Building Consents: Nuwave Software v. Objective Corporation

The boys from Sydney sneaked into New Zealand under cover of darkness, incurring a $1.54 million Commerce Act fine, planning to seize control of local authorities’ use of online systems for processing building consents.  A High Court injunction blocked poaching.

Wellington-based Nuwave Software Ltd alleges Australian-owned Objective Corporation Solutions is party to illegal commercial conduct attempting to dominate online building consents.

The High Court was told Nuwave joined with Master Business Systems in 2016 to develop an end-to-end online system for processing building consents.  Their joint venture company GoCouncil provides bundled software to about twenty local authorities under the brand GoGet.  Terms of the joint venture prohibit both Nuwave and Master Business from hiring each other’s employees or poaching clients; to protect each company’s goodwill and know-how, the agreement says.

In June 2022, Master Business along with three other companies was merged into Objective Corporation Solutions NZ Ltd, under ultimate control of Sydney-based investors.  This merger fell foul of the Commerce Act.  In the course of a Commerce Commission investigation, Objective Corporation acknowledged the merger was likely to substantially lessen competition.  It was fined $1.54 million.  Commerce Commission did not seek to reverse the merger.  Divestment would likely disrupt building consents filed throughout the country.

This left Nuwave with the risk that Master Business staff operating their joint venture GoCouncil portal would be used to staff up Objectives’s operations, stealing clients and leaving GoCouncil to wither. Justice Palmer issued an injunction prohibiting Objective from approaching GoCouncil customers.  Objective is free to offer its services to local authority consenting authorities that are not current GoCouncil customers.  

Objective claims Nuwave’s non-poaching agreement is itself anti-competitive.  This claim requires a further court hearing.

Nuwave Software Ltd v. Objective Corporation Solutions NZ Ltd – High Court (30.09.22)

22.171

Tax Fraud: Sami v. Inland Revenue

The High Court refused Rajesh Sami leave to appeal his 2017 conviction for tax fraud; his last ditch effort to avoid deportation to Fiji.

Sami pleaded guilty in 2017 to Inland Revenue charges of tax fraud totalling some $669,800; failing to declare cash jobs for income tax and failing to register for GST or to pay GST over a seven year period. Sami worked as a builder.  He was sentenced to two years ten months imprisonment.

On his release, Sami was issued with a deportation order.  He is a Fiji citizen and a New Zealand resident, but is not a New Zealand citizen. The High Court was told Sami unsuccessfully appealed his deportation to the Immigration and Protection Tribunal. A claim to refugee status was also unsuccessful.

He then asked the High Court for leave to appeal his conviction for tax fraud; an attempt to remove the reason for his deportation.  His appeal rights had lapsed four years previously.

Sami said he would never have pleaded guilty if he had known conviction would result in deportation.  He has lived in New Zealand for about 24 years.  His wife and three children also live in New Zealand.

Sami said there had been a miscarriage of justice; his lawyer did not warn him that conviction could result in deportation.  Sami’s defence lawyer advised him to plead guilty in order to get a sentencing discount.  This was appropriate advice, Justice Davison said.  Even if the possibility of deportation had been raised at sentencing, there was never any realistic possibility that the trial judge could be persuaded to discharge Sami without conviction, he said.  Any appeal against conviction was hopeless, Justice Davison ruled.

Sami v. Inland Revenue – High Court (23.09.22)

22.170

Leasehold: KOL Holdings v. Xu

Owners of twenty-one leasehold apartments on Auckland’s Remuera Road have had their leases cancelled following a rent strike when annual rents more than doubled in 2021 on a seven-year rent review.

The High Court was told owners had abandoned their leased properties with power subsequently cut off for unpaid arrears. Freehold title to the apartments at 267 Remuera Road is held by property company KOL Holdings Ltd with Anthony David Frith and Anna Kristina Frith named as both directors and shareholders.

Lease terms permit KOL to review rent every seven years. The 2021 review saw annual rent for the block of predominately small studio apartments rise from $250,000 to $645,000 with GST to be added.  Leasehold owners walked away.  Legal action was taken against eight owners who had not done a deal for surrender of their lease. The High Court ruled these eight were jointly and severally liable for rent arrears of some $1.03 million and rates arrears of just over $115,000. Joint and several liability leaves each of the eight leaseholders liable to contribute equally to the amount due, but if one does not pay then the other leaseholders have to make good the difference. At a minimum, each is liable to pay more than $140,000 with no compensation for loss of their leasehold interest. 

At KOL Holdings’ request, the High Court cancelled all twenty-one apartment leases giving KOL complete control of the site. A hotel advertising itself as the Devereux Boutique Hotel sits to the rear of the property, partially obscured by the studio apartments.

KOL Holdings Ltd v. Xu – High Court (22.09.22)

22.169

Legal Costs: Criffel Deer Ltd v. ANZ Bank

Facing allegations of fraud from Wellington lawyer and entrepreneur Mike Garnham and his Garnham group of companies, ANZ Bank spent some $250,000 defending claims it said were improper, frivolous, vexatious and totally without merit.  After the claims were struck out, the High Court awarded ANZ $150,900 costs.  

The High Court was told ANZ bank poured considerable resources into preparing its defence to the Garnham claims filed in 2021. Bank records were searched and senior counsel hired.  ANZ said Garnham contributed to these costs by failing to comply with court rules, raising untenable arguments about admissibility of evidence and persisting in pressing forward with litigation in the name of a company which had been struck off.   

ANZ’s loan contract with Garnham Group included an indemnity clause allowing it to recover all costs in exercising and enforcing rights as creditor.  Mr Garnham argued the bank’s litigation costs were attempts to avoid scrutiny of its conduct rather than protection of its loan rights.  Justice Churchman disagreed.

Some, but not all, of ANZ’s costs were recoverable. While defending serious fraud allegations incurred costs, they were not strictly necessary in this case, he said. Final legal argument centred on only two issues, neither of them involving allegations of fraud.  ANZ was awarded $150,900 as its costs of dealing with these two issues: whether the Garnham claims were time-barred and whether there had been an out of court settlement.  ANZ went to extreme lengths in determining whether the Garnham fraud allegations had merit resulting in excessive costs which were not reasonably incurred, Justice Churchman said.  These excessive costs could not be recovered as part of the loan indemnity, he ruled. 

Criffel Deer Ltd v. ANZ Bank – High Court (21.09.22)

22.167

Leasehold: Smith v. Paros Property Trust

Auckland commercial landlord Neil Christian thought he was dealing with just one pesky leaseholder running a hopeless legal argument about lease cancellation when the Court of Appeal ran a bulldozer through the entire case ruling that Christian’s Paros Property Trust invalidly raised rents for all its Freemans Bay leaseholders, failing to follow the correct statutory procedure for its 2018 rent review.  

Occupants of leased townhouses in Auckland’s Freemans Bay look to benefit with substantial rent credits; the 2018 review almost tripled previous annual rents.

Sixty years ago, slum housing in Freemans Bay was demolished by Auckland Council, replaced by townhouses sold on long-term leases. Council subsequently sold its leasehold interests.  Neil Christian’s Paros Property Trust Ltd snapped up the properties.  It now exercises all the rights as lessor previously held by Council.  The leases allow rent reviews every seven years.

Since 2018, Napier Street leaseholder Tim Smith has been waging a quixotic battle with Paros Property over his rights to purchase the freehold.  The Court of Appeal was told the dispute arose after Mr Smith received his 2018 rent review, raising annual rent from $31,000 to $81,375.  He signalled an interest in freeholding.  Neither side could agree on the process.  Mr Smith was adamant he had the right to choose a valuer to determine cost of freeholding; Paros Properties said the lease was explicit, it was for Paros as lessor to choose the valuer.  Mr Smith argued this stalemate meant the lease was cancelled and he was not liable for rental arrears.  The High Court ruled Paros had the right to choose the valuer and ordered Mr Smith pay over $240,000 in rental arrears.

Mr Smith appealed.  The Court of Appeal confirmed the lease was never cancelled, but then put Paros Property’s lawyers in a spin by ruling the 2018 rent review process was not properly carried out.  This had the effect of freezing rents at the pre-2018 rate.  Mr Smith’s liability for rent arrears dropped markedly to some $87,000.

The court ruled rent reviews required a prior valuation by three independent valuers to set market rates.  Both Mr Smith and Paros Property had assumed valuation was required from one valuer only.

After doing its own homework and then marking it as correct, the Court of Appeal ruled that supposedly repealed valuation procedures in the Municipal Corporations Act still applied.  This anomaly arose because of the legal history of Freemans Bay’s gentrification; properties were compulsory purchased and the area redeveloped by Auckland Council using 1945 legislation: the Urban Renewal and Housing Improvement Act.

Smith v. Paros Property Trust Ltd – Court of Appeal (21.09.22)

22.168

De facto director: NZ Causeway International v. Wang

Whilst living back in China, Jie Cao left fellow shareholder Yi Wang in sole charge of their Auckland health food store.  Ms Wang was ordered to hand over $157,244 wrongly taken from the business and to account for profits from $370,700 stock she diverted to her own rival business.  

Cao and Wang agreed to join forces in 2017 setting up a health supplement store when Mr Cao as a recent immigrant met Ms Wang working as store manager on Dominion Road in Mt Eden.  NZ Causeway Bay International Trading Ltd was registered with Mr Cao as sole director and shareholding split 70:30 between Mr Cao and Ms Wang.  Unbeknown to Mr Cao, Ms Wang joined with another investor within months to set up a rival business trading as Oceania Health Care Product which set up shop over the road from Causeway Bay’s retail store.

The High Court was told Mr Cao spent most of his time in China, leaving Ms Wang in full control of Causeway Bay operations.  He became suspicious when she stopped providing financial information.  He later discovered she was diverting company cash for personal expenses, used her own WeChat barcode at Causeway Bay’s counter to divert store revenue into her own bank account and also transferred Causeway’s stock to Oceania Health across the road.

Justice Tahana held Ms Wang liable for a breach of directors’ duties as if she were a director of Causeway Bay.  She was not in fact a director, but treated at law as a ‘de facto’ director since she had complete control of Causeway’s management decisions in the absence of Mr Cao.  As a de facto director she did not act in good faith and she did not act in the best interests of Causeway Bay, Justice Tahana ruled.

Ms Wang did not appear in court to defend the claim.

NZ Causeway International Trading Ltd v. Wang – High Court (20.09.22)

22.166

Stonewood: Boult & Merrick v. Cain

Creditors can be told details of a $3.5 million confidential settlement between liquidator of Stonewood Homes and directors James Boult and Brent Mettrick which resulted in no payment for unsecured creditors, the High Court ruled. 

In 2016, Stonewood Group went into liquidation.  Reports filed by the liquidator identify $3.5 million recovered in an agreed out of court settlement with directors.  Stonewood’s secured creditor has not been paid in full. There is nothing available for unsecured creditors.

In 2022, unsecured creditor Geoff Ball applied to the High Court for access to settlement details.  Associate judge Paulsen said the better course of action was to ask Stonewood’s liquidator to release the information.  Mr Ball is a member of Stonewall’s liquidation committee.

In any insolvent liquidation, unsecured creditors can vote for a liquidation committee.  It provides oversight, both protecting creditor interests and assisting the liquidator.  Unpaid creditors can provide industry insights, helping with the location and sale of company assets.

Mr Ball was joined by two other creditors on Stonewood’s liquidation committee requesting terms of the confidential settlement. When the liquidator indicated his intent to allow disclosure, Mr Boult and Mr Mettrick were back in front of Judge Paulsen claiming that disclosure was in breach of their settlement agreement and that the request was being made for an improper purpose, being the potential for legal action taken by individual creditors.

The liquidation committee has Company Act rights to inspect all liquidation records and documents, subject only to a liquidator having reasonable grounds to believe this would prejudice the company’s liquidation, Judge Paulsen ruled.  There was no such prejudice here, he said.

The High Court was told the liquidator proposed members of the liquidation committee be allowed to read the file, but not take notes or make copies.

Boult & Merrick v. Cain – High Court (20.09.22)

22.165

Construction: United Builders v. MKOD Developments

It seemed like a good idea at the time; have an acquaintance hold deposits as a stakeholder for later onward payment to a builder.  Now both builder Munesh Chand and property owner Mavis Wolfgramm are having trouble extracting their money from stakeholder Chandar Prakash in payment for building work completed.

The High Court was told Mr Prakash assisted Ms Wolfgramm following a fire at an Auckland home in Mt Roskill owned by her company Wolfgramm Contracting Ltd.  He drafted plans for renovations and arranged with Mr Chand’s United Builders Ltd to do the job.  United Builders quoted $529,000 in May 2022 for the work.  Ms Wolfgramm was unwilling to pay upfront a requested deposit of $211,600. She asked Mr Prakash to act as ‘middleman.’  

Evidence was given that Mr Prakash then offered an alternative payment schedule to Ms Wolfgramm with the initial deposit being only $69,000 on a full contract price of $529,000.  She paid the $69,000 deposit to his company: MKOD Developments Ltd. At the same time, Mr Prakash confirmed a payment schedule with United Builders which specified a higher contract price payable: $667,000.

Three months on, United Builders complained its invoices were not being paid, with only $40,000 received to date.  Ms Wolgramm said she had paid $219,000 across to Mr Prakash’s MKOD Developments.  There was $179,000 unaccounted for that should have been passed on to United Builders, she said.

Mr Prakash said payments were held back because of concerns about quality of the work done and a need to get Council signoffs.           

Learning that Mr Prakash had been convicted of GST offences for a failure to pay some $170,000 to Inland Revenue and that he was in that habit of travelling overseas to Fiji, the two asked the High Court to put MKOD Developments into liquidation immediately to preserve what assets it holds. Associate judge Gardiner refused. A formal court hearing is necessary to establish exactly what were the terms on which MKOD held funds as stakeholder. The fact that there is no written agreement between United Builders and MKOD or Wolfgramm Contracting and that their respective payment schedules do not reconcile means all sides need to be heard in court, she said.

United Builders Ltd v. MKOD Developments Ltd – High Court (16.09.22)

22.163

Lease: Tobem Holdings v. Kid Country Holdings

Sued for more than one million dollars in a dispute over lease of commercial space intended for use as a childcare facility, tenant Kid Country Holdings pulled the plug just prior to a scheduled court hearing; acting hand in hand with the liquidator using liquidation to stifle its claim, landlord Tobem Holdings alleges. 

The High Court at Auckland was told Tobem Holdings Ltd purchased the commercial property in February 2019 and along with it an existing lease to tenant Kid Country Holdings Ltd with Kid Country committed to annual rental payments of $390,000.  Tobem never received any rent.  Kid Country disputes how rentals are assessed and also disputes the area of usable space potentially available for operation as a childcare facility.

Tobem cancelled Kid Country’s lease in June 2020. It is now suing Kid Country for over one million dollars: arrears of rent; the cost of finding a replacement tenant; and the shortfall in rent between what Kid Country agreed to pay and what the new tenant is paying.

Two years after Tobem filed its claim and two weeks before trial date, Kid Country shareholders put their company into liquidation.  This killed the litigation stone dead. Ongoing litigation can continue after liquidation only with approval of either the liquidator or the court.  Kid Country’s chosen liquidator refused approval. Tobem’s attempts to remove the liquidator failed.  There are only three unpaid Kid Country creditors, it says: two each owed less than $7000 voted for the existing liquidator to remain; Tobem voted for removal. It was outvoted 2:1. The liquidator refused to identify who were the two creditors who kept him in office.        

In the High Court, Justice Gordon ruled the one million dollar litigation could continue.  All parties were ready for trial when liquidation intervened.  The claim can be dealt with immediately.

The alternative would see the liquidator assessing Tobem’s claim.  Tobem said its expectation was that the liquidator would reject its claim, causing further delays while it waited for a new court hearing date to challenge any adverse decision by the liquidator.

Companies Office records name David Lowry and Paul Hamlyn as directors of Kid Country; Narendra Patel as director of Tobem Holdings.

Tobem Holdings Ltd v. Kid Country Holdings Ltd – High Court (16.09.22)

22.162

Land: CSR Pokeno Ltd v. Yes Investments

It was a game of high stakes poker. Interests associated with Annie Shui and her much litigated attempts to develop a residential subdivision at Pokeno south of Auckland were on the hook for late settlement interest running at $3830 per day when taking out a short term loan to complete a $12.5 million purchase. A call option imbedded with the loan saw South Island-based investors seize control of the entire project which now has a reputed value of $150 million.

Ms Shui was convicted on two charges of fraud and ruled to be in breach of the Fair Trading Act in separate civil litigation as she worked to combine several land holdings in Pokeno West for an intended 1600 lot subdivision. By 2022 she was left with a one per cent stake in CSR Pokeno Ltd, with Andrew Shui as a named director.  The High Court was told CSR committed in January 2017 to paying $12 million for its Pokeno purchase.  After failing to settle the purchase in May 2022, settlement was deferred to the following August at an increased price of $12.5 million.  Part payment was then made.  This left default interest running at $3830 per day with CSR still nine million dollars short.

Evidence was given of a deal subsequently struck with Yes Investment NZ Ltd, getting money in the door completing the purchase.  Companies Office records show Yes Investments owned primarily by investors based in Christchurch and Dunedin.  Yes put up some four million cash for a thirty per cent stake in the project, coupled with a $4.9 million two year loan.  A call option was attached to the loan; Yes Investment could call for transfer of CSR’s seventy per cent stake in Pokeno West at no cost other than forgiveness of the $4.9 million loan.  Yes Investment exercised this option in August 2022 when the two year loan fell due, unpaid.

In the High Court, CSR challenged exercise of this option. It claims seizing control amounts to a penalty; taking assets valued well in excess of the unpaid $4.9 million loan. There was evidence of a third party conditional offer to buy Pokeno West’s assets for $150 million.  CSR also claims Yes Investments improperly blocked attempts to refinance the loan.

Justice Jagose refused to block the call option. At best, CSR is entitled to damages if successful following a hearing of its claims at a later court hearing, he ruled. CSR should not be allowed to tie up Pokeno West’s valuable resources pending trial, he said.

Companies Office records show Yes Investments assuming full ownership of Pokeno West twelve days after the High Court ruling.  Andrew Shui resigned as director the day of the ruling.

CSR Pokeno Ltd v. Yes Investments NZ Ltd – High Court (16.09.22)

20.164

Class Action: Body Corporate 91535 v. 3A Composites GmbH

German manufacturer of aluminium cladding alleged to be high fire risk fended off litigation funders saying there was no ‘commonality of interest’ to support a class action; experts are divided on whether 3A Composites’ product is a fire risk. 

Risk of fire spreading through aluminium cladding in high rise buildings came to public attention after the 2014 Lacrosse Tower fire in Melbourne and the 2017 Grenfell Tower fire in London.  In New Zealand, a three story Mount Maunganui resort apartment was reclad with 3A Composites product in 2008 at a cost of nine million dollars.  Now joined by Argosy Property, they both are suing for damages claiming the product is not fit for purpose.  Argosy made use of the product for commercial buildings in Auckland suburbs of Albany and Mangere.

The High Court was told both the resort and Argosy have entered into litigation funding agreements with investors providing cash to fund legal expenses in return for a share in any recovery.  Terms of the agreements were not disclosed.  They applied for court approval to label their court proceedings as a representative action; colloquially known as a class action. This would have owners of other properties with the same aluminium cladding tied into the litigation.  Class actions require a ‘commonality of interest’ such that a decision from a single court case can be applied across a multiple of disputes; saving time and costs.

The litigation funders argue 3A Composites’ product is inherently incapable of meeting building code requirements.  This is disputed.

Justice Jagose ruled there is no commonality between affected building owners.  Fire risk code compliance for cladding differs from building to building depending on when it was built, where it was built, how high it was built and the building’s use. Any argument that the product is inherently in breach of the Code is a ‘potentially contrived allegation’ designed to get around issues of commonality, Justice Jagose said.  The application for class action status had the appearance of being primarily for the benefit of litigation funders, he said.

Drawing more property owners into the current litigation would potentially increase the payout for litigation funders; the bigger the pot the bigger the litigation funders’ return as a share of that pot. The court was told there are at least thirty buildings across New Zealand supplied with the disputed product. Terms of the class action application would have seen these property owners automatically included as part of the class action, unless they formally opted out, leaving the litigation funder controlling terms of any potential out of court settlement and the size of their pay out.  

Body Corporate 91535 & Argosy Property v. 3A Composites GmbH – High Court (14.09.22)

22.161

Fraud: Pome'e v. Inland Revenue

Confirming Sione Na’aniumotu Pome’e 27 months’ imprisonment for a $1.8 million tax fraud, the High Court said this sentence was generous given that a promised $200,000 voluntary reparation was never paid. 

Pome’e pleaded guilty after an Inland Revenue audit uncovered a long running seven year tax fraud.  He was sole director and shareholder of labour hire company Pome’e Engineering.  Returns filed with Inland Revene understated levels of employee PAYE deductions.  Payment deadlines to Inland Revenue were met late or missed altogether.  The court was told over one million dollars was diverted to a joint account held in the name of Pome’e and his uncle.  Money was used for: overseas travel; personal expenditure; and gifts to a wide social circle including family members, employees and $25,000 to support a nephew’s burgeoning music career.

Evidence was given that Inland Revenue recovered some $224,000 from liquidation of Pome’e Engineering and a further $125,000 from bank accounts.  Pome’e voluntarily paid back some $366,200.  Pome’s promise prior to sentencing by the trial judge to make a further voluntary payment of $200,000 came to nothing.

Pome’e v. Inland Revenue – High Court (14.09.22)

22.160

Fraud: Vuniduvu v. R.

Litia Rokele Vuniduvu’s conviction for fraud after stealing over $360,000 from Ports of Auckland in a false invoicing scam was upheld by the Court of Appeal.  She was guilty of dishonestly ‘using’ a document, even when most of the fifty false invoices in what was a three-year long scam were concocted by her lover, Ports of Auckland senior ICT manager Paul Bainbridge. 

Bainbridge pleaded guilty when charged.  Vuniduvu was found guilty after a District Court trial and sentenced to three years’ imprisonment.  She claimed there was no dishonesty.  She had done the work and was entitled to payment, she said.  The jury did not believe her.  There was evidence she had not declared the supposed income for tax.

On appeal, Vuniduvu said facts of the case did not support a Crimes Act conviction for ‘dishonestly using a document.’  She was not the principal offender, she said.  It was Bainbridge who prepared and processed the false invoices.  Bainbridge alone ‘used’ the documents to engineer a fraud, she said.

Vuniduvu’s actions in providing information to Bainbridge necessary to compile the false invoices and her actions in personally creating and submitting some of the invoices amounted to ‘using’ a document to perpetrate a fraud, the Court of Appeal ruled.

Bainbridge was sentenced in 2017 to three years and one month’s imprisonment for his part in the fraud.  By the time of her appeal against conviction, Vuniduvu had served her sentence.  Failing to overturn her conviction for fraud affects her ability to remain in New Zealand as an immigrant.    

Vuniduvu v. R – Court of Appeal (7.09.22)

22.159

Fraud: Rosebud Corporate v. Bublitz & Cook

Judges frequently chide litigants for failure to follow the rules.  You might expect the High Court to be a paragon of virtue when it comes to compliance. You would be wrong.  Requests from Hong Kong for evidentiary assistance into alleged fraud by directors Paul Bublitz and Chris Cook lay in court unprocessed for over a year before action was taken.   

In June 2021, the Solicitor-General asked on behalf of Hong Kong police for access to court documents relating to a property development on Auckland’s North Shore.  Hong Kong investors had provided project funding.  They were soon to become wary of Paul Bublitz and Chris Cook who were in charge of the project.  Hunter Gills Road Ltd was wound up insolvent in 2013.  The liquidator negotiated confidential settlements totalling $312,000, including settlements with an unnamed insurer and an unnamed Hunter Gills director.

Unpaid Hong Kong investors allege Paul Bublitz and Chris Cook were party to a conspiracy to defraud.  They laid a complaint with Hong Kong police.  As part of its investigations, New Zealand courts were asked to provide details of New Zealand litigation involving the two.

This request for copies of the court record was filed in June 2021.  Nothing happened.  Follow up requests on progress made a few weeks later and then eight months later again saw no result.  One year on, the request for access was finally set down for immediate hearing before the trial judge; three months later, release of the Hunter Gills court record to Hong Kong authorities was approved, over the objections of Mr Bublitz and Mr Cook both of whom deny any wrongdoing.

Release of the court documents is conditional on Hong Kong authorities’ prior written agreement to using this information only in relation to their criminal investigation.

Rosebud Corporate Trustee Ltd v. Bublitz, Cook & Hunter Gills Road Ltd – High Court (6.09.22)

22.158

Discovery: Andrews v. Lomax

Described by Judge Lester as an attempted ‘gotcha’ moment in highly charged pre-trial challenges to document discovery, Arrowtown hoteliers Rob and Kerry Andrews allege Auckland publican Paul Lomax is falsifying evidence in a dispute over management fees charged their joint venture company.   

In 2018, Rob and Kerry Andrews joined with Paul Lomax in leasing Arrowtown’s New Orleans Hotel.  It has not been plain sailing.  Associate judge Lester was moved to remark that litigation between two sides has become acrimonious.  There is a complete lack of trust, he said.

This lack of trust was underscored in a pre-trial discovery dispute.  Discovery procedures are intended to have each side disclose in advance all relevant documentary evidence they hold, supposedly sharpening the issues in dispute and reducing court hearing time.

The Andrews asked for disclosure of specific accounting information relating to management costs for their joint venture company Arrow Hospitality Ltd, including employee names and remuneration, cash distributions made and all documents relating to covid-19 wage subsidies.  Also requested was email correspondence between Paul Lomax and management staff.

The Andrews pounced after sighting the information provided.  Apparently unbeknown to Paul Lomax, Kerry Andrews still had access to Dropbox subfolders storing employment files.  She alleges some files have been deleted and others altered before disclosure.  Paul Lomax countered that the Andrews themselves were in breach of rules for discovery; they did not disclose that documents under their control included their access to the Dropbox files.

Judge Lester ordered a forensic examination of the disputed files by an independent IT specialist.  If the Andrews allegations are proved to be true, Mr Lomax is liable for investigation costs.  If a reasonable explanation is found for the file changes, the Andrews pay.

Also in dispute is: release of accounting records for Arrow Hospitality held by the company’s former accountants; and what the Andrews complain is a paucity of disclosed email traffic between Mr Lomax and his staff relating to management services they provided to Arrow.  Mr Lomax says much of this communication was verbal; there is no written record.  

Andrews v. Lomax – High Court (5.09.22)

22.157

Joint Venture: Matvin Group v. Crown Finance

Chris Arbuckle’s Crown Finance Ltd was ordered to compensate Matvin Group after unilaterally taking over a joint property development at Auckland’s Hobsonville Point, using all of Matvin’s planning and preliminary work for a retail and residential development. 

The High Court was told Kevin Clark and Matt Ellingham at Matvin Group spent much of 2013 dealing with zoning and consent requirements for a project at 122 Hobsonville Road under a loose arrangement with Crown Finance, expecting Crown to join them providing project funding.  Matvin was squeezed out at the last minute with Crown taking over the project through related company, Viscount Investment Corporation Ltd.  Matvin was incensed.

The High Court heard several weeks of evidence with Crown Finance arguing it was merely a bystander providing mezzanine finance rescuing the project while Matvin said Crown was a joint venture partner which had misused confidential information.

Matvin Group purchased the former Buljan vineyard in Hobsonville for $14.5 million in July 2013; 4.5 hectares of undeveloped land. Both the purchase and a later payment of a $1.45 million deposit was conditional on due diligence.  Evidence was given of earlier discussions with Crown Finance over potential funding and then of ongoing communications as Matvin reported on progress with planning and consent issues plus potential retail leasing prospects.  All looked encouraging.  The first hint for Matvin that not all was going to plan arose when Crown Finance was late in providing the necessary $1.45 million deposit.  Matvin paid a holding fee to get time extended.  Matvin was also concerned about increasingly onerous loan requirements Crown was putting forward as part of negotiations for a formal joint venture agreement.  In late October, Buljan told Matvin its purchase was cancelled.  Stalled negotiations with Crown about joint venture terms meant Matvin did not have the funds to complete a $14.5 million purchase. Matvin then learnt Viscount Investment had signed up the next day to buy 122 Hobsonville with an unconditional contract at the same price as the cancelled Matvin deal.

Justice Duffy ruled Crown Finance had misused confidential planning and consenting information provided by Matvin and that Viscount Investment had knowingly used that confidential information for its own benefit. Mr Arbuckle controls both Crown and Viscount.  It was only because of the preparatory work undertaken by Matvin that Viscount was able to sign up so quickly, Justice Duffy ruled.  Viscount also knew Matvin had no other source of funds; a squeeze was on. Crown Finance could not claim to be a disinterested arms-length financier when it was actively involved from the outset in planning the proposed development.

A further court hearing is required to determine profits made by Crown Finance and Viscount from the Hobsonville development and to establish how this profit is to be shared with Matvin.

Matvin Group Ltd v. Crown Finance Ltd & Viscount Investment Corp Ltd – High Court (2.09.22)

22.156

Relationship Property: Capper v. Dallinger

It came as a surprise to Steven Dallinger when accountants holding a High Court order told him they were now in charge of Murupara farming decisions, part of an ongoing dispute with his former partner Tania Capper over control of their relationship property.

The two jointly own Riverside Pride Ltd, a 160 hectare dairy farm near Murupara in Bay of Plenty.  The High Court was told Steven and Tania had been together since 2001, starting out as sharemilkers and progressing to ownership of their own farm as shareholders in Riverside Pride.  Their relationship has ended; the two separated in late 2019 after she was physically assaulted.  Steven was charged and convicted; Tania obtained a protection order against him. They now communicate only through their lawyers.

Tania alleges that Steven is running down Riverside assets; part of a scheme to reduce the value of her half share in the farm, she says.  There are allegations of company assets being sold at an undervalue to a separate business owned by Steve, of Fonterra milk payouts being diverted to a bank account he controls and of livestock sales not being credited to the farm account.

Tania asked the High Court to appoint interim liquidators to take control of Riverside.  Steven was not told of the court application.  Tania said it had to be done quickly and quietly because of her ongoing concern about Riverside’s value being eroded.  Associate judge Taylor appointed insolvency specialists from KhovJones to take control of all company assets and to report back to the court on Riverside’s current financial position.

The court was told there is also a subsidiary dispute over Riverside’s lease of farmland owned by a Tapper family trust.  Tania is a trust beneficiary.

Capper v. Dallinger – High Court (1.09.22)

22.155

Director Disqualification: Registrar of Companies v. Bublitz & McKay

Paul Bublitz’ and Bruce McKay’s current disqualifications from acting as company directors were extended to 2026 by the High Court.  Companies Office wanted their disqualifications extended to 2032.

Bublitz and McKay were convicted in 2019 of fraud following a cost to taxpayers of $3.38 million on government guaranteed borrowings by Mutual Finance Ltd; a guarantee offered finance companies to discourage feared runs by depositors during the 2008 world-wide banking crisis.  Their direct and indirect control of several companies enabled losses that would otherwise be suffered by Bublitz’ Hunter Capital to be shifted across to taxpayers through a series of related party dealings; Hunter Capital assets were transferred to Mutual, with Mutual in return providing further funding for property developments.  These related party dealings were specifically prohibited as a condition of Mutual getting a government guarantee for its borrowing from the public.

Conviction for dishonesty resulted in an automatic five year Companies Act disqualification from acting as directors. Their automatic ban expires in February 2024.  Companies Office applied to the High Court for a further twelve year extension.  The court looks to see if past behaviour indicates a future need to protect both the public and the commercial community. Justice Fitzgerald ruled a further extension was necessary, given the seriousness of their dishonesty.  But since the convictions leading to current disqualification arose from their business activities more than a decade ago, a twelve year extension was too long, she said.

Legal argument that any further extension is a ‘penalty’ governed by the Sentencing Act and Bill of Rights Act was dismissed. Australian courts have treated director disqualifications as a penalty. 

Registrar of Companies v. Bublitz & McKay – High Court (30.08.22)

22.154 

Business Valuation: Green v. Gillette

Nelson business owner Thomas Green had difficulty convincing the Court of Appeal that his company now known as Roofpower Installations Ltd was worthless when assessing a buyout valuation after he had previously sold a 49 per cent stake to intended joint venture partner Nathan Gillette for $98,000 and then after the two later fell out sold Roofpower’s assets to a third party for $120,000. 

This chemistry of moving business valuations followed a 2019 High Court hearing which saw Mr Gillette awarded damages of $60,000 for his 49 per cent interest.  Evidence was given that Mr Gillette came to New Zealand from Singapore in 2016 on a visa backed by an employment contract with Roofpower.  The business installed domestic solar power systems.  Part of the deal saw Mr Gillette paying $98,000 to buy a 49 per cent stake in Roofpower.  Plans for him to take a management role came to nothing.  Mr Green alleged Mr Gillette had lied in his CV, lacked the specialist expertise he claimed to have and was incompetent.  Mr Gillette sued.  A claim in the Employment Relations Authority saw Mr Green ordered to pay $20,600 damages; the High Court awarded Mr Gillette $60,000 damages for his minority stake in Roofpower.  Company law rules allow a court to order compulsory purchase of minority interests in closely-held companies where owners have fallen out and their company is deadlocked.

In the Court of Appeal, Mr Green said the trial judge had hopelessly overvalued Roofpower when deciding a 49 per cent stake was worth $60,000.  He produced accounting evidence that at the time of the dispute Roofpower was trading at a loss (valued on an earnings basis it was worthless) and its net assets at that time amounted to a mere $10,900.  The figure to buy out Mr Gillette should have been 49 per cent of nothing, he said.

The Court of Appeal left the buy-out figure at $60,000. Net assets valued at $10,900 did not take into account intangible assets owned by Roofpower such as continuing work flowing from its existing reputation and the benefit of its supply lines.  The fact Roofpower’s assets were sold months later for $120,000 confirmed this point, the court said.  Mr Green’s claim that these intangible assets were not owned by Roofpower but were his own personal property were dismissed.  The price demanded from Mr Gillette to buy into the company and the price paid for subsequent sale of Roofpower’s assets proved the contrary, the court ruled.  In addition, the shareholder agreement between Mr Green and Mr Gillette signed when he joined Roofpower recorded that these intangible assets were part of goodwill owned by the company.   

Green v. Gillette – Court of Appeal (29.08.22)

22.153

Land Subdivision: Ryan v. M & E Ryan & Sons Ltd

Valuable family vineyards now claimed to be worth some $70 million at Seddon carefully set up in 2009 to avoid any tax liability on subdivision are now the centre of a bitter dispute between brothers John and Chris Ryan as they attempt to divide the property into separate ownership.  

Their mother June was a driving force behind development of the vineyards purchasing 204 hectares of rolling barren land near Blenheim in 2000, a decade after her husband’s death.  As the business was developed, title to the land was transferred into the name of a family trust then controlled by herself and son John. The High Court was told a subsequent decision to bring another son Chris into the business saw business entities controlled separately by John and Chris sharing ownership of the vineyards as tenants in common with unequal shares.  A 2009 agreement saw John taking title to a 77.8 per cent share; Chris 22.2 per cent.  Being registered as tenants in common meant at law they were each a part-owner of the entire property, avoiding tax liability then applying to subdivisions of land.  In fact, each had exclusive occupation of separate parts of the vineyard enabling them to run separate businesses; John with the name Sedgemere and Chris with Redgate.

Advised in 2015 that their business interests could be now transformed into separate land titles tax free, preliminary steps were taken to subdivide title.  Seven years later, they are in court arguing over valuations.  While Chris is currently recorded as part-owner with a 22.2 per cent share, the proposed geographic split would see him taking title to only that land where he has exclusive occupation; about 15 per cent of the land.  Ownership defined in the 2009 split was not calculated solely on land area each would control but on value of business assets each would take in setting up their separate businesses.  Any attempt to agree on compensation with a proposed transfer into separate titles has foundered.  Evidence was given of earlier family divisions when John forced his mother out as co-trustee of Sedgemere Trust.  She says John is now ‘upping the ante’ against brother Chris.

John asked the High Court to subdivide their land 85:15 with no compensation; implementation of the 2009 agreement, he claimed.

Associate judge Paulsen ruled there was nothing in the 2009 agreement setting out any formula for future subdivision of the land. In 2009, their primary concern was to avoid any tax liability.  A Property Law Act court-ordered partition some thirteen years later requires a full court hearing supported by detailed valuations, Judge Paulsen ruled.

Ryan v. M & E Ryan & Sons Ltd – High Court (25.08.22)

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Ormiston Rise: Jackson v. Grant

With unsecured creditors of Auckland’s failed Ormiston Rise development currently claiming $20.9 million, liquidator Damian Grant questions why receivers from Calibre Partners haven’t closed their files and quit.  US funders claiming as secured creditors have been paid in full and the receivers’ job is over, Grant claims.

Plans for Ormiston Rise were broadcast in a blaze of publicity with nearly 800 new homes promised, primarily for first home buyers. Funding was provided by US financiers: Arena Alceon NZ Credit Partners LLC.  What was intended to be a four-stage project started in early 2020. Some fifteen months later, Arena pulled its finance with only stage one civil engineering works nearly complete and stage one houses under construction.  Receivers from Calibre Partners took control on behalf of Arena. They sold off the balance of the land in 2021 to a company related to Arena: The Neighbourhood South Ltd.  Mr Grant claims the $198,000 sale price cleared all of Ormiston’s secured mortgage debt.  The receivers’ job is over, he says.  Remaining company assets including all cash should be handed over to him as liquidator for the benefit of unsecured creditors, he says.  Calibre Partners refuse; the level of unpaid secured debt is not finalised, it says.

The High Court was told legal action is under way to determine how much Arena can claim under its mortgage.  The liquidator claims $18 million claimed by Arena as a ‘final interest payment’ is in reality a ‘success fee’ payable only on successful completion of the development.  The liquidator questions whether ‘preservation costs’ incurred by Calibre Partners are also covered by Arena’s mortgage.  Evidence was given that Arena agreed to stump up an extra $30 million so Calibre Partners could complete partly finished homes at Ormiston and get money from purchasers buying off the plan.

Whether either of these amounts is recoverable by Arena as part of its secured debt is yet to be decided.  In the interim, both Arena and Calibre Partners were ordered to make available to the liquidator all details of the receivers’ construction budget, plus copies of the project’s monthly progress certification and quantity surveyor reports.

Jackson v. Grant – High Court (24.08.22)

22.151

Undue Influence: re estate of Vilmos Gaitz

Vilmos Gaitz arrived in New Zealand as a teenager fleeing the abortive 1956 Hungarian uprising against Russian domination.  On his death in 2021, a daughter of his first marriage successfully challenged benefits Vilmos’ fifth wife Gizella claimed under his will.  Gizella was described as controlling, isolating Vilmos from his family and scheming to take control of his assets.    

The High Court was told of changes to Vilmos behaviour after his 2009 marriage to Gizella.  The two met when Vilmos travelled back to Hungary for a holiday. They were distantly related.  Soon after their marriage, Vilmos transferred a half interest in his Panmure property to Gizella and then in 2011 changed his will to give her a life interest in his estate on death with the balance of his estate to go to his three children on her death.

Evidence was given by daughter Bilynda that after Gizella arrived in New Zealand regular contact with her father was curtailed dramatically.  Gizella refused access to the house, would not answer the phone and declined all invitations for her and Vilmos to attend family gatherings.  Bilynda and her daughter got to see Vilmos in late 2014 after he made an urgent phone call.  They found Vilmos distressed, claiming Gizella was stealing all his money and threatening divorce unless he transferred all his assets into her name. They were told Gizella was sending his money to her adult children living in Hungary.  Bilynda took her father to the bank to have Gizella removed as signatory to his bank account, learning later that Gizella had taken Vilmos back the next day to be reinstated as signatory.  The 2014 meeting between Bilynda and Gizella ended in a screaming match with Gizella throwing a chair at Bilynda’s daughter.           

Discovering in 2019 that Gizella had travelled to Hungary alone on holiday, Bilynda tried to contact her father, failing to find him at his Panmure home.  Nearly two years later, Bilynda learnt he was in a rest home with instructions from Gizella that family members were not to have contact and not to be told when Vilmos’ died.  On her father’s death, Bilynda found there was a 2015 will in existence that left all assets to Gizella.  Bilynda challenged the will.

Justice Lang ruled the 2015 will invalid on grounds of undue influence by Gizella.  She deliberately isolated Vilmos from his family to advance her own financial interests, he said.  Justice Lang was critical of the lawyer drafting Vilmos’ 2015 will who took instructions from Vilmos while Gizella was present and who did not speak to Vilmos alone. Evidence was given that Gizella arranged for a friend to also be present at the lawyer’s office, supposedly to provide English/Hungarian translation for Vilmos benefit.  Bilynda told the court Vilmos spoke English, it was Gizella who was not fluent.

Gizella did not attend court to defend Bilynda’s claim. Striking down the 2015 will leaves the earlier 2011 will as Vilmos’ final will.  Gizella receives a life interest in his estate; on her death Vilmos’ children inherit a half share of the Panmure home.

re Estate of Vilmos Gaitz – High Court (24.08.22)

22.150

Joint Venture: Carrington Resort v. van den Brink

Theo van den Brink walked away from a proposed joint venture with Shanghai-based interests who control Carrington Resort at Northland’s Matai Bay leaving a planned Ngawha coffee plantation part-finished.  He was ordered to account for money used, hand over all equipment and was held liable by the High Court to pay damages.

In 2021, Mr van den Brink was in negotiations with Carrington over plans for a project germinating green coffee beans to produce seedlings for planting.  Mr van den Brink described himself as having coffee plantation expertise from his time in New Caledonia.   Financial projections on offer were tantalising: after an initial three years of negative cash flow, projections offered positive cash flow of $6.6 million from year four through to $34.8 million from year eleven.  No profits ever eventuated.

The High Court was told Carrington advanced $80,000 cash to Mr van den Brink in late 2021 and purchased equipment at his request costing close to $700,000.  Carrington baulked at requests for further funding, questioning a lack of progress. Mr van den Brink had agreed to propagate up to one million seeds ready for planting out within one year. Carrington representatives were trespassed from the project site when attempting to meet with Mr van den Brink. It was all downhill from there.

Mr van den Brink said the project was on hold until such time as their relationship was ‘normalised’ with signature of a formal joint venture agreement.  To date, their business relationship had been set out in a signed ‘memorandum of understanding’ in which Carrington agreed to provide funding taking a proposed 60 per cent stake, Mr van den Brink to provide expertise and having a 35 per cent stake.  The High Court was to later rule it was irrelevant that no formal joint venture agreement was ever signed.  Business proceeded as if one were signed.

Carrington obtained a High Court order freezing Mr van den Brink’s project bank account and a further order that Mr van den Brink hand over all equipment purchased.  After another High Court hearing that Mr van den Brink chose not to attend, Justice Tahana ruled that Mr van den Brink: breached fiduciary duties owed Carrington (by failing to account for money used and refusing to hand over equipment paid for by Carrington); and made statements both negligently and in breach of the Fair Trading Act (with his representations of expertise in procuring and germinating coffee seeds).  Calculation of damages was deferred for a further court hearing.  Carrington says it has been left to absorb full cost of the failed project after Mr van den Brink walked away.

Carrington Resort Jade LP v. van den Brink – High Court (23.08.22)

22.149

Property Sale: Mao v. Singh

 Xieyan Mao sold an Auckland property ripe for redevelopment supposedly free of any tenancy then argued it was the purchaser’s problem to remove a fixed term tenant.  Legal argument that purchaser Hargun Singh was the one in breach of contract failed in the Court of Appeal. 

The court was told Ms Mao sold her Te Atatu property on Yeovil Road for $1.55 million in August 2020.  There was a tenanted dwelling on site.  The property was advertised as ripe for development with resource consent for up to seven townhouses.  Neither the sale agreement nor the real estate advertising made reference to a sale being subject to the existing tenancy.  Mr Singh gave evidence that he was aware the property was tenanted when he viewed it, but assumed tenants would have vacated by settlement date. Ms Mao said the real estate agent was told there was a fixed term tenancy expiring in July 2021 and she claimed Mr Singh had been told.

Emails flew between lawyers on settlement date.  Ms Mao said Mr Singh had to pay the full price and the tenancy was his problem.  He said he had the money and was ready to settle, but would not pay until Ms Mao removed the tenants.  Ms Mao said Mr Singh being ‘ready’ to settle was not enough; the contract required formal offer to pay and since Mr Singh had not done this he was in breach of contract and she was legally justified in cancelling the sale.

The Court of Appeal ruled it was futile for Mr Singh to formally tender payment; Ms Mao herself was not in position to transfer Yeovil Road free of the tenancy and had made it clear she was not going to do so. It was Ms Mao who was in breach of contract, the court ruled.

Ms Mao was ordered to perform the contract as agreed. There was evidence that the tenants might have packed up and left if paid $18,000 compensation for an early end to their fixed term tenancy.

Mao v. Singh – Court of Appeal (22.08.22)

22.148

Will: re Meyer

Instructions to be acted on after death entered on a Microsoft Excel spreadsheet were validated as a will by the High Court.

The Wills Act prescribes detailed technical requirements as to signature and witnessing for a will to be valid.  A court may ignore these technical requirements provided intentions are clearly expressed.

The High Court was told Hendrik Jeffrey Meyer was unable to leave his Auckland home during the covid-19 pandemic.  Suffering from aplastic anaemia, he was at high risk of bleeding and infection because of his bone marrow’s inability to produce new cells.  He prepared a spreadsheet on his home computer, detailing how his assets were to be divided on death.  Daughter Samantha was entrusted with computer access.  This Excel document was never formally reconstructed as a will satisfying technical requirements of the Wills Act.  He died in February 2022.

On Samantha’s application, Justice Lang approved the Excel spreadsheet as being her late father’s valid will.  The High Court was told their family home was owned jointly with his wife; she gained full ownership by survivorship on her husband’s death.  The balance of his estate, valued at less than $70,000, was distributed according to instructions in Mr Myer’s spreadsheet.

re Meyer – High Court (19.08.22)

22.147

Passing Off: Pure Dew Water v. Pantranz

Auckland water bottler Pure Dew claims distributors Kyle and Selina Paniora have stolen Pure Dew customers and have been selling their own rival product in Pure Dew bottles.  The two were ordered to provide Pure Dew with a list of all customers sold water in the three months prior to an April 2022 cancellation of their distribution rights and Pure Dew was given High Court authority to contact these customers direct.

Belinda and Tony Gillion’s bottled water business has operated for nearly three decades, using the trademark Pure Dew since 1996. Product is sold through supermarkets and direct to homes and businesses.  Sales are also made through franchised distributorships.

The High Court was told Kyle Paniora and Selina Paniora, also known as Selina Rutherford, purchased two Pure Dew distributorships from the then franchise holders: a North Shore and central Auckland distributorship in 2016 for about $55,000; and a south Auckland distributorship in 2019 for $150,000.  In early 2022, staff at Pure Dew’s East Tamaki processing plant noticed that some of the bottles returned for refilling by the Panioras had different coloured tops from those used by Pure Dew.  This, coupled with the fact that the numbers of bottles they returned for washing and refilling had recently reduced by about fifty per cent, led Pure Dew to suspect the Panioras were running a parallel rival business using Pure Dew bottles. A flyer distributed by the Panioras to customers advertising future deliveries of their own product branded as OraWai Pure Still Water confirmed suspicions.  Pure Dew sued, claiming damages.

In a preliminary High Court hearing, Justice van Bohemen ruled there was an arguable case that the Panioras had passed off their own product as Pure Dew.  They were ordered to disclose their customer lists.  Pure Dew was permitted to contact these customers, advising them product recently sold in Pure Dew branded bottles may not have matched Pure Dew’s exacting standards.  Expert evidence identified that Pure Dew’s product is processed to a standard of less than one milligram of dissolved solids per litre; similar tests of the OraWai product identified up to nine milligams of dissolved solids per litre. Pure Water distils its product; OraWai uses filtration.  Pure Dew believes between 200 and 300 of its customers were affected.

Pure Dew Water Company Ltd v. Pantranz Ltd – High Court (17.08.22)

22.146

Gulf Harbour: Inert Holdings v. Gulf Harbour Marine Village

It was a lawyers’ delight: the original developer of Gulf Harbour subdivision on Auckland’s Whangaparoa Peninsular was wound up at a loss; its supposed successor folded owing Westpac money; and then developer Inert Holdings Ltd boldly argued it was now the designated Gulf Harbour developer holding ‘super-voting’ rights with power to take control of disputed marina berthing rights.  No it didn’t, the Court of Appeal ruled.

Inert Holdings Ltd and related company Western Arm Marina Ltd are both controlled by Whangaparoa resident Ian McKay.  In 2014, Inert Holdings purchased 3.7 hectares of Gulf Harbour land and with Western Arm constructed 23 marina berths as part of a residential subdivision.  Mr McKay’s right to allocate berthing rights is disputed by the Gulf Harbour residents association.  To push his point, Mr McKay argued his companies had inherited the status of Gulf Harbour project developer and ‘controlling member’ giving them super-voting rights under Gulf Harbour’s constitution enabling him to outvote everyone else.   

Lawyers blew dust off some ancient files as they dug into the history of Gulf Harbour.

Gulf Harbour’s original developers in the mid-1990s were Singaporean interests trading as Gulf Harbour Development Ltd.  A residents’ association was created as part of the project.  Each property owner has one vote, but the project developer, and its successors, hold super-voting rights which enable it to outvote all residents.  This was necessary to block objections from current residents as Gulf Harbour was developed in stages.  Singapore developers bowed out in 2008, their company liquidated with unsecured creditors receiving just under 26 cents in the dollar. Included as an unsecured creditor was Singapore project finance of some four million dollars not recovered from land sales.

A November 2012 rewrite of the Gulf Harbour constitution saw a company called Gulf Harbour Marlin Ltd described as the project developer and ‘controlling member.’  This was a mistake.  There was never any residents’ vote to install Harbour Marlin as ‘controlling member.’ In any event, Harbour Marlin was later removed from the companies register in 2016 after a three year receivership leaving Westpac out of pocket; it financed this receivership to the tune of $72,000 for a nil return.

Gulf Harbour residents’ association owns the marina waterway.  To get voting control of residents’ association decisions about marina berths, Mr McKay said his companies now filled the role of ‘controlling member.’ Both the High Court and the Court of Appeal ruled that Gulf Harbour currently has no developer with overarching control of the project.  The land has been subdivided and sold.  Mr McKay’s companies are not carrying out the development of Gulf Harbour; they are carrying out a development within Gulf Harbour, the courts decided.  His project covers less than four per cent of Gulf Harbour land area.  He had no status as ‘controlling member’ to override resident rights to control marina allocations, the courts ruled.

Inert Holdings Ltd v. Gulf Harbour Marine Village Residents’ Association Inc – Court of Appeal (15.08.22)

22.143