Insurance: Saijad v. Tower Insurance

 Owners of a tenanted south Auckland property failed in their fire insurance claim because of a material non-disclosure when taking out the policy, failing to tell Tower Insurance the house had been partitioned into two separate tenancies occupied by two separate families.

A Papatoetoe rental owned by Saijad Ali Maqbool and his fatherwas severely damaged in 2013 following a kitchen fire.  Tower refused to pay.

The general rule with insurance law is that those seeking cover must disclose all relevant information material to the risk.  Only then, can insurers determine the risk and set the premium.  The questions asked in an insurance proposal form are not the full extent of information required; any other relevant information must be disclosed.  Policies can be cancelled following any material non-disclosure.

This rule has caused much anger and heartbreak amongst property owners; only when a claim is made does an insurer carry out due diligence on the risk and consider voiding the policy – often for reasons which a typical property owner would never consider relevant to an assessment of the risk. The high water mark for insurance companies is a century-old legal case in which an English judge ruled an insurance contract could be cancelled after a claim was made because the insured failed to disclose he was not born in England.

Following the Papatoetoe house fire, Justice Lang ruled the owners did not disclose all material information.  The house had been divided into two residential units with a partitioned hallway and creation of a separate kitchen.  The two areas were separately tenanted, occupied by two different families.  One of the tenants had arranged for the work to be done, with the consent of the property owner.

There was evidence from the insurance industry that unconsented property alterations increase claim costs.  Here, the addition of a second kitchen and the lack of proper fire proofing meant a higher risk of fire and the likelihood of greater damage resulting from any fire.

Alterations to the property should have been disclosed to Tower at the very latest when the annual fire policy came up for renewal, Justice Lang said.

Saijad v. Tower Insurance Ltd – High Court (28.03.23)

23.039

Mining: LMCHB Ltd v. Buller Coal

Piqued at losing a USD40 million claim in the Supreme Court by a narrow 3:2 margin, L&M Holdings then claimed Bathurst Resources subsidiary Buller Coal was instead liable to pay, only to lose a second time.  Buller’s liability as guarantor had not crystallised, the High Court ruled. USD40 million was owing, but not due.   

In hard fought litigation spread over six years and multiple court cases, L&M Holdings (now known as LMCHB Ltd) has been chasing what it claims are instalment payments due from Bathurst on a USD160 million sale in 2010 of West Coast coal mining rights.

Bitterly disappointed that a Supreme Court ruling saw it wave goodbye to the final USD40 million claimed, L&M Holdings reversed course and sued Buller Coal which had guaranteed Bathurst’s obligations on the USD160 million deal.

The 3:2 split in the Supreme Court turned on interpretation of a series of contracts between L&M and Bathurst negotiated over several years while Bathurst was obtaining resource consents to start coal extraction, negotiating rights of access with Department of Conservation and seeking finance for the project.  The majority of judges in the Supreme Court ruled payment of the last USD40 million did not fall due so long as royalty payments were being made on coal extracted. This suited Bathurst; it had closed down its West Coast operations.  With coal no longer being mined, no royalties were currently payable but equally payment of the final USD40 million was suspended.  L&M was enraged.  In its view, Bathurst had agreed upfront to payment of a full USD160 million but now with its short-payment of the agreed price had effectively passed back to L&M the commercial risk of mining on site becoming uneconomic.

In the High Court, Justice Isac said terms of Buller Coal’s guarantee held it liable for money owing by Bathurst.  But any money ‘owing’ changed over time as a result of the extensive series of contracts negotiated between L&M and Bathurst. Since the Supreme Court had ruled a USD40 million balance of the purchase price owed by Bathurst was not due because of the current royalty agreement, there was no present obligation by Bathurst to pay the USD40 million demanded.  Since Bathurst was not liable, Buller Coal was not liable as guarantor.

The court was told periodic royalty payments were earlier agreed by L&M to temporarily assist Bathurst with its then cash flow difficulties whilst seeking to raise finance for the project.

LMCHB Ltd v. Buller Coal Ltd – High Court (27.03.23)

23.038

Compensation: Cooper v. Hastings District

 With 2.76 hectares of her land in Howard Street Hastings re-zoned residential in 2019, Karen Cooper was entitled to compensation at residential value for that part of the land compulsorily taken for roading and stormwater.  Hastings Council said compensation should be less, assessed on its former rural zoning.

When private land is taken for public works, the Public Works Act requires payment of ‘full and fair’ compensation. Hastings Council said since the land taken for subdivision infrastructure was previously zoned for cropping, viticulture and orchards it should be valued as such.

In the High Court, Justice Cooke ruled the zone change was independent of subsequent roading and stormwater requirements.  By changing land use zoning to residential, Council was enabling private developers to carry out a residential subdivision. Public works involving roading and stormwater did follow re-zoning but were not ‘caused’ by re-zoning.  Compensation for land taken should be assessed on residential value, being its value at the time taken.  The difference in value was not disclosed.

Separately, Hastings Council argued without success that no compensation should be paid at all; the increased value accruing to Dr Cooper’s land after being re-zoned residential more than offset the value of that part of the land taken for public works.  She had suffered no loss, Council said.

Re-zoning land, by itself, is not a ‘public work,’ Justice Cooke ruled.  Any increase in value arising from re-zoning could not be set off against compensation due for taking part of that land for public works.

Cooper v. Hastings District Council – High Court (24.03.24 & 3.05.23)

23.037

Restraint of Trade: Colville v. Colville

Suing his brother alleging he welshed on an agreement not to go into competition, Mathew Colville is in court seeking detail of what he claims is his brother’s backdoor buy into a rival building franchise disguised as a personal loan.

Mathew Collville bought out his brother Adam’s share of their West Coast GJ Gardiner housing franchise.  Adam agreed not to set up in competition; a common commercial arrangement justified as protecting the existing business’ customer base.

Mathew alleges brother Adam then turned around and bought into a West Coast Stonewood Homes franchise at a cost of $200,000, in breach of their agreed restraint of trade.  This involved doing a deal with Stonewood’s new West Coast franchise holder Peter Bright, Mathew alleges.  Mr Bright is resisting disclosure of any deal.

Adam says payment of $200,000 was a personal loan from him to Peter Bright.  Meanwhile Stonewood Homes publicity material in June 2021 proclaimed its delight in welcoming both Peter Bright and Adam Colville as Stonewood’s ‘newest’ franchise holders.

In the High Court, Associate judge Lester ordered Mr Bright to disclose any documents concerning financial details of Adam’s involvement in Stonewood Homes.  Disclosure of computer records was also ordered.

Colville v. Colville – High Court (24.03.23)

23.036

Money Laundering: re Qian DuoDuo Ltd

Internal Affairs scrambled to restore Auckland money remitter Qian DuoDuo Ltd to the Companies Office register after the company quietly disappeared in the middle of a criminal prosecution charged with breaches of money laundering legislation.  

Owned by husband and wife Zenhua Qian and Ye Hua, Qian DuoDuo Ltd has been under investigation since 2015 for alleged breaches of the Anti-Money Laundering and Countering Financing of Terrorism Act.  The two shareholders and their company came under suspicion following failures to report a significant number of transactions totalling close to $100 million.

Their business traded under the name Lidong Foreign Exchange.

In 2018, Qian DuoDuo Ltd was ordered to pay a civil penalty of $356,000 for breaching the Act.  An Internal Affairs criminal prosecution is underway.

The High Court was told the company was struck of the companies register in August 2022 after it failed to provide Companies Office with detailed documents requested.  Internal Affairs realised two working days after the Companies Act striking-off notice period expired that Qian DuoDuo was disappearing.  It was too late; Companies Office refused to reinstate the company.

In the High Court, Associate judge Taylor ordered reinstatement over objections from Qian DuoDuo’s shareholders.  They said it was pointless continuing a criminal prosecution against their company.  It cannot be sent to jail.  It cannot pay a fine; it had no money when struck off, they claim.

Reinstatement enables Internal Affairs to put the company into liquidation if it does not pay any fines imposed and then have a liquidator investigate what happened to company assets.

The High Court was told both Mr Qian and Ms Hua also each face criminal prosecutions for breaches of the Act.

re Qian DuoDuo Ltd – High Court (23.03.23)

23.035

Creditor Freeze: re Black Dog Consulting Ltd

Intended to provide a short breathing space keeping creditors at bay allowing a decision on whether a struggling business is viable, Wellington insolvency specialist Heath Gair instead got High Court approval to downsize a contracting business under the umbrella of an extended creditor freeze using Companies Act voluntary administration rules.

Lobbying by insolvency practitioners saw a system of voluntary administration included in company law.  Too many companies were pushed under by creditors when there was a chance they be turned around, they said.  A short-term freeze on creditors rights would allow an assessment of a company’s likely future.  Voluntary administration legislation allows for a twenty day freeze, with creditors then given a chance to vote at a so-called ‘watershed’ meeting; either approving any restructuring proposal put up or instead pushing the business into liquidation.

The High Court was told Peter Jones put his Wellington consulting company Black Dog Consulting Ltd into voluntary administration in February 2023. Black Dog’s net profit of some $894,500 for the 2020 financial year was followed by a $74,300 loss the following year.  Liquidity was maintained by failing to pay PAYE, GST and income tax.  Inland Revenue is owed $548,000.       

Appointed as Black Dog administrator, Heath Gair told the High Court that no recommendation could be made to creditors within the required twenty days, leading to likely liquidation of Black Dog and loss of employment for the sixteen staff employed.  But if given a further ninety days he could slim down the company, he said.  Mr Gair proposed selling off surplus vehicles and equipment and pro-actively chasing two large outstanding invoices.

Justice McQueen extended the creditors freeze out to June 2023 with the proviso that any aggrieved creditor could challenge this extension.

re Black Dog Consulting Ltd – High Court (21.03.23)

23.034

Patent: Thaler v. Commissioner of Patents

Artificial intelligence cannot be an ‘inventor’ registering a patent for a novel product, ruled the High Court in a landmark case.  An inventor must be a person.  The immediate consequence is that any product developed solely by artificial intelligence cannot be patented.

Dr Stephen Thaler took a test case to the High Court seeking a patent for his new type of food container.  Designed to hold liquids, it has fractal walls, allowing it to interlock with other containers.

He has developed an AI system which he calls DABUS: Device for the Autonomous Bootstrapping of Unified Sentience.  When submitting the patent application, Dr Thaler said the final product was the result of unsupervised generative learning by DABUS with no contributions from himself or anyone else.  Naming himself or any other person as the inventor would leave the patent open to challenge.

The Patent Act does not specifically state that an inventor has to be a person, Justice Palmer said.  But New Zealand patent legislation in its various guises since 1860 has been predicated on the assumption that the inventor is a person.  The most recent patent legislation in 2013 was enacted at a time when the existence of and capabilities of artificial intelligence were known.

Any expansion of the definition of ‘inventor’ to include artificial intelligence is for parliament to decide, Justice Palmer said. The UK government has decided not to expand the definition when reviewing its patent legislation, he noted.

The court was told Dr Thaler has named DABUS as the inventor in similar patent applications in the United Kingdom, the United States and Australia.  In each case, patent registration was refused. Dr Thaler is based in the US.

Thaler v. Commissioner of Patents – High Court (17.03.23)

23.033

Charity: re Tikipunga Children's Home

Charitable trusts live forever.  When their charitable purpose has ended, they have to be legally killed and buried; now required for a Whangarei children’s trust set up in 1925 but now defunct. 

Charitable trusts differ from the hundreds of thousands of discretionary family trusts existing in New Zealand.  Charitable status requires all trust income and assets to be applied for the benefit of a defined but wide sector of society.  Too narrow a focus and the purpose is no longer charitable.  The focus of family trusts is typically extended family; too narrow to be a charity. These family trusts are invalid if they do not have a specified limited life, a hangover from English legal rules which prohibited malign testators ruling from the grave attempting to tie up their assets forever.  But charitable trusts live forever, on the assumption they provide a public benefit. 

The High Court was told what became the Tikipunga Protestant Children’s Home was established in 1925 with the purchase of land in Corks Road by Mr and Mrs Frederick Seymour Potter.  An orphanage was subsequently built on the site with funds provided by both the Potters and the local council.  The original trust deed stated the orphanage was for the benefit of ‘orphans and destitute children who must be brought up in the protestant faith.’  The orphanage closed in 2012, at that time the last privately-run establishment of its type in New Zealand.

A subsequent court-approved change to its trust deed allowed the Trust to sell off its land and distribute most of the $4.8 million sale proceeds to charities around Northland supporting disadvantaged children. As acknowledgement of the Potters pioneering work, a playground was built in Whangarei for local children to enjoy; known as Potter Park.  Now, $22,937 is left in the kitty.

David Reyburn, secretary of the Trust, administered the last rites getting a High Court order that the Trust be put into liquidation with any surplus after liquidation costs going to another charity: CCS Disability Action.

re Tikipunga Protestants Children’s Home – High Court (17.03.23)

23.032

David Reid franchise: Swann v. Canterbury Design & Development

Christopher Swann’s sale of part interest in his Canterbury David Reid Homes franchise sees a dispute with new business partners over payment of his $50,000 working capital contribution.

The High Court was told Swann agreed in November 2020 to sell a two-thirds interest in his David Reid franchise to Aaron Hooper and Carl Fordyce.  Canterbury Design and Development Ltd was set up to operate the restructured business with each to hold five hundred shares and with each to be represented on the board. Two years later there was an argument over whether Chris Swann had paid in a promised $50,000.

Evidence was given of a January 2022 email exchange after which a $50,000 invoice was paid relating to a Bishop Street build in St Albans, Christchurch.  Bishop Street was not a Canterbury Design project.  Mr Swann said the $50,000 he paid was his Canterbury Design working capital contribution; Mr Fordyce said it was payment of an unrelated debt and Mr Swann’s promised $50,000 working capital for Canterbury Design is still outstanding. Mr Swann took issue with the fact that he had yet to be allocated his promised one-third shareholding in Canterbury Design and that his chosen nominee as director had not been appointed to the board.

Associate judge Lester said the shareholding and directorship rights were acknowledged in a 2020 shareholders agreement.  These rights were entirely separate from each promising to put in $50,000 working capital.  The required $50,000 payment was not payment for an issue of shares.

Disputes between shareholders over Mr Swann’s allocation of shares and appointment of a director were governed by an arbitration clause in their shareholders agreement.  First stop for the warring shareholders was arbitration, Judge Lester ruled.  This arbitration will most likely also sort out the provenance of Mr Swann’s claimed payment of $50,000 working capital, he said. Failing that, back to court.

Swann v. Canterbury Design and Development Ltd – High Court (16.03.23)

23.031

 

Further Note: Prior to its sale in 2020 to Canterbury Design, the David Reid Homes Canterbury franchise was owned by Mr Swann through his company First Design & Build Ltd.  A Companies Office search discloses that some ten months after this sale, First Design was in liquidation insolvent owing secured creditors $1.2 million.

Liquidation: re Tiny Town Properties Ltd

They thought they were buying houses, but in court it was legal argument about sale of goods when New Plymouth-based Tiny Town Projects Ltd went into liquidation insolvent leaving partly finished relocatable houses in its yard.  The High Court ruled buyers were secured creditors having an equitable lien over each of their incomplete houses. 

Tiny Town went into liquidation in November 2022. Director and sole shareholder James Cameron is bankrupt.  Six customers were left in the cold; three had paid in full for relocatable homes with construction complete but awaiting a council code of compliance certificate and three had partly paid for houses under construction.  Tiny Town sold custom-built relocatable homes constructed on a steel trailer ready for transport to a site of the buyer’s choice.  Prices started at just under $156,000.

Tiny Town liquidators asked the High Court for a ruling on each house buyer’s status.  If treated as unsecured creditors they would get nothing; no house and no refund.

Justice Venning ruled buyers could not claim ownership of the house each had signed up for.  Being built on a trailer meant it was a sale of goods.  Ownership of each house did not pass until the house was ‘completed.’ The build contract stated completion did not occur until a code compliance certificate was issued.

But an equitable lien gave each purchaser the status of a secured creditor, Justice Venning ruled.  Each house under construction was clearly identifiable as being built for a specific customer.  Each instalment payment by each customer gave that customer an equitable claim over their house.

As a result, each was allowed to uplift their house from the yard after paying for any extra work done by Tiny Town not covered by payments previously made.

re Tiny Town Projects Ltd – High Court (14.03.23)

23.030

Eric Watson: Kea Investments v. Wikeley Family Trustee

 

It is just another Eric Watson fraud, designed to hamper recovery of GBP129 million damages due following an earlier fraud, Sir Owen Glenn alleges.

After nearly a decade attempting fruitlessly to recover his money following an investment fraud orchestrated by Watson, Glenn now alleges Watson and his associates have created a bogus US claim against his investment company Kea Investments seeking to extort USD136.2 million.

Glenn claims the conspiracy was hatched in a UK prison where Watson was briefly imprisoned in late 2020 for contempt of court after his failure to disclose assets.

The High Court was told Kea Investments is embroiled in US litigation with a Kentucky court ordering payment of USD136.2 million for breach of a ‘Coal Funding and JV Investment Agreement’ dated October 2012.  Eric Watson’s signature appears as witness to the agreement between NZ-based company Wikeley Family Trustee Ltd and Kea.  Kea says the contract is bogus.  It says it never signed any such agreement, never received notice of the intended Kentucky court action where judgment was entered against by default and claims the whole arrangement is an attempt either to wind up Kea or to extort money from the company.

Kea’s application to reopen the Kentucky case was unsuccessful.  Notice of the court proceedings was properly served on Kea, the US court ruled.  Kea says notice was served on its British Virgin Island’s agent but not passed on.      

Adding to Kea Investments’s woes are activity by a Rizwan Hussain who Kea says had Kea’s genuine directors removed from the record, replaced by so-called ‘protective directors’ who then supposedly agreed to settlement of the Kentucky court case at a price of USD100 million.  Kea says Watson and Hussain met in prison and that Hussain has a UK track record of using fraudulent schemes to hijack companies.  In 2022, the English High Court described Hussain’s manipulation of Kea directorships as being a legal absurdity and ruled his actions were abusive proceedings conducted for the benefit of Eric Watson.  These proceedings included legal action by Kea initiated by the ‘protective directors’ against both Sir Owen Glenn and lawyers who acted for him in the earlier litigation where Watson was held liable for fraud.

In the New Zealand courts, Kea sued to block enforcement of the disputed Kentucky court judgment.  As the successful Kentucky litigant, Wikeley Family Trustee is chasing funds in the US held by Kea.  It said the New Zealand courts have no jurisdiction.  This is a dispute in the US courts.      

Justice Gault said Wikely Family Trustee Ltd is a New Zealand registered company and New Zealand courts have jurisdiction.  Kenneth David Wikeley controls Wikeley Family Trustee.  He lives in Queensland.  Temporary orders were imposed to stop enforcement of the Kentucky court judgment.

It is back to court later to decide on validity of the disputed 2012 Coal Funding agreement.

Kea Investments Ltd v. Wikeley Family Trustee Ltd – High Court (10.03.23)

23.029

Undue Influence: Gorringe v. Pointon

 

‘Judy bullied me to do it:’ an anguished complaint by a 97 year old widow or words spoken in mischievous jest, the Court of Appeal was asked to decide.  The outcome would decide half share of Joan Gorringe’s $1.5 million estate.

Joan died in 2019 aged 101 years.  Her final will dated in 2016 leaving all to daughter Judith was challenged by grandchildren Romiley and Ashley, children of Joan’s son Peter.  Peter had died suddenly of an aneurysm in November 2015.

The Court of Appeal was told Peter’s sudden death triggered a flurry of legal activity as extended family looked at the status of their then current wills.  Peter’s sister Judith was to later give evidence that their mother Joan indicated she also wanted to update her will.  Changes made led to allegations of undue influence by Judith.

Nine days after Peter’s death in 2015, Joan signed a new will having the effect of disinheriting Peter’s children who would otherwise have received the half share destined for their father.  Joan left the balance of her estate to Judith after cash gifts of $50,000 to each of her grandchildren.  Four months later, in 2016, Joan signed a further will which provided that should Judith die before her mother then Judith’s share of Joan’s estate would go in full to Judith’s husband.

The court was told of a conversation Joan had with Peter’s children shortly after Peter’s death.  They said Joan told them she had been bullied by Judith into changing her will, cutting them out.  They took legal advice, being told they had no right to see Joan’s will whilst she was alive and had to wait until Joan’s death to see what her will said.  Three years after Joan’s death, extended family were in court.

Judith denied she had exercised any undue influence over her mother and said that if her mother spoke of being bullied into signing a new will it was merely an example of her common teasing practice of deflecting acknowledgement of a decision she had made.  There was no evidence from rest home staff of Judith having bullied her mother.

The Court of Appeal said it is improbable that comments by Joan of being bullied into signing were mischievous.  While family are sometimes told in advance terms of a potential inheritance, it is not common to tell someone they have been disinherited.  It is more probable than not that the 2015 and 2016 wills were made as a result of Judith’s undue influence, the Court of Appeal ruled.  Joan’s age, the fact the 2015 will was drafted before Peter’s funeral, the fact Joan had become increasingly reliant on Judith to handle her personal affairs plus the lack of independent legal advice all indicated undue influence.

The 2015 and 2016 wills were ruled invalid, resulting in Peter’s children inheriting the half share of Joan’s estate that their late father Peter would otherwise have inherited.

Gorringe v. Pointon – Court of Appeal (7.03.23)

23.028

Defamation: Cato v. Manaia Media

 

Ordered to pay $240,000 damages, Manaia Media could not claim its defamatory comments about lawyer Kristin Cato were justified on public interest grounds.  Comments in New Zealand Horse & Pony painting Ms Cato as acting in an unethical and unprofessional manner had no relevance to Manaia’s defence in court that it was acting in the public interest by questioning governance issues at Equestrian Sports New Zealand.  

Following a 2017 tour of Australia by a New Zealand equestrian team, complaints of unacceptable behaviour by some team members led to a private mediation.  Details have not been made public.  Ms Cato acted for the complainants.  The Australian tour and its consequences resulted in online discussion within the equestrian community about how the complaints were resolved.

The High Court was told Horse & Pony website published a December 2017 article which called into question both Equestrian NZ’s handling of the dispute and Ms Cato’s subsequent release of a media statement.  Horse & Pony claimed Ms Cato’s media release both breached confidentiality rules at the mediation and since it was not a general media release was designed to financially benefit a rival publication produced by her mother.

Ms Cato was awarded $240,000 damages by a jury, deciding the Horse & Pony comments defamatory. Justice Robinson was then asked to rule whether the article, even though defamatory, could be excused on public interest grounds.  Published statements, even if untrue, can be justified if they are on a matter of public interest and the published communication was made responsibly.

Equestrian NZ’s complaints procedure is a matter of general public interest, Justice Robinson said.  But no reference to Ms Cato was needed to further this discussion, he ruled.  The article did not need to mention her at all, either directly or indirectly.  Nor did it need to mention Ms Cato’s mother, he said.  Manaia did not need to include defamatory comments about Ms Cato in order to make public comment about the performance of Equestrian NZ.

Cato v. Manaia Media Ltd – High Court (3.03.23)

23.027

 

Post Judgment Note: In June 2025, Court of Appeal ordered a retrial, ruling there had been a miscarriage of justice in relation to Manaia Media’s ‘public interest’ defence.  Manaia was not permitted to introduce at trial evidence supporting this defence whilst, in contrast, Ms Cato introduced evidence on this point described by the Court as being irrelevant and unfairly prejudicial.

In addition, the Court set aside the $240,000 damages award as being excessive.  The Court suggested damages of $75,000 would be appropriate should Ms Cato succeed in her defamation claim at any subsequent retrial.

De facto director: re Delta Shared Services Ltd

Struck-off Cambridge lawyer Murray Osmond claimed to act as consultant only to Delta Shared Services Ltd, now in liquidation insolvent.  Ruled to be a ‘de facto’ director, he was ordered to front up in court explaining what had happened to business assets.

Part of a network of over twenty companies with Osmond in control at the apex, Delta Shared Services owes unsecured creditors some $252,000 according to the liquidators’ most recent report.  Sale of those company assets liquidators managed to track down left a small surplus of only $114 after costs.  With Mr Osmond refusing to assist liquidators in their search for further assets, the High Court ruled he had acted as a ‘de facto’ director and under Companies Act rules was required to front up.

Grahame Graig is named as sole director of Delta Shared.  Mr Osmond said he was not a Delta director, his role was solely to give advice to the company and to carry out some administrative tasks while Mr Craig was ill.   

Associate judge Taylor ruled Mr Osmond was acting as a director.  This followed evidence that Mr Osmond’s home address in Cambridge was also the company’s registered address and that he consistently acted on behalf of the company in negotiations with its landlord and in legal issues which followed. Keeping Delta Shared’s Companies Office file up to date while describing himself as being an ‘authorised person’ indicated he held relevant information about the company, Judge Taylor said. 

Mr Osmond was ordered to hand over to the liquidators all company records he held, to list all documents he is aware of held in other locations and to appear in court for examination on oath about his knowledge of company affairs.

re Delta Shared Services Ltd – High Court (24.02.23)

23.026

Bankruptcy: Bamber v. Official Assignee

Appeals to tikanga Maori did not override bankruptcy legislation allowing Insolvency Service to seize a Rotorua home, evicting Kathleen and Bruce Bamber following their bankruptcy on debts totalling $332,750.

The Bambers claimed it was contrary to Maori custom for them to be removed from their family home.  The two were bankrupted in 2019 on an unpaid debt of about $175,850 owed to the Tahorakuri Trust following their lease of land at Reporoa, near Taupo.

The High Court was told Tahorakuri had taken action to recover monies the Bambers received after subletting Reporoa.

The Bambers lived at Reporoa for a time, later shifting to Wingrove Road, in the Rotorua suburb Owhata.

Justice Harvey said Maori custom can form part of New Zealand common law, but does not override legislation.  The Insolvency Act is clear; bankrupts can be required to surrender any property they own to Insolvency Service for sale to pay creditors.

The Bambers claim to retain possession of their Wingrove Road home on grounds of tikanga Maori was misguided, Justice Harvey ruled.  Within Maoridom; your home or turangawaewae is your ancestral home, your house or whare is where you currently live.  Wingrove Road was where the Bambers currently lived, it was not situated on their ancestral tribal land.  And even if it were, the house could still be seized on bankruptcy by Insolvency Service, he said.

Bamber v. Official Assignee – High Court (23.02.23)

23.025

Real Estate Agent: Marsh v. Goldline Properties

Rules restricting real estate agents from benefitting in a property sale beyond their commission do not apply to subsequent deals done after a sale contract is signed, the High Court ruled in a dispute involving south Auckland property developer Glen William Cooper.

Mr Cooper seeks to cancel sale of four properties by his company Goldline Properties Ltd alleging Counties Realty agent Ian Croft did not disclose he was in league with the buyer, in breach of rules in the Real Estate Agents Act.

The High Court was told Maree Dawn Marsh signed up in mid-2020 to buy four vacant lots from Goldline Properties.  She intended to buy relocatable houses, selling after shifting them on site.  Ian Croft acted for Goldline, selling the vacant lots.  Some weeks later, Ms Marsh turned to Mr Croft for advice and assistance after realising she would not be able to get finance for the project.  She had previous dealings with Mr Croft who had acted as vendor agent when she bought other real estate.  A joint venture agreement designed to advance her new project was signed in July 2020 by Ms Marsh, first with Mr Croft personally and later with his company One Property & Co Ltd.  Goldline Properties gave notice cancelling sale of the four lots to Ms Marsh, stating Mr Croft’s failure to disclose his interest as purchaser as required by the Real Estate Agents Act gave it an automatic right of cancellation.

Ms Marsh registered caveats over the land to protect her rights as intending buyer.  Associate judge Lester ruled the caveats remain.  The conflicts of interest existing when a real estate agent purchases from a vendor client do not arise if the agent gains an interest in the property after the sale, Judge Lester said. 

After the four lots were sold in mid-2020, Mr Croft’s role as agent for the sale was at an end.  Ms Marsh said there was no intention when she purcashed that Mr Croft would be involved in the project.  He became involved as a joint venture participant only at a later date, she said.

Marsh v. Goldline Properties Ltd – High Court (23.02.23)

23.024

Island Grace: Island Grace (Fiji) v. Satori Holdings

Promoted during 2015 in a blaze of publicity, construction of Island Grace resort on Fiji’s Malolo Island now sees the original investors daggers drawn in both the New Zealand and Fiji courts fighting over liability for unpaid development costs with the resort now sold on and trading as Six Senses Fiji. 

Guests at Six Senses are offered luxury accommodation with a nod towards environmental issues, de rigueur for those seeking to justify their conspicuous consumption. No such candy coating for original investors in the Island Grace joint venture.  Secured creditor Sequitur Hotels Pty Ltd has recovered 46 cents in the dollar to date, according to the receivers’ most recent report.  Nothing on the horizon for unsecured creditors.  Further recoveries depend in part on recovery of disputed unpaid calls on capital contributions allegedly due from the resort’s original joint venture investors.  In the mix is New Zealand company Satori Holdings Ltd, corporate trustee of Andrew Griffiths’ family trust holding a 24 per cent stake in the Island Grace project.

The High Court was told their original joint venture was wound down in 2021 on evidence that the project was insolvent. The resort itself was on-sold to interests associated with Sequitur Hotels for FJD 24 million.  Sale at this price left a shortfall to joint venture creditors of FJD 29.7 million.  Satori Holdings share of this shortfall as joint venture participant came to at least FJD 6.1 million, Island Grace claims. 

Mr Griffith claims the 2021 resort sale was at a ‘gross undervalue’ and further claims any dispute about what Satori owes should be heard in Fiji courts.  In New Zealand, Associate judge Andrew put Satori Holdings into liquidation at Island Grace’s request.  Satori was deeply insolvent, he said.  It is a New Zealand registered company and the Island Grace joint venture agreement is governed by New Zealand law.  Courts in New Zealand have jurisdiction, he ruled.

Island Grace alleges Mr Griffith has been running down Satori’s assets in the face of its likely liquidation.  Island Grace raised concerns about Mr Griffith’s moves in Fiji to transfer Satori assets to a Delaware US-based company associated with his wife.

Island Grace is suing in Fiji both Satori and Mr Griffith alleging misrepresentation, misleading conduct and breach of contractual warranties in respect of their joint venture formation.

Island Grace (Fiji) Ltd v. Satori Holdings Ltd – High Court (17.02.23)

23.023

Defamation: Young v. Ross

Twenty years after agreeing to settle out of court a defamation claim alleging he was a credit risk, Hamilton accountant Philip Young filed further legal claims alleging Napier lawyer Philip Ross was in contempt of court and had breached their earlier agreement. Young’s new claims were struck out.

The High Court was told Mr Young sued in 1997, alleging he had been defamed by comments that he was a credit risk; comments made by Mr Ross both on the internet and directly to clients.  This claim was subsequently abandoned with an agreement filed in court in 2000.  Mr Ross agreed to take down the internet comments and both sides agreed to no further publicity.

Two decades later, Mr Young again sued, alleging Mr Ross authored a September 2018 internet blog post publicising events in Mr Young’s life subsequent to his earlier defamation claim.  This included: reference to Mr Young being struck off the register of chartered accountants in 2003 for misconduct, for conduct unbecoming an accountant and for professional negligence or incompetence following investigations into his involvement with a number of finance companies; reference to his bankruptcy in 2003; and reference to his 2006 conviction for assaulting a Hamilton court security guard while resisting being taken into custody after shouting down a community magistrate during a court hearing.  The High Court was told this 2018 blog post was taken down following Mr Young’s complaints, but then later re-posted by a third party.

The High Court ruled Mr Young was unable to enforce the 2000 defamation settlement agreement, even if it had been breached. Mr Young’s subsequent bankruptcy resulted in Insolvency Service taking over all legal rights he then held.  That included all rights contained in the settlement agreement.  It was for Insolvency Service, not Mr Young, to decide whether legal action be taken.

Separately, Mr Young’s Hamilton accounting practice Progressive Accountants Ltd sued claiming it had rights to enforce the 2000 defamation settlement agreement.  Progressive was not party to this agreement.  To sue as a non-party, the Contract and Commercial Law Act required Progressive to prove it was identified in the 2000 agreement by name or description as someone intended to benefit.  Progressive’s claim was struck out.  In what was a short four paragraph agreement between the two protagonists, Progressive was not specified as having any rights.

Young v. Ross – High Court (17.02.23)

23.022

Maori Land: Nicholas v. Ta Whaiti-A-Toi Trust

Described variously as a shack, a shed and a house, the dwelling on Maori freehold land in the North Island West Urewera mountains became the central focus in a tug-of-war between members of the extended Martin whanau.  Phyllis Nicholas, who renovated and maintained the house, was entitled to rights of occupation extending out to 2066 over the claims of other Martin whanau, the Court of Appeal ruled.  

The property was carved out of about one hectare of forestry by Phyllis Nicholas and her husband, the court was told.  At that time, the land was leased to the then Ministry of Forests.  Ms Nicholas’ wider whanau (the Martin family) are beneficial owners of the land, held by trustees as Maori freehold land.

Evidence was given that after 2003 her brother Reo Martin and his immediate whanau progressively took up occupation of the property, eventually forcing out Ms Nicholas.  By 2019, Reo’s son Danny was in occupation.  He was removed by police after threatening a cousin who had begun building next door.  Phyllis moved back.  Escalating disputes over rights to occupy saw trustees ask for a court ruling.  They wanted the building removed.

In 1989, Mrs Nicholas and her husband were given informal consent by one of the trustees to move a shed on to the property.  The two subsequently upgraded the shed; concreting the dirt floor, adding a kitchen and bathroom, and installing new windows and doors.  They and their immediate family were regular visitors, spending time at the property.  Extended whanau also stayed for periods.  Phyllis paid for power and insurance.   

With agreement of the trustees back in 1990, Ministry of Forests as the then leaseholder had issued a licence to occupy recorded initially in the name of Phyllis’ brother Frank, later amended to be in the name of the Martin whanau with Frank specified as the ‘responsible caretaker.’ 

The Court of Appeal ruled Phyllis Nicholas’ personal right of occupation arose from terms of her original agreement with trustees when negotiating with Ministry of Forests.  There was no dispute that she had complied with all the trustees’ requirements, including compliance with Whakatane District building requirements.  Having incurred costs in renovating and maintaining the property she was entitled to enforce terms of the occupation licence, giving her rights of occupation through to 2066.

Nicholas v. Te Whaiti-Nui-A-Toi Trust – Court of Appeal (16.02.23)

23.021

Insolvency Proposal: re Ian George Fistonich

Saved from immediate bankruptcy, the High Court approved a part payment scheme put up by Accent on Construction’s Ian Fistonich offering creditors six cents in the dollar over five years and the chance to potentially benefit from a disputed claim against Premier Legal Finance Limited Partnership, an entity associated with Graeme Halse of Auckland law firm Foy & Halse.   

Mr Fistonich is insolvent, under threat of bankruptcy on personal guarantees given to creditors of Auckland-based Accent on Construction Ltd.  Accent was propelled into receivership in November 2018 by Premier Legal claiming some $2.1 million.

Bankruptcies can be avoided with a part payment scheme of arrangement provided they are approved in each case by a majority of creditors holding between them 75 per cent of claimed indebtedness and court approval is given.

The High Court was told of a fraught creditors meeting in June 2022 where Premier Legal’s vote against the proposed scheme was disallowed.   Premier Legal claims to be owed one million dollars by Mr Fistonich personally.  If allowed, this vote against would have scuppered the scheme resulting in Mr Fistonich’s likely bankruptcy.  The meeting chair said Premier Legal’s debt was disputed; Mr Fistonich has filed legal proceedings against Premier Legal alleging negligence and breach of contract.

Evidence was given this claim against Premier Legal relates to mortgages held over a property owned by Zlato Trust, a trust associated with Mr Fistonich.  Premier Legal said this claim is purely speculative, lacks merit and is without substance.  Mr Fistonich is simply trying to prevent loss of his family home, it says.

Associate judge Taylor put on hold the bankruptcy application against Mr Fistonich subject to the agreed part payment scheme being honoured and proceeds of any successful claim against Premier Legal also being paid across to his creditors.

re Ian George Fistonich – High Court (8.02.23)

23.020

Bankruptcy: re Rebecca Kennedy

Bankrupt with creditors owed nearly one million dollars and also charged with fraud offences totalling some $1.7 million dollars Rebecca Kennedy, also known as Sarena Walker, has been banned for life from managing any business.

With Kennedy’s 2015 bankruptcy due to be discharged automatically in 2018, Insolvency Service asked the High Court to restrict her future commercial activities.  She was a significant risk to the public, Insolvency Service said.  She had attempted to conceal bank accounts, trying to hide some $500,000, and was obstructive by changing her name and travelling outside New Zealand without Insolvency Service permission.

At Insolvency Service request, the High Court discharged Kennedy from her bankruptcy but imposed a lifetime ban from her directly or indirectly taking part in any business or from being employed by a relative.

In 2018, Kennedy was ordered to repay $653,000 stolen in a Wellington property swindle.  She had previously been convicted in Australia of fraud offences.

re Rebecca Kennedy – High Court (3.02.23)

23.019

Valuation: Reynolds v. Finnigan

 Receivers Peri Finnigan and Boris van Delden are potentially liable for damages in excess of $150,000 after Dayle Walker forced business colleague Joanne Young out of their Auckland early childhood business Learning Ladder in a March 2018 pre-packaged receivership.  

The High Court was told management differences between Walker and Young saw Dayle Walker use a secured loan over their Howick business assets to call in receivers who took control of the business.  One day later, receivers sold the childcare centre assets to a new company controlled by Dayle Walker, cutting out Joanne Young who alleged assets were sold on the cheap at her cost.

Nearly one week of conflicting valuation evidence in the High Court saw divergent views on Learning Ladder’s value.

Chartered accountant Eric Lucas took the orthodox view; current value is assessed by analysing historical financial data.  He valued Learning Ladder at between $450,000 and $500,000.  Receivers sold Learning Ladder assets to Ms Walker’s new company at $470,000.  Most of that money went to Ms Walker and her husband in repayment of their $430,000 on demand loan to Learning Ladder.

Michael Nimot valued Learning Ladder at $760,000. Operational efficiencies could improve business profitability, he said.  The possibility of future cost savings should be taken into account when assessing current value.

Justice Walker took future cost savings into account. Wage costs are the biggest single line item for early childhood centres.  The High Court was told staff costs at Learning Ladder were high by industry standards, even taking into account staffing levels required by childhood centre regulations.  Potential savings saw Learning Ladder have a market value of around $700,000 as at March 2018, she ruled.

Receivers are liable to pay compensation if they sell assets at an undervalue.

Rather than selling at $470,000, the best price receivers should have obtained was between $625,000 and $643,000 Justice Walker ruled.  For a trading business like a childcare centre there is no obligation to get full market price, she said.  There are too many uncertainties should receivers be left in control for an eleven to twelve week marketing programme; key staff may leave and customers take business elsewhere while receivership costs continue to rise.

Reynolds v. Finnigan – High Court (1.02.23)

23.017

Negligence: Buchanan v. Tasman District

Keith Marshall, former CEO of Nelson City Council, sued Tasman District recovering some $270,000 damages for negligent pool inspections of his award-winning home on Eight Eight Valley Road at Wakefield. More than ten years after issuing a code compliance certificate for the pool and also making subsequent inspections, Tasman District changed its mind in 2019 saying pool fencing was non-compliant when the property was put up for sale.

Residential swimming pools are regulated under the Fencing of Swimming Pools Act.  To prevent drownings, pools must be adequately fenced to block access by young children.  Councils are required to inspect pools every three years.  

Keith Marshall and Louise Buchanan purchased their 2.9 hectare lifestyle block at Eight Eight Valley in 2008 for $780,000.  They pulled the property from sale in 2019 after Tasman District advised gates to pool surrounds did not comply.  There had been no alterations since the original compliance certificate was issued back in 2006.

In the High Court, Justice Palmer ruled Tasman District liable in negligence for failing to carry out proper pool inspections.  Determining damages; what was the market value of Eighty Eight Valley in 2008 if it was then known that pool fencing was non-compliant?  Tasman District said market value would be about five per cent less; the property would be less desirable to families with young children.  The valuer acting for Ms Buchanan and Mr Marshall said the remediation work required had the effect of ‘butchering’ what was an award-winning home.  Justice Palmer ruled the market value as at time of purchase in 2008 was $195,000 less than the $780,000 paid.

Tasman District was also ordered to pay about $50,000 for costs of remediation which included lengthy negotiations with Tasman District.  General damages of $25,000 were added for distress and humiliation caused by the dispute.  Mr Marshall told the court publicity about the pool dispute would likely hinder any possibility of future employment as chief executive of a local authority.      

Buchanan v. Tasman District Council – High Court (1.02.23)

23.018

Loan: Wake Up Commercial Ltd v. Extension Capital Ltd

 Taking out a $2.35 million short-term loan in the heat of the covid-19 property boom came unstuck when Auckland development plans collapsed and the borrower had no exit strategy.  The High Court refused to block forced sale of a Whangamata home put up by Michelle Joy O’Byrne as security.  

In the depths of Auckland’s lockdown, Ms O’Byrne was frantically putting together a deal to purchase and develop land on Leybourne Circle in Glen Innes.  In early November 2021, paperwork was finalised.  With face-to-face meetings prohibited, documents were signed in a meeting co-ordinated using Facetime.  Ms O’Byrne agreed to a two month $2.35 million loan with security over both Leybourne Circle and an investment property in Whangamata owned by her family trust.  Latitude Homes was lined up to carry out the Leybourne Circle development.

The High Court was told Ms O’Byrne learnt just days after the loan was drawn down that Latitude Homes could not commit to the build. The full amount of this loan was used to purchase Leybourne Circle.  She was left holding a building site with building consents issued but no builder, a $2.35 million loan falling due within weeks and no funds to further progress the development.  With forced sale of Leybourne Circle threatened, Ms O’Byrne sold up leaving a shortfall on her $2.35 million loan of some $1.1 million and interest running at about $780 per day.

With her family trust’s Whangamata property also threatened with a mortgagee sale, Ms O’Byrne challenged terms of the original $2.35 million loan.  There was a breach of the Responsible Lending Code in the Credit Contracts and Consumer Finance Act, she alleged.  The lender, Extension Capital Ltd, knew from the outset that further finance was needed to progress the development and failed to provide promised further funding, she claimed.  It was clear from all documentation that the $2.35 million was a short-term loan only. The Responsible Lending Code did not apply, Justice Robinson ruled.  This was a commercial transaction; the Code applies only to consumer loans.

Ms O’Byrne alleges her then financial adviser failed to properly explain terms of the deal.

Wake Up Commercial Ltd v. Extension Capital Ltd – High Court (10.01.23)

23.016