit then followed through the High Court, Court of Appeal and Supreme Court with Mr Prescott seeking judicial review of his unsuccessful rehearing.  He was told this was not a case for judicial review; he should simply exercise his further right of appeal against conviction.  At each stage costs were awarded against him.

Mr Prescott back-tracked, succeeding in having his speeding conviction overturned on appeal.  This success negated the judicial review costs orders made against him, he said.  Not so, said the police.  It took steps to bankrupt Mr Prescott on the cumulative $27,700 unpaid costs orders racked up through his judicial review claims.

Mr Prescott unsuccessfully challenged the bankruptcy application arguing variously: the costs figures were incorrectly calculated; he had a counter-claim against police for malicious prosecution; both the police and the courts were legal fictions having no rights against him; there was no such person as Peter Richard Prescott as the identity with this name is a corporate entity registered in the state of Minnesota and that the natural person called Peter Richard Prescott no longer exists but has the name Peter-richard.

He was bankrupted with effect from 28 February 2022. He lives in Auckland according to Insolvency Service records.

Police v. Prescott – High Court (28.02.22)

22.045 

Fraud: Hicks v. Police

Rebekah Hicks, also known as Rebecca Harris, was convicted of theft and sentenced to two years two months’ imprisonment following thefts and false invoicing frauds affecting successive employers netting nearly $80,000.

The first employer, anonymised as company A, provided sandblasting and zinc coating services.  Four years after Hicks started work, the company identified she was stealing cash payments made by customers and supressing invoices for these transactions. Further enquiries identified that she was creating false transactions to cover transfer of company funds to a Kiwibank account she controlled and that she had been having her personal car serviced with costs charged to the company account.  Hicks admitted the thefts and resigned.

The High Court was told she immediately started work at a separate company concocting a story that she had left her previous job for health reasons.  Within months she was stealing from this company, diverting customer payments into her bank account.

Hicks pleaded guilty to four representative charges of theft by a person in a special relationship.  She appealed a District Court sentence of two years two months’ imprisonment.  The sentencing judge did not give adequate allowance for a familial trait of compulsivity and impulsivity coupled with the stress of ill health and her having to financially support a family and her mother, she said.

The calculated nature and sophistication of her offending meant there was no apparent link between her claimed personality traits and the admitted offending, Justice Osborne ruled.  The sentencing judge made adequate allowance for these factors in sentencing, he said.

Hicks v. Police – High Court (28.02.22)

22.046

Bunnings: Sunrise Management v. Bunnings

Bunnings use of a ‘pay now, argue later’ clause in its terms of trade took a knock when the High Court ruled it does not apply when a customer was misled about a Bunning’s product when signing up.

The High Court dismissed Bunnings fast-track summary judgment application on a claim against builder Sunrise Management Ltd for some $202,300 after hearing evidence Sunrise was sold China-sourced shiplap vertical weatherboard after being told it was a New Zealand made product.  A ‘pay now, argue later’ clause should not apply where a customer signs up on the basis of a misrepresentation about the product sold, Associate judge Sussock ruled.

Zhaohui Liu, director of Auckland builder Sunrise, was approached by a Bunnings’ rep in 2019 encouraging a shift to Bunnings as supplier.  While completing Bunnings’ credit approval process, Ms Liu made enquiries about delivery of weatherboard cladding.  She made it clear she did not want a China sourced product.  She was told Pineclad is manufactured in New Zealand.  She ordered the product and Sunrise was invoiced for Pineclad.  In fact, a China sourced product was supplied.  Sunrise is suing Bunnings for about $300,000 being the claimed cost of replacing cladding on four houses.  Bunnings claims Sunrise was told of the product switch prior to installation. It sued Sunrise for its unpaid trade account, saying terms of trade required Sunrise to pay now and argue later.

Judge Sussock refused fast-track judgment.  Sunrise claims it signed up to Bunnings terms of trade only after being told the product was not sourced from China.  If the facts as claimed by Sunrise are substantiated following a full court hearing, it would not be conscionable to enforce the ‘pay now, argue later’ clause, Judge Sussock ruled.

Sunrise Management Ltd v. Bunnings Ltd – High Court (28.02.22)

22.048

Sanatan Sabha: Chand v. Chand

Without a validly appointed executive since 2018 and with membership split into two warring factions after convictions for gaming grant frauds, the High Court approved attempts by Manukau Sanatan Sabha to hold an informal meeting to chart the way forward.

Manukau Sanatan Sabha is an incorporated society based in south Auckland, promoting interests of Hindu members from the Fiji Indian community.  The High Court was told Society affairs have been dysfunctional for nearly five years. This followed an Internal Affairs investigation into misuse of gaming grant funding.  Five Society members and Manukau Sanatan Sabha itself were convicted in late 2018 following evidence of false quotes supporting funding applications and a failure to use money obtained for promised activities.  Two members, Rakesh Prasad and Pradeep Chand, were separately convicted for obstruction; encouraging individuals to lie when questioned by Internal Affairs investigators.  Subsequently, Sanatan Sabha’s affairs drifted along informally with no annual general members meetings held and financial statements filed late.  Society rules see terms of office for the Society executive expire each year.  With no annual members meeting held, no replacements were ever voted into office.

One member, Satish Chand, objected to Pradeep Chand informally handing over running of Society affairs in 2020 to Rakesh Prasad. Satish said Pradeep had no authority to do so and he challenged plans to call a special meeting of members. Satish Chand told the High Court there were concerns this unelected executive would sell Society assets.  He alleged ‘false accounts’ had been filed with the registrar of incorporated societies.  Unaudited accounts filed for the year ended March 2020 record Manukau Sanatan Sabha as owning three properties in Papatoetoe.  Satish Chand leases one of these properties.  Caveats have been registered against titles to Society properties, blocking registration of any sale.

Justice Fitzgerald ruled the proposed informal meeting of members should go ahead.  The Society had no validly appointed executive.  The proposed special meeting could make no decisions affecting Society activities other than propose a date for a formal general meeting of members to appoint a new executive.  Justice Fitzgerald warned the two opposing factions that the proposed special meeting had to be held in an open and transparent manner.  Aired in the High Court were suggestions there was no complete list of current members and allegations that factions were planning to ‘stack’ meetings with newly appointed members sympathetic to their side.

Chand v. Chand – High Court (28.02.22)

22.047

Estate: Connolly v. Eckhout

Karen Elizabeth Eckhout is under threat of arrest for contempt of court after failing to properly distribute assets from her late husband’s estate.

Dan Eckhout died in 2017.  What followed was an arm-wrestle over money between his third wife, 59 year old Karen, and a daughter from his first marriage, 50 year old Michelle.  Born in South Africa, Dan led an itinerant life working on oil rigs around the world. Dan had five children and a stepdaughter from his first two marriages.  Michelle was the only child to challenge Dan’s final will which left nearly all his assets to widow Karen.  With Michelle living on the Channel island of Guernsey and Karen now in Perth, West Australia, disputes over Dan’s will have been carried out long distance in the New Zealand courts.   

In 2021, the High Court ruled Michelle was entitled to $350,000 plus her legal costs in a successful claim under the Family Protection Act against her late father’s estate.  Michelle and her father had a close and mutually supportive relationship from when she turned eighteen, Justice Downs said.  Her father had offered financial support shortly before his death for her to purchase a home.

Karen was appointed administrator of her late husband’s estate after a South Africa executor named in Dan’s will declined to act. The High Court was told of difficulties in pinning down the extent of Dan’s assets.  There was a family trust, now controlled by Karen as surviving trustee, with assets of some $2.1 million.  The court was told this trust had been dissolved with Karen taking ownership of all assets.  These trust assets did not form part of Dan’s estate on his death.

Karen proved evasive in disclosing what assets Dan owned.  It took a court order to force disclosure.  In May 2021, Karen filed a statutory declaration stating she had received some $1.6 million of which $642,400 was held in a Commonwealth Bank account in Australia.  While declaring she held this money ready to hand over if Michelle’s claim was successful, Karen did not release any money.  It took further court orders before Commonwealth Bank handed over the funds. By then, there was only $4828 in the account.

Justice Campbell issued a warrant for Karen’s arrest.  Her non-compliance with court orders was flagrant, he said.  Execution of the arrest warrant was suspended for one month, giving her time to pay money due Michelle.  Karen is liable to pay in excess of $450,000; the court-ordered Family Protection claim plus all of Michelle’s legal costs to date.

Connolly v. Eckhout – High Court (1.04.21, 15.06.21 & 25.02.22)

22.044

Apartments: Body Corporate 210106 v. Apartment Owners

High Court assistance was needed to force sale of a twelve-apartment building in Auckland’s central business district after several owners refused consent.  Redevelopment potential of the land likely exceeded cost of repairs.

A 1950s warehouse in Edinburgh Street was refurbished in early 2000s and separate apartments sold off in a project branded as The Zone.  Weathertightness defects saw owners facing a repair bill estimated at between $7.5 million and $8.5 million.  Expert advice recommended owners sell The Zone in its entirety to a developer allowing the building to be demolished and the site redeveloped.  This proposal required unanimous consent from all current owners. Three owners refused to sign up. They offered no alternative proposal. Frustrated, The Zone body corporate applied to the High Court for approvals.

Justice Campbell ordered cancellation of The Zone’s current individual unit titles.  The building could no longer be safely occupied by owners and they could not afford to pay remediation costs.   

He also ordered sale of the owners’ resulting joint interest in the building.  Net sale proceeds are to be divided between each apartment owner.  Each apartment owner then has deducted from their share any outstanding body corporate levies and any mortgage secured against the apartment.

The High Court was told Edinburgh Street had been sold ahead of the court application with settlement conditional on court approval for cancellation of owner’s individual unit titles.  Online records show Edinburgh Street selling for $8.3 million in May 2021 and selling again for $11.4 million in June 2021.

Body Corporate 210106 v. Apartment Owners – High Court (23.02.22)

22.041

Insurance: Sneesby v. Southern Response

Having settled a Christchurch earthquake insurance claim against Southern Response in 2017 as ‘full and final’ settlement of all claims, John Sneesby could not later make a further claim supposedly on behalf of himself and some 9500 other people he says were underpaid.

Mr Sneesby says he was sold short in 2014 when Southern Response did not pay out his full entitlement under an AMI insurance policy. Government-funded Southern Response took over AMI Insurance earthquake liabilities when the sheer weight of claims meant AMI would shut up shop, insolvent.  Mr Sneesby says he is owed at least a further $6200.  This arose after a 2016 High Court case identified professional design fees should have been included in cash settlement payouts: Dodds Case.

Mr Sneesby mounted a class action, claiming in his name on behalf of all policyholders similarly paid short.  Southern Response told the High Court it has responded to the Dodds decision by offering a top-up to affected policyholders previously paid out.  It challenged Mr Sneesby’s right to bring a class action.

Associate judge Lester ruled Mr Sneesby did not even get to first base.  Mr Sneesby ended entirely separate Christchurch earthquake litigation against Southern Response in 2017, signing an extensive ‘full and final’ settlement agreement preventing any ‘further or other claim.’  Judge Lester said litigants can sign away rights and claims they are unaware of, provided the wording is clear.  The effect of the 2017 ‘full and final’ settlement was to bar Mr Sneesby from re-opening his earlier separate 2014 claim, Judge Lester ruled.

Sneesby v. Southern Response Earthquake Services Ltd – High Court (23.02.22)

22.042

 

Charity: re St John's College Trust Board

High Court approval was given for Anglican St John’s College Trust Board to write off loans totalling $14.85 million made to two Maori-Anglican schools in Hawkes Bay: Te Aute College and Hukarere Girls’ College.

In 2012, St John’s Trust provided financial support to avert the Schools’ closure.  Further funds were provided over following years.  A total of $14.85 million was advanced by 2020.  The schools are managed by the Te Aute Trust Board.  It was a condition of the loans that St John’s Trust be represented on the board of Te Aute Trust.  It was anticipated that Te Aute Trust would never be in a position to repay.

Legal issues arose when St John’s Trust decided to write off the loans.  There was a conflict of interest.  Trustees from the St John’s Board who are obliged to look after the interests of St John’s were also sitting on the Te Aute Board which would benefit from any loan write off.

St John’s told the High Court that the three St John’s trustees sitting on the Te Aute Board took no part in the St John’s Trust Board’s vote approving cancellation of Te Aute’s debt.  High Court approval was given to the cancellation.  The dual trustees did not vote; their abstention avoided a conflict of interest.

St John’s College Trust Board financial statements for the 2020 year record annual net income of $64.7 million, including capital gains of $46 million.

re St John’s College Trust Board – High Court (23.02.22)

22.043

Fraud: Singh v. R.

Being fired from his job and facing deportation are the natural consequences of involvement in a SIM-swapping fraud the Court of Appeal ruled, refusing a discharge without conviction for India national Jaswinder Jass Singh.

The court was told Singh acted as a ‘secondary mule’ in a mobile phone fraud in which phone users saw their SIM card hijacked and bank accounts accessed.  Fraudsters transferred funds to a bank account they controlled and then had secondary mules withdraw cash from these accounts.  On three occasions over two months, Singh withdrew $23,000 on behalf of fraudsters.  Singh said he was paid five hundred dollars ‘maybe once or twice’ for acting as a mule.

Singh pleaded guilty to fraud, asking for discharge without conviction.  In the District Court, he was sentenced to twelve months supervision and ordered to pay $23,000 reparations.  The reparations have been paid.  Immigration advised he was liable for deportation. He was told informally by an immigration officer that deportation might be averted if his conviction was overturned. The Immigration Act in fact allows for deportation even if discharged without conviction; decisions about deportation are based on the fact of offending, not on conviction.

Singh said his job with a NZ Post contractor was at risk. NZ Post prohibits contractors from employing staff with fraud convictions.

Singh v. R. – Court of Appeal (21.02.22)

22.040 

Advertising Hoarding: Freedom Ventures v. L'Estrange-Corbet

Disputes over access rights cannot be used for the collateral advantage of forcing approval to resource consent the High Court ruled in a dispute over access to install digital advertising on the side of an Auckland building.

Napier-based business Freedom Ventures Ltd owns a small 99 square metre site on Pitt Street in Auckland’s central business district. It earned income from a static billboard previously fixed to a wall on the southern boundary.  The neighbouring property is owned by a trust controlled by Denise L’Estrange-Corbet.  The High Court was told she refused access to install a digital billboard.  She was told it would be only a two or three day job and that there was resource consent for the work.  Ms L’Estrange-Corbet learnt from Auckland City there was no resource consent for a digital billboard and that an application was still under consideration.  Legal action followed.

Freedom Ventures sued under the Property Law Act claiming access through Ms L’Estrange-Corbet’s land to the boundary wall was needed since the wall was landlocked land.  Courts may order reasonable access.

Associate judge Sussock ruled it was too early to decide whether the wall was landlocked.  It only became a legal issue if and when Freedom Ventures had resource consent to install a digital advertising sign and was then unable to agree access with its neighbour.

The court was told progress on resource consent was on hold; Freedom Ventures had yet to pay required fees.  There is currently no billboard on the boundary wall.  The earlier static billboard was removed in March 2020 after Freedom Ventures cancelled its contract with the media company then managing static billboards.  Freedom Ventures has also learnt that its Pitt Street building is built over the boundary and encroaches on Ms L’Estrange-Corbet’s land.

Freedom Ventures Ltd v. L’Estrange-Corbet – High Court (18.02.22)

22.039

Legal Highs: Stewart v. Fatupaito

Liquidators for legal-high company Eversons have a Court of Appeal ruling forcing director Evan Stewart into court to explain what happened to some two million dollars withdrawn from Everson’s bank account days before a government law change prohibited sales of synthetic highs. 

Eversons International Ltd is in liquidation with Inland Revenue claiming $3.7 million.  The company’s tax accounts make reference to overseas investments totalling $6.5 million, overseas investments Mr Stewart denies any knowledge of. Liquidators questioned him in early 2021 at their KPMG office.  Mr Stewart denied knowing what Eversons offshore cash transfers were used for.  On further questioning, he said the company’s overseas investments had ‘flopped.’  When liquidators later identified an Australian solicitor who had supposedly received Eversons funds for onward investment, she told liquidators she was unaware of Eversons’ existence and did not act for the company.  Mr Stewart refused to attend any more meetings with Eversons’ liquidators. He challenged a High Court order that he attend at court for further examination about company operations saying one round of questioning by liquidators was enough and he did not have to answer any more.

The Court of Appeal ruled there was no policy reason why a court-ordered examination should not follow.  Mr Stewart had been un-cooperative at the earlier voluntary meeting with liquidators.  As sole director of Eversons, Mr Stewart would be expected to know what had happened to company assets, the court said.

The effect of a court-ordered examination is that a director can be forced to produce company books and records in court and is liable for perjury if questions are answered dishonestly. 

Stewart v. Fatupaito – Court of Appeal (18.02.22)

22.038

Construction: Dempsey Wood v. Concrete Structures (NZ) Ltd

Before having an enforceable construction contract ‘pay now’ claim, contractors must comply strictly with rules for submitting progress payment claims, the High Court ruled in a dispute over Concrete Structures (NZ) Ltd claim to $1.8 million for work on Auckland’s Whau bridge.

In 2020, civil engineers Dempsey Wood sub-contracted part of the Whau bridge construction in New Lynn to Concrete Structures.  All sub-contractors were subsequently required to submit progress payment claims to a given Dempsey Wood email address in PDF format.  This enabled progress payments to be easily processed through its finance system.  The High Court was told Concrete Structures had been already following this requirement but in addition had been forwarding an email copy to Dempsey Wood’s project engineer Dale Pickard.

In dispute was a $1.8 million progress claim sent only to Mr Pickard’s email address in late January 2021.  Unlike other previous progress payment claims, no copy was sent to the nominated Dempsey Wood email account.   Mr Pickard did not become aware of the email until early April.  In late January, he was busy working on a large KiwiRail project.  He was getting over one hundred work emails a day and went on leave days later.  On discovering the Pickard email, Dempsey Wood responded immediately to the $1.8 million claim, reducing the amount to what it assessed was due: $135,600.  It paid this amount and disputed payment of the balance.

Concrete Structures sued.  It said under the Constructions Contracts Act ‘pay now, argue later’ regime Dempsey Wood had to front up with full payment.  Dempsey Wood alleged Concrete Structures was gaming the strict ‘pay now, argue later’ rules by deliberately sending the email to Mr Pickard alone, predicting it would be overlooked.  Concrete Structures said failing to also email Dempsey Wood’s nominated account was just a mistake.

Associate judge Sussock ruled Dempsey Wood did not have to ‘pay now;’ it had grounds to delay full payment and to argue its case. The $1.8 million payment claim was not ‘received’ until delivered into the nominated company email account, Dempsey Wood argued.  And the progress payment claim sent to Mr Pickard’s email account was not ‘received’ until Mr Pickard actually opened the email in April, it further argued.

The Construction Contracts Regulations set out rules as to when emailed documents are deemed to have been received. Failure to respond promptly to a progress payment claim means the full amount claimed is immediately enforceable as a debt due.

Dempsey Wood Civil Ltd v. Concrete Structures (NZ) Ltd – High Court (17.02.22)

22.036

Construction: Palmer v. Hewitt Building

Fearing that Masterton builder Mark Hewitt was deliberately running down his home renovation business Hewitt Building Ltd as a ploy to avoid paying a $392,400 court judgment, Barbara Palmer forced him back into court to admit Hewitt Building was profitable and in a position to pay over time.

In June 2021, the High Court ordered Mark Hewitt personally pay $67,500 and his company separately pay $392,400 following the failure to complete a fixed price home renovation according to contract specifications.  His company Hewitt Building Ltd did not bother to defend the claim and Mr Hewitt defiantly told the court that his company had no assets to meet any damages claim.  Ms Palmer called his bluff.

In late December 2021, she had Mr Hewitt ordered into court to answer questions about his company.  Financial statements for the year ended March 2021 evidenced that Hewitt Building had earnings before interest and tax of some $250,000.  If it continued trading, the $392,400 court order could be paid over time.  Ms Palmer expressed concern that Mr Hewitt was running down his company’s operations, switching key staff and existing work across to a new company.  Associate judge Johnstone ordered Hewitt Building Ltd start making instalment payments at $8000 per month to Ms Palmer.

This instalment payment order reminds Mr Hewitt of his potential personal liability for the company’s debt.  If assets are stripped out of Hewitt Building making it unable to continue instalment payments, Mr Hewitt faces liability as director for actions leaving his company insolvent.

The court was told that Mr Hewitt had taken steps to pay Ms Palmer $184,000 being the June 2021 court judgment against him personally plus a substantial costs order he was subsequently ordered to pay.

Palmer v. Hewitt Building Ltd – High Court (17.02.22)

22.035

Family Trust: re Ruby Trust

Changes to trust law allowing all beneficiaries access to family trust details now has its expected consequence; a family trust in court asking certain beneficiaries be excluded from any distributions and details of court proceedings supressed and kept secret.

A 1980s Wellington family trust was first.  As part of the court suppression order, it was given a fictitious name: Ruby Trust.  Parents set up the trust to hold business assets; beneficiaries being their two daughters along with their spouses and children plus extended family members. Trustees have a wide discretionary power to allocate income and capital between beneficiaries.

The High Court was told one daughter disputed decisions made by trustees.  Deep divisions developed between members of the immediate family as to how Ruby Trust was operated.  The daughter sued.  All this took place outside the knowledge of extended family members who did not know they were also Ruby Trust beneficiaries.  As a further complication, two other family trusts were tied in with Ruby Trust.  After detailed discussions and negotiations between the one surviving parent and members of immediate family a proposal was hatched to deal with Ruby Trust assets: fifty per cent of all future distributions were to go to one daughter and her immediate family; forty per cent to a second daughter and her immediate family; and ten per cent to the surviving parent with this share going to the second daughter by default if she was no longer alive at time of distribution. The deal required all extended family beneficiaries be cut out of any future distributions.  They did not know of the deal being arranged.

In the High Court, Justice Gendall gave judicial blessing to the arrangement.  The agreement finalised a bitter family dispute between members of the immediate family, enabling them to get on with their lives.  The effect of deleting extended family beneficiaries was minimal, Justice Gendall ruled. They did not know they were beneficiaries.  Trustees were not expected to make trust distributions to them in any event.  When setting up Ruby Trust, the parents signed a ‘memorandum of wishes’ indicating they intended members of immediate family be primary beneficiaries.

re Ruby Trust – High Court (17.02.22)

22.037

Management Contract: Body Corporate S90876 v. Palmer Trading

Owners of unit titles at Aspen Villas in Taupo successfully challenged a long-term management contract set up by the Calvert family who redeveloped the property in 2001.

Property management contracts are a valuable asset, promising a regular income stream.  Government was forced to change the rules with effect from 2011 to stop property developers giving themselves favourable management contracts over apartment projects at the early stages of development and then either sitting pretty after onselling unit titles or selling the management rights and generating further profit from the development.

The High Court was told Aspen apartment owners objected to a long run management contract which left Palmer Trading Ltd, controlled by the Calvert family, with potential control over management of Aspen through to 2048.  They stopped paying Palmer Trading’s monthly invoices.  Aspen Villas operates as a seventeen unit motel.  By early 2022, unpaid invoices totalled $190,000 and management fees were accruing at some $6600 per month.

Palmer Trading was given the management contract in 2008, at a time when the Calvert family had majority voting control of Aspen’s body corporate.  This initial management contract was for a term of five years, automatically renewable for three further five year periods.  Justice van Bohemen ruled the contract was valid for five years only, being the first term ending in 2013.  Aspen Villa body corporate rules, as they then stood, put a limit on long-term contracts entered into.  It could not enter into contracts of more than five years duration.  Any decision to renew had to come back to the body corporate for a new vote.

Aspen Villa owners were left to sort out the downside consequences of Palmer Trading apparently having no right to charge management fees since 2013.

Changes to the Unit Titles Act, effective from July 2011, limited unit developers use of their voting control to set up favourable management contracts.  Terms must benefit unit owners, not management.  Contracts can be set aside if ‘harsh and unconscionable.’

Body Corporate S90876 v. Palmer Trading Ltd – High Court (10.02.22)

22.034

Debt: re Vey Group Ltd

A nearly five year campaign by Palmerston North director Leslie Fugle unsuccessfully challenging minority shareholder rights in a Wellington property company saw the High Court commenting that he would have saved himself hundreds of thousands of dollars if he had just bought out the minority at fair price from the outset.  

Minority shareholder claims that Vey Group owes them over one million dollars has been the major issue.  Vey owns an investment property in Wellington’s Webb Street.  Interests associated with Mr Fugle hold a majority interest.  The Orana Trust, representing Turvey family interests, was reduced to a minority stake after dissension within the Turvey family saw a partial sell-down of their holding in a forced sale.  At that time, Patricia Turvey was allied with Mr Fugle.  A series of court cases followed after Mr Fugle attempted to freeze out Orana Trust.  A court-ordered receivership was followed by a court-ordered liquidation.

The High Court was told Mr Fugle disputed the level of unsecured loans put into Vey Group by Orana Trust.  Arguments about the extent of this liability meant no price could be agreed in setting a figure for Mr Fugle to buy out Orana’s minority holding.  Meanwhile, redevelopment of Webb Street remained on hold.

Acting on court instructions, accountants analysed Vey Group transactions determining that Orana was owed $1.04 million.  This debt was accepted by Vey Group liquidators as a claim in the liquidation.  Mr Fugle was back in court, challenging the debt.  He variously alleged most of this money related to Turvey family tax arrangements unrelated to Vey Group but run through Vey Group’s books and that much of the money Orana put into the company was capital, not loans enjoying prior payment on liquidation.  Justice Mallon dismissed Mr Fugle’s attempt to overturn the liquidator’s decision.  He put up no evidence to support his claims, she said.  In contrast, the accountants had used source documents to verify as best possible the debt claimed by Orana Trust.  Receivers marked down Orana’s initial claim of a $1.3 million debt to a final figure of $1.04 million.

Justice Mallon also dismissed Mr Fugle’s claim that even if the $1.04 million was loaned to Vey Group the loans were ‘stale,’ payment being outside the Limitation Act six year period and were no longer recoverable.  Funds provided were either expressly repayable on demand or impliedly repayable on demand and the six year rule did not start running until demand was made, Justice Mallon ruled.  Orana Group made demand for payment in June 2018.

The court was told Mr Fugle has now taken one hundred per cent control of Vey Group by paying $200,000 to buy out Orana Trust’s 49 per cent holding.  The court-ordered liquidation has not been terminated.  Mr Fugle told the court he has funds in hand to pay out Vey Group creditors.  Orana Trust remains a Vey Group creditor for the sum of $1.04 million.

re Vey Group Ltd – High Court (2.02.22)

22.033

Bankrupt: Hewitson v. Official Assignee

Bankrupted in 2009, former Invercargill tax accountant Darryl Robert Hewitson was under the mistaken belief that his bankruptcy was over when in 2014 his father gifted him $250,000.  The money was not his, it was after-acquired property available to pay his creditors who had received only twenty five cents in the dollar, the High Court ruled.

Bankrupts are automatically discharged from bankruptcy after three years, but this is calculated not from the date of the bankruptcy order but from the date a full statement of financial affairs is provided to Insolvency Service.  The High Court was told Mr Hewitson received multiple letters and phone messages from Insolvency Service asking him to send in a statement of affairs and warning him that delays would extend his period of bankruptcy.  It has no record of him responding, though Mr Hewitson claims to have provided details in 2014.  He has no copy of the document sent.

In the early stages of Mr Hewitson’s bankruptcy, Insolvency Service was looking to sell his Regent Street home in Invercargill. He was bailed out by his mother who paid $180,000 to Insolvency Service, taking ownership of Regent Street and allowing her son to remain in occupation.  Four years later, she sold Regent Street back to her son for $165,000. Funding came in part from a windfall $250,000 gifted to Mr Hewitson by his father following sale of the father’s poultry farm.

Learning that Mr Hewitson as an undischarged bankrupt had regained ownership of Regent Street, Insolvency Service lodged a caveat against the title looking to force a sale.  In the High Court, Justice Dunningham ruled Insolvency Service was justified in laying claim to Regent Street.  It has a statutory duty to collect in assets in order to pay creditors. The fact Mr Hewitson misunderstood the circumstances in which bankruptcies end was not grounds to stop Insolvency Service claiming Regent Street as an asset acquired after bankruptcy and before discharge. 

The court was told Mr Hewitson did send a completed statement of affairs to Insolvency Service in April 2018 and was automatically discharged from bankruptcy three years later in 2021.  His 2009 bankruptcy followed client losses after he failed to file their tax returns.  Failure to file on time meant clients were forced to pay substantial tax penalties.

Hewitson v. Offical Assignee – High Court (31.01.22)

22.032

Debt: Jones v. Stace Hammond

Barrister Greg Jones was ordered to pay a $14,900 legal bill owed Hamilton solicitors Stace Hammond after the High Court dismissed his allegations that the law firm was in league with the bloodstock industry, conspiring to damage his breeding programme.

In December 2018, Mr Jones hired Stace Hammond to defend a claim against him by Wentworth Grange, a thoroughbred stud farm near Cambridge.  Wentworth was suing for unpaid agistment fees.  Stace Hammond did some preliminary work which was later overtaken by Mr Jones putting forward a draft statement of defence.  Mr Jones was alleging in his defence that Wentworth was party to fraud and dishonesty.  Stace Hammond withdrew, saying it could no longer represent him.  Rules governing operation of law practices prohibit lawyers from raising defences of fraud on behalf of clients unless there is solid evidence to back the allegation.

When Mr Jones refused to pay its bill for the preliminary work done, Stace Hammond proposed writing off the debt but was forced into court when Mr Jones sued them alleging Stace Hammond was also part of a general bloodstock industry conspiracy against him.  Mr Jones said Stace Hammond’s clients included other horse studs in the district.  In agreeing to take him on as a client, Stace Hammond was acting unethically and in breach of obligations of good faith, he alleged.  There was evidence that the issue of potential conflicts of interest had been raised at a preliminary meeting between Mr Jones and Stace Hammond. At that point Mr Jones raised no concerns about Stace Hammond having a number of horse stud owners on its client list. 

The High Court confirmed a District Court ruling that Mr Jones had no tenable defence to Stace Hammond’s invoice for work done. He was ordered to pay the $14,900 bill.

Jones v. Stace Hammond – High Court (27.01.22)

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George Kerr: Jackson v. Kerr

Failing to act promptly on court orders to disclose documents required by receivers of Pyne Holdings, director George Kerr has been ordered to pay receivers $103,300 for their full costs in chasing him along.

In April 2021, Bank of New Zealand put Pyne Holdings Ltd into receivership claiming some $67.7 million.  Mr Kerr is Pyne Holdings’ sole director.  Receivers from insolvency specialists Calibre Partners were refused access to Pyne Holdings records.  It took several contested court hearings to get a court ruling ordering Mr Kerr release the information.  He stalled. Calibre Partners said it was bordering on contempt of court that Mr Kerr failed to respond.  It took nearly six months for Mr Kerr to provide information. He said delay was caused by the size of the task; Pyne Holdings records had to be obtained and collated from multiple sources including lawyers and accountants.

Justice van Bohemen ruled there was no justification for the extended delay.  Receivers were entitled to recover all costs incurred in their multiple applications to court needed to force Mr Kerr’s hand.

Jackson v. Kerr – High Court (19.01.22)

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Receivership: Tellen Systems NZ (2013) Ltd v. Fibre Investments Ltd

An immediate sale of Tellen Systems assets was blocked by the High Court following allegations insolvency practitioner Kevin Davies was in league with a Tellen shareholder in a ploy to spirit assets out of the company following its improvident purchase of competitor Sedco New Zealand.

Tellen Systems NZ (2013) Ltd provided telco services primarily to the health care and aged care sectors.  It is owned by Fibre Investments Ltd which in turn is ultimately controlled by Neil Simmonds.  Tellen’s purchase of a majority stake in Simon William’s Sedco New Zealand Ltd was bad news all round; Tellen alleges Sedco was insolvent. Sedco also provided communication services to the health sector.  Subsequent litigation saw Tellen ordered to pay Mr Williams some $560,000 and also contribute to Sedco debts guaranteed by Mr Williams.

In October 2021, Mr Williams forced Tellen Systems into liquidation following failure to pay the High Court $560,000 judgment. Weeks earlier, Tellen shareholder Fibre Investments put Tellen into receivership claiming to be a secured creditor with the right to seize all Tellen’s assets.

Tellen liquidators allege Fibre Investments is not a creditor to the amount it claims and that it is trying to sell Tellen assets at a knock-down price without following proper receivership procedures.    

Tellen liquidators told the High Court that receiver Kevin Davies has been stalling when asked to prove the existence of Fibre Investment’s claimed secured debt.  Fibre Investments claims to be owed in excess of two million dollars as a secured creditor. Liquidators also allege the receiver is manipulating the sale process.  It is claimed no independent valuation was obtained for Tellen assets, that the proposed sale was poorly marketed with the number of potential bidders limited because of the receiver’s demand intending buyers post a $50,000 bond before getting access to company information, and that a proposed sale of Tellen assets to interests associated with Mr Simmonds at $520,000 is a sale at gross undervalue.  Mr Simmonds made his $520,000 bid under the name Dark Horse Technologies.

Justice Doogue issued an interim injunction blocking any sale until these issues are sorted out.

Tellen Systems NZ (2013) Ltd v. Fibre Investments Ltd – High Court (14.01.22)

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Family Trust: Hingston v. Hingston

Short of cash and under pressure to sell his home in order to pay some $306,000 to his second wife following separation, Keith Hingston turned to son David for financial assistance.  Over a decade later, the High Court ruled David both exercised undue influence over his father in the benefits he extracted and then did not honour terms of their agreement.

A story of pressured bargaining, father and son subsequently falling out and then bizarre behaviour by the son filming his father’s every activity were told to the High Court.

Keith Hingston had worked for the local power board. He designed and built his retirement home in Welcome Bay, Tauranga.  When in his early seventies, his second marriage came to an end.  Keith was desperate to stay in his Welcome Bay home and spoke to son David about ways to get cash needed to pay out his second wife.  David is the child of his first marriage.  He is a doctor.  Justice Gwyn described David as being more financially sophisticated than his father.

Initial discussions centred on Welcome Bay being sold to a family trust set up by David with David his partner and child as beneficiaries, freeing up cash.  The trust in turn would grant Keith the right to occupy Welcome Bay for life.  The deal saw Keith not only selling Welcome Bay to David’s family trust but also transferring his boat, trailer, car and all household chattels to the trust and in addition assigning pension payments from his power board superannuation across to the trust. Keith remained responsible for rates, insurance, power and phone.  Justice Gwyn ruled the contract evidenced undue influence over Keith by his son. Welcome Bay was undervalued at the price nominated for transfer to the trust.  The financial benefit from the Welcome Bay undervaluation and the extra value obtained from including chattels and pension rights meant Keith overpaid for the actuarial value of occupation rights given in return.  Son David exploited a relationship of trust and confidence between himself and his father, Justice Gwyn ruled.

After his second marriage ended, Keith reconciled with David’s mother Gwen.  A further agreement was signed by David’s family trust also giving Gwen rights to occupy Welcome Bay.  Three years later, Gwen left Welcome Bay and a woman named Petra came to live with Keith. David took exception.  Evidence was given of David on one occasion hiding in a cupboard at Welcome Bay, leaping out and surprising them when they returned home.  He remained in the house, uninvited, filming their daily lives.  He attempted to change the locks.  He issued multiple trespass notices.  Keith eventually left, after being served with an eviction notice. David, as trustee of his family trust, was ruled to be in breach of the ‘occupation for life’ agreement with his father.  Having Petra come and live at Welcome Bay was not a breach of Keith’s occupation agreement. David failed to provide alternative accommodation for his father on eviction, as required by the occupation agreement.

The court was not asked to rule on the level of damages due Keith from his son.

Hingston v. Hingston – High Court (23.12.21)

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Post judgment note: The Court of Appeal subsequently ruled there had been no undue influence.  There was a valid explanation for terms of the financial arrangement between Keith Hingston and his son David.  See post dated 22 November 2022 for details.

Ponzi Fraud: re Strahl

The judicial axe fell to decide allocation of ANZ bank compensation for victims of the Ponzi fraud perpetrated by Wellington-based David Ross.  Different investors had differing interests in litigation which propelled ANZ into settlement talks.  They could not agree on how compensation should be divvied up.

Ross was jailed for his fraud in which clients’ money was stolen and investment returns to earlier investors paid out of money put in by later investors.  When the scheme collapsed in late 2012, then current investors potentially waved goodbye to some $440 million.  Diligent work by Ross Asset Management Ltd liquidators looks to have narrowed losses to about $115 million.  Some 550 of Asset Management’s 700 victims banded together in a class action to sue ANZ Bank alleging the bank was party to the fraud.  Because of the irregular manner in which the Ross Asset Management account was operated, the Bank knew Ross was misappropriating client money, they alleged. ANZ has at all times denied knowledge of Ross’ fraudulent activity.  After failing to get the case thrown out before trial, ANZ quietly settled with investors for an amount all agreed to keep confidential.

When signing up for the ANZ class action, all agreed an investor committee could decide allocation between investors of any compensation recovered and that this allocation was to be put to the court for approval.

Investors were divided into two categories: Class A investors who put new money into Asset Management after the date ANZ was presumed to know Ross was acting fraudulently and Class B investors who had previously put money into Asset Management but had since rolled over or amended their investment instructions.  Legal advice was that Class A investors were a slam dunk to get their money back from ANZ, if it could be proved the bank did have knowledge of Ross’ dishonesty.  Class B investors would likely get some compensation, legal advice confirmed, but it was not clear cut.

The investor committee recommended Class A investors share 75 per cent of the ANZ payout (after deduction of legal fees and the litigation funder’s costs) with Class B investors sharing the remaining 25 per cent.  Class B investors objected.  The investor committee was biased, they said.  The committee was dominated by Class A investors.  The ANZ payout should be distributed equally, split pro rata across all Class A and Class B creditors, they said.

Justice Mallon ruled a 67/33 split was more appropriate.  Class A creditors clearly had a better chance of success if the ANZ case had gone to trial.

One critical issue was the so-called ‘knowledge date;’ the date at which the investor committee assumed ANZ Bank would have had knowledge of Ross’ fraud.  New money put in after that date meant you were a Class A investor; money in one day before that date and you were a Class B investor.  For purposes of allocating compensation, the investment committee assumed 31 May 2010 as the knowledge date.  For reasons supressed in the publically-available High Court judgment, Justice Mallon approved this date as the knowledge date.

The amount to be received by investors was also supressed.

re Strahl – High Court (23.12.21)

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Relationship Property: Wu v. Chiu

Jian Wu used powers of attorney given him by two former classmates as cover to hide funding for two south Auckland properties ruled by the High Court to be relationship property.  He was ordered to hand over half the properties’ value to former spouse Yu-Ju Chiu after their marriage of ten years came to an end.

Funding sources for Mr Wu’s 2015 purchase of two adjoining properties in Flat Bush were disputed after the couple separated.  He said funding came from two former classmates, not relationship resources.

The High Court was told the two classmates signed powers of attorney in favour of Mr Wu in 2008.  There was no dispute that these powers of attorney were valid; they were properly executed in front of an Auckland solicitor.  It was intended Mr Wu would act on their behalf whilst they were in China.  In 2012, the two Flat Bush properties were purchased in their respective names, the paperwork signed by Mr Wu.  Three years later, Mr Wu transferred Flat Bush ownership into his own name in what purported to be a sale from his classmates to himself at a price of $680,000 for each property.  In a brief written agreement signed by Mr Wu on behalf of each classmate, they each supposedly left the full purchase price owing as an unsecured debt, payable on demand. Three months later, Mr Wu sold one of the properties for $750,000.  He used the proceeds to pay down personal debts.  There was no evidence of any classmate receiving repayment of the promised unsecured loan.  

In the High Court, Justice Woolford ruled the purchases were a sham; Mr Wu was the true owner from the outset.  There was no evidence of any overseas funding from his classmates for the initial Flat Bush purchases.  The supposed onward sale by these classmates to Mr Wu was a fiction. Leaving in vendor finance without the protection of mortgage security and the fact Mr Wu kept the full proceeds of his onward sale all indicated Mr Wu was always the true owner.

Funding for the initial Flat Bush purchases in 2015 was from relationship resources and the properties were relationship property, Justice Woolford ruled.  Ms Chiu was entitled to half the $750,000 sale price from the Flat Bush property which had been sold and half the value of the second property still owned by Mr Wu.

There was no clear evidence of the source of funds used in 2015 to first purchase the Flat Bush properties.  Ms Chiu alleged it was undeclared income from his business: Master Architectural Design Ltd.

Wu v. Chiu – High Court (21.12.21)

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Negligence: Routhan v. PGG Wrightson

PGG Wrightson Real Estate was ordered to pay $1.6 million damages after one of their Hokitika sales staff negligently provided inaccurate milk production figures to a farm purchaser going so far as including the error while drafting information in support of their Rabobank loan application.

Phil and Julie Routhan bought a dairy farm on the Kaniere-Kowhitirangi Road in 2010 for $2.8 million from Nelson Cook, owner of Cooks Stud Farms Ltd.  The Routhans had not wanted to show their hand when scouting for a farm.  They had a Mr Daly, one of PGG Wrightson’s sales staff, approach Mr Cook.  Mr Daly was working off a brochure prepared by a rival real estate firm advertising details of the Cook property.  This brochure advertised the Cook property as producing an impressive 103,000 kg of milk solids per season from 260 cows off 105 hectares.  Market prices for farms are governed by raw milk prices multiplied by expected milk production for a particular farm.  The Kowhitirangi purchase looked attractive on the advertised production figures.  The Routhans were also looking to buy a neighbouring farm with plans to merge the two. This vendor backed out at the last minute and the second purchase did not go ahead.

After taking over the Kowhitirangi farm, the Routhans found annual milk production was almost twenty per cent below what was advertised.

The High Court was told the Routhans had asked Mr Daly to verify advertised milk production figures before the purchase. Justice Dunningham ruled that Mr Cook never in fact confirmed to Mr Daly that prior production levels of 103,000 kg per season were being maintained in subsequent seasons.  Mr Daly misunderstood comments made.  Mr Daly did not follow up when he subsequently could not reconcile the number of Westland Dairy shares held by Mr Cook with advertised levels of production.  This anomaly indicated Kowhitirangi production levels had fallen.  The Routhans went ahead with their purchase unaware that advertised production levels were not being achieved in recent milking seasons.

Evidence was given that previous high levels of production had been achieved only because of high grass growth; very high levels of fertiliser had been applied and much of the stock had been wintered off site at a run-off.

Lower production levels than expected meant farming was unprofitable, given the level of borrowings taken up by the Routhans to complete their purchase.  Adding to the Routhans’ financial difficulties, milk prices had fallen causing farm prices to fall.  Rabobank told the Routhans they had to sell; the bank wanted its money back.  The Routhans sued PGG Wrightson to recover their losses.

Wrightson was ordered to pay damages of $2.1 million reduced by twenty per cent to $1.6 million.  Money the Routhans spent on capital improvements at a time when the farm was struggling financially could not be recovered.

Wrightson alleged the Routhans losses were all due to their lack of farming experience.  Justice Dunningham said expert evidence showed the Routhans were achieving production levels matching industry levels for the district.

Routhan v. PGG Wrightson Real Estate – High Court (21.12.21)

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Fraud: Luo v. Shiu

Robert Luo and Anny Yip needed High Court assistance to extricate themselves from a Pokeno land development alleging Annie Shiu had dishonestly locked them into a long-term project with false promises they would share in profits.  Ms Shiu was ordered to pay them $2.6 million; this in addition to $2.5 million Annie had already paid Robert Luo in the middle of the High Court hearing. 

Over Christmas dinner in December 2016, Annie Shiu, also known as Annie Chen, discussed with Mr Luo the possibility of him joining her in subdividing land at Pokeno just south of Auckland City boundary.  He was a recent immigrant to New Zealand. Together with other investors, he agreed to help fund purchase of properties in separate titles on Helenslee Road.  Subsequently, Ms Shiu approached Ms Yip about further purchases in the area and Ms Yip agreed to fund the purchase of more land on Helenslee Road.  At this point, neither Mr Luo nor Ms Yip knew of the other’s existence.  Both claimed the deal each was offered involved a profit share in Ms Shiu’s intended residential property development.  Consolidation of land titles in Pokeno west would enable development of 1600 residential sections.

The High Court was told Ms Shiu denied there was any joint venture partnership.  The investors were only providing long-term debt finance with any joint venture agreement extending only as far as getting the land rezoned residential, she said.

Justice Whata ruled Ms Shiu was in breach of the Fair Trading Act.  She extracted from both Mr Luo and Mr Yip several hundred thousand dollars for what she described as brokerage fees or commissions payable to a broker for setting up the respective deals.  This was dishonest.  No fees were payable.  In 2021, Ms Shiu was convicted on two charges of obtaining by deception.   

Ms Shiu also falsely represented to both Mr Luo and Ms Yip that they would share in development profits when there was no intention to involve them as profit-sharing partners, Justice Whata said.

Annie Shiu was ordered to repay $1.04 million to Mr Luo (a balance of $632,800 lent for the project plus interest of $407,200) and $1.6 million to Ms Yip’s investment company (being $1.5 million provided for land purchased and $131,000 in interest).

Luo v. Shiu – High Court (21.12.21)

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Employee/Contractor: Labour Inspector v. Southern Taxis

Owners of a Dunedin taxi company face personal liability for $80,000 due four drivers held to be employees, not independent contractors.  A test case before the Court of Appeal ruled business owners are personally liable where they knew factually that a supposed contractor could be viewed as an employee even if the owners did not know the precise legal rules defining what is an employment relationship.

Southern Taxis Ltd stopped trading in 2016, short of funds needed to pay an Employment Relations Tribunal order it pay $80,000 to four drivers for unpaid holiday pay and to make good wages less than the minimum wage.  The Tribunal ruled these drivers were employees, not independent contractors.  Southern Taxi owners Ronald and Maureen Grant said the drivers were hired as independent contractors. The four drivers had worked on commission: forty per cent of fares.

It is administratively tidier for businesses to hire in contractors rather than take on staff; minimum wage rules, holiday pay, sick leave and rest break requirements are not obligations of any business that hires contractors.

If a business does not pay employee entitlements, labour law holds owners personally liable to make good payments if they were ‘knowingly concerned in’ breaches of employment legislation.  The Grants said they genuinely believed the working relationship between the company and its drivers meant the drivers were independent contractors, not employees.  The drivers thought they were employees.  Drivers worked to a roster fixed by Southern Taxis.  They were not registered for GST.  Southern owned the vehicles and met all running costs.  Drivers could not sub-contract their rostered work to anyone else.

The Court of Appeal was asked to rule in what circumstances would a business owner be ‘knowingly concerned’ in any breach, and hence personally liable.  Knowledge of the essential facts is sufficient, the Court ruled.  It is immaterial whether the owner had any knowledge of the relevant law as it applies to these primary facts.

The case was referred back to the Employment Court to determine whether the Grants personally did have knowledge of the ‘essential facts’ causing their drivers to be viewed as employees.

Labour Inspector v. Southern Taxis Ltd & Grant – Court of Appeal (20.12.21)

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Liquidation Fees: Toon v. Quinn

Auckland insolvency specialist Victoria Toon walked unwittingly into a family scrap when she took on the job of winding down a solvent property investment company.  Shareholders related by both blood and marriage had been at each other’s throats for nearly twenty years.  Majority shareholder, former chartered accountant Clive Quinn, soon turned his attention to Ms Toon, unsuccessfully challenging fees and expenses she charged for the company’s liquidation.  

Investacorp Holdings Ltd owned a commercial building in Auckland’s central business district and half share in commercial premises at Papatoetoe.  Interests associated with Mr Quinn held a controlling 50.2 per cent stake in Investacorp; the minority holding being family interests of fellow investor Bruce Thompson. Mr Quinn is married to Mr Thompson’s sister.  Mr Quinn occupied Investacorp’s Papatoetoe building, paying rent.  Investacorp paid fees to Mr Quinn’s accounting practice for tax and management services provided.

The High Court was told of a history of bad blood between Mr Thompson and Mr Quinn.  Mr Thompson alleged Mr Quinn was milking money out of Investacorp, charging excessive fees for his professional services.  A 2011 court case saw Quinn interests ordered to pay Investacorp $291,300 compensation following arguments that Mr Quinn was paying below market rentals for use of the Papatoetoe office.  Mr Thompson complained to the New Zealand Institute of Chartered Accountants about Mr Quinn’s conflict of interest in charging professional fees to Investacorp whilst also being a director and shareholder.  The Institute censured Mr Quinn and he agreed to stop.  Evidence was given that Mr Quinn then handed on the work to a chartered accounting firm run by relatives; his daughter and son-in-law. He then took steps to augment his remuneration from Investacorp by increasing directors’ remuneration. Quinn interests used their voting majority to fire Mr Thompson as a director in 2015.

In the face of legal action taken by Mr Thompson to force liquidation of Investacorp, the two sides signed a settlement document agreeing to wind up their company with Ms Toon appointed liquidator.  Mr Thompson was of the view that the settlement agreement required Ms Toon as liquidator to investigate the level of fees received by Mr and Mrs Quinn.  By contrast, the Quinns were of the view that their settlement agreement precluded any enquiry; a quick cashing-up of company assets and distribution to shareholders was all that was required.  Mr Thompson soon alerted Ms Toon as to his view of the deal.

With $3.6 million banked from realisation of company assets, final distribution was delayed as Ms Toon faced down Mr Quinn’s blank refusal to hand over company records.  Finally forced to hand them over and learning that Ms Toon had decided it was uneconomic to challenge any excessive fees allegedly taken, he sued Ms Toon complaining that she had charged too much in liquidation fees for what should have been a quick liquidation.  She should have ignored Mr Thompson’s allegations, he said.  Mr Quinn challenged steps she had taken and the level of legal fees incurred.

The Court of Appeal ruled it was proper for Ms Toon as liquidator to take an independent line, following up on Mr Thompson’s allegations.  Investacorp was not a party to the settlement agreement between shareholders.  The Court approved her fees of some $101,700 for work as liquidator spread across four years.

Toon v. Quinn – Court of Appeal (17.12.21)

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