Relationship Property: Gerring-Gunn v. Gunn

 

The family was based in Abu Dhabi with husband Steve Gunn employed as an Emirates pilot when marriage with Anna came to an end.  She subsequently challenged, without success, a relationship property agreement leaving Steve with nearly 94 per cent of relationship assets. 

The High Court was told Anna returned to New Zealand in 2011 with their two children after the relationship soured.

They agreed to split 50/50 both the value of their Abu Dhabi property (estimated to be worth about $150,000 net of its mortgage debt) and cash totalling some $30,000.

Steve did not have to split the value of his vehicles and a boat, all of which were mortgaged.  He kept the value of his Emirates superannuation.  He took over financial responsibility for all their joint debts.

He agreed to pay Anna $3000 a month (net of tax) for the support of their two children until the youngest, then aged six, reached eighteen and to also pay their school costs.

Anna later challenged this agreement as inadequate.  A relationship property agreement can be set aside if it would cause a ‘serious injustice.’

The High Court was told Steve had faithfully met his maintenance obligations, and more, with Anna having access to his bank account through until 2016.  Family holidays overseas were funded through use of Steve’s Emirate travel privileges.  He provided support for the family when Anna fell seriously ill.

Anna claimed she received inadequate legal advice when signing the relationship property agreement.  It should be re-opened, she said.

Justice Jagose ruled the lawyer provided adequate advice as to the effect and implications of the agreement.  She was not asked to advise on what Anna’s rights might be if she did not sign.

The effect of the agreement may not be as one-sided as Anna claims, Justice Jagose speculated.  Steve agreed to take on sole responsibility for mortgages on their relationship assets.  There was no independent evidence as to the extent of these mortgages.

Gerring-Gunn v. Gunn – High Court (19.09.23)

23.157

Tax: Foley v. R.

 

The Court of Appeal dismissed Auckland building contractor Stephen Eugene Foley’s appeal on cultural grounds for a reduction in sentence of two years eight months’ imprisonment for aiding and abetting his two companies in their failure to forward $356,000 PAYE deductions to Inland Revenue.  Of Maori heritage, Foley said his actions were culturally consistent with an obligation to look after wider whanau, keeping them employed. 

At their peak, his two companies had 89 employees.  Foley said his contracting business provided opportunities for ‘fugitives’ from society.  Neither company is currently trading.

The Court of Appeal was told Foley selectively paid company creditors, failing to forward PAYE deductions to Inland Revenue over periods spanning 2014 to 2017.  Foley said a liquidity crunch arose because his business grew too fast.

While support for whanau is a strong component of Maori culture, the Court of Appeal said, equally important is the cultural duty to discharge obligations to others.  Loyalty to employees with efforts to keep a failing business alive does not justify ignoring obligations owed the wider community by accounting for taxes due, the court ruled.

Separately, Foley said his sentence should be reduced because of an offer to pay reparations to Inland Revenue out of future income.  Foley claims to have been offered a job paying $140,000 per year.  Taking up the job requires his prison sentence be converted to home detention.

The Court of Appeal remitted his case to the District Court for a sentence review.  The District Court is to check whether any reparations promised to date have been paid and also consider terms of his promised future employment.

Foley has yet to start his current sentence.  The court was told he was bankrupted in 2001, and again in 2018.  He has a history of business failures having been director of other companies which went into liquidation with unpaid debts, including unpaid tax debts.

Foley v. R – Court of Appeal (19.09.23)

23.158

Director: re Mark Benjamin

 

Convicted of fraud offences fourteen years apart, Mark Joseph Benjamin’s prohibition from acting as a company director was lifted by the High Court on strict conditions, over objections from both Companies Office and Corrections.

Benjamin was convicted of fraud in 2008 on proof he dishonestly accessed the electronic payroll system operated by his then employer Kerry (NZ) Ltd where he worked as chief financial officer, increasing his pay and holiday pay.  He was sentenced to community service and ordered to pay $18,600 reparations.

At this sentencing, the trial judge was moved to say Benjamin was unlikely to ever come to the court’s notice again.  His offending was described as a probably a classic example of a good man fallen from grace.

These sentiments proved optimistic.

Benjamin subsequently became chief executive officer of a company called Five Star Pork (NZ) Ltd.  In 2016, he approved ‘advance payments’ to Kaimai Pork Ltd totalling $495,000 for pork which was never delivered to Five Star.  He was a director of Kaimai.  Funds misappropriated were repaid within months.  The full extent of this fraud was not uncovered until after Benjamin left Five Star in late 2016.

In 2022, Benjamin pleaded guilty to the Five Star fraud.  He was sentenced to nine months home detention.

Both the 2008 and 2022 fraud convictions resulted in automatic five-year Companies Act disqualifications from acting as a company director.  As he had done following his prior 2008 fraud conviction, Benjamin asked the High Court to lift his second prohibition from company management following his subsequent 2020 conviction.     

Benjamin told the court he is director of Burnley Lodge (2009) Ltd, a company providing residential care for individuals experiencing mental health issues; a twelve-bedroom facility with all tenants on WINZ benefits.  This social service will collapse without his participation as director and manager, he claimed.

The business was described as a modest operation, paying Benjamin a salary of $50,000 while generating a $34,000 operating surplus for the year ended March 2022.

Companies Office said the past pattern and circumstances of Benjamin’s offending meant the public, and Burnley Lodge residents in particular, were at risk.  It asked the prohibition be left to run its five years.

Corrections told the court Benjamin disregarded directives issued when he was on home detention.  It said those Burnley Lodge residents not as financially savvy or socially aware as other members of society were at risk of financial exploitation by Benjamin, particularly if they were to come into a fortuitous financial windfall.

Benjamin was criticised for not putting before the court evidence of current notices from Tenancy Service and Fire & Emergency requiring upgrades at Burnley Lodge.

Justice Becroft said Benjamin’s lack of candour in his evidence and his past non-compliance demonstrated a degree of self-entitlement which did not bode well for any conditions imposed on his return to company management.

Approval to manage Burnley Lodge was approved, under strict conditions, including a requirement that the company’s financial statements be audited each year, with all payments verified by a third party.  Burnley Lodge is prohibited from making any loans to Benjamin.  All current and future residents of Burnley Lodge are to be told of Benjamin’s fraud convictions.

Justice Becroft also ordered Benjamin’s past offending be disclosed to those public agencies he currently deals with: WINZ, Auckland City Mission, Auckland Mental Health Services, Tenancy Services and Fire & Emergency.

re Mark Joseph Benjamin – High Court (14.09.23)

23.156

Construction: Birchler v. Homebuild Homes

 

Sudden death ‘pay now, argue later’ rules in the Construction Contracts Act came into play with disgruntled clients of Homebuild Homes ordered to pay immediately a disputed $45,000 invoice.  Arguing about validity of the work done did not amount to a statutory ‘payment schedule’ which would otherwise halt liability to pay while their dispute was sorted out. 

In September 2020, the Birchlers signed a $750,000 contract with Homebuild Homes Ltd for construction of a new home at Halcombe, just north of Feilding.  Their fixed-price contract was subject to any additional costs resulting from engineering variations to foundations, floors or framing.

Fourteen months later, they received a $45,100 invoice for extra work; primarily foundations.  The Birchlers’ email in response requested a full breakdown of all ‘out of contract pricing’ and criticised what they called grossly over-engineered foundations.

They were sued after refusing to pay.  The High Court confirmed a lower court ruling that the Birchlers were liable to pay upfront and then argue later.

The Construction Contracts Act sets out a precise statutory dance for construction payments.

First move is a ‘payment claim.’  If there is no immediate response, the amount claimed becomes an enforceable debt, with customers at this point not allowed to challenge with their own claim.

To avoid immediate liability by default, customers must quickly respond with a ‘payment schedule;’ disputing the amount claimed, setting out what is in dispute and why payment will not be made, or part-payment made only.  Importantly, a client’s payment schedule must specify a ‘scheduled amount:’ the amount the client is currently willing to pay, even if that amount is zero.

The Birchlers claimed in the High Court that their emails with Homebuild responding to the disputed $45,100 invoice amounted to a valid Construction Contracts Act payment schedule and they did not have to make immediate payment.

Justice Radich ruled a payment schedule can be delivered in an email, but just complaining about a bill is insufficient.  The Birchlers’ email did not specify a ‘scheduled amount.’  And stating simply that the foundations were ‘grossly over-engineered’ was insufficient to clearly specify what was in dispute such that Homebuild could assess its options.

The essence of Construction Contracts Act payment rules is that a customer can dispute the reasonableness of a builder’s work, but if a ‘payment schedule’ is not delivered, or not delivered in time, the customer must first pay and argue later.

Birchler v. Homebuild Homes Ltd – High Court (13.09.23)

23.155

House Sale: Whakaruru Trust v. Bath

 

Ordered to pay $429,000 damages after defaulting on an Auckland residential property deal; Jay Bath signed up in September 2021 agreeing to buy for $1.16 million with settlement not due for eight months, then failed to complete, short of cash in a falling property market. 

After he defaulted, the property in Pallant Street, Manurewa, was resold at a price thirty per cent less than Mr Bath had agreed to pay.  He claimed Whakaruru Family Trust as vendors should instead have accepted his request to re-jig the deal at a lower price.  This claim was dismissed by Associate judge Sussock.  Mr Bath had defaulted on the first deal.  There was every chance he would default again on a revised deal, she ruled.  

The High Court was told Mr Bath had come back with a revised offer to instead pay $900,000, later upped to one million dollars, after he failed to settle in May 2022.  These revised offers required a further delayed settlement: six months.

Mr Bath, in turn, declined the Trust’s suggestion of a six month settlement extension at the original $1.16 million price together with an immediate payment of $88,000: payment on account ($58,000) plus contribution towards the Trust’s holding costs ($30,000).  He didn’t have the cash, he said.     

After cancelling Mr Bath’s contract, Whakaruru Trust put Pallant Street back on the market.  It was passed in at auction, later selling for $781,500.

Mr Bath was ordered to pay damages for breach of contract: loss on resale less the deposit retained ($320,500); penalty interest at 18 per cent ($72,800); and costs of resale ($36,000).

Whakaruru Family Trust v. Bath – High Court (11.09.23)

23.194

Trespass: Nuttall Properties v. Corcoran

 

Given permission for temporary relocation of his company’s baled waste at a Christchurch commercial site, director Michael Corcoran was ordered to pay $2.83 million damages for trespass after abandoning this waste product.

In early 2021, Mr Corcoran’s company ERP Group Ltd took a short term lease on warehouse space owned by Nuttall Properties Ltd on Port Hills Road in Christchurch.  It was intended the baled waste would be incinerated at a waste to energy plant with whom ERP claimed to have a supply contract.  That did not happen.

Meanwhile, Nuttall’s insurers advised cover for the warehouse would be cancelled unless the baled waste was removed from the warehouse on a date in January 2022 when ERP’s short-term lease was due to expire.

To avoid insurance complications, Nuttall agreed with Mr Corcoran on lease expiry date that the thousands of bales could be shifted to an adjoining yard, an area not covered by the warehouse lease.  The agreement was clear; this was a temporary arrangement.   The baled waste was to be shifted offsite permanently, with the short-term warehouse lease having expired.

The High Court was told Mr Corcoran took his time, relocating the bales to the outside yard over a period of some ten weeks.  Shortly afterwards, ERP Group went into liquidation.  Mr Corcoran and his company walked away from the problem, abandoning the baled waste.

Nuttall Properties spent $2.831 million clearing the site.  It sued Mr Corcoran for trespass.

Associate judge Lester ruled the arrangement for ERP Group to temporarily relocate was made with Mr Corcoran personally.  There was no agreement to leave bales in the adjoining yard for an extended period.  Having supervised relocation of the bales, Mr Corcoran was personally liable for the tort of trespass.

Nuttall Properties Ltd v. Corcoran – High Court (8.09.23)

23.193

Estate: Reeves & Middleton v. McEldowney

 

An extra $900,000 awarded New Plymouth’s Brian and Shirley McEldowney as a testamentary promises claim on top of their existing bequest from the $6.1 million estate of friend Dawn Kennedy was overturned by the High Court as being plainly excessive, cutting their inheritance by two-thirds.

Widowed and with no immediate family, Dawn Kennedy died in 2020.  In her will she left gifts of $100,000 each to Mr & Mrs McEldowney (to be adjusted by the rate of inflation from date of her 2013 will) to mark the care and assistance they had provided in her later years.  The bulk of her estate goes to an education trust to fund students studying engineering.

The McEldowneys challenged her will with claims under the Law Reform (Testamentary Promises) Act.  After a Family Court hearing, Mr McEldowney was awarded net sale proceeds of Dawn Kennedy’s Tukapa Street property ($574,250) on the basis that he had been promised the property on her death.  The Family Court also awarded further cash to each: Mr McEldowney ($300,000) and Mrs McEldowney ($600,000), as reward for services provided Mrs Kennedy in the decade before her death.

Evidence was given of Mrs McEldowney first becoming acquainted with Mrs Kennedy as a Presbyterian Support Services nurse caring for Mrs Kennedy’s father.  A friendship developed between the Kennedys and the McEldowneys.  After she was widowed, Mrs Kennedy was ‘treated as family’ by the McEldowneys.  This extended to them taking Mrs Kennedy into their home at times when she was ill or recovering from an accident.  Mrs Kennedy was resident of a rest home when she died.

Lawyers acting as executors of her estate challenged these extra payments awarded by the Family Court.

In the High Court, Justice Cooke ruled Mr McEldowney’s claim to $574,250 from sale proceeds of Tukapa Street was adequate compensation for them both, representing generous compensation for the care and support provided Mrs Kennedy.  The two $100,000 bequests already paid are to be deducted from this $574,250. 

Prior to the High Court appeal, the McEldowneys stood to receive a total of $1.67 million from Dawn Kennedy’s state.  After the appeal, they get $574,000.

While the McEldowneys assistance to Mrs Kennedy was significant, it did not involve the significant personal sacrifice as seen when a child foregoes employment or other activities to care for a parent.  As a proportion of the overall value of the estate, the extra amount awarded by the Family Court exceeded what would likely be awarded to a child making a testamentary promises claim against the estate of a parent, Justice Cooke said.

Reeves & Middleton v. McEldowney – High Court (7.09.23)

23.192

Mistake: Wrenn v. Boughen

 

Having paid one million dollars back in 2014 to purchase a century-old home in Wellington’s Te Aro valley, Philippa Wren’s family trust years later sued vendor Brenda Boughen claiming over $800,000 for cost of repairs alleging a failure to disclose pre-existing fire damage and water ingress issues.  Compensation for fire damage only was awarded: $130,000.

The three-storey timber-framed house on Maarama Crescent was built around 1901.  Ms Boughen lived at the address for some twenty five years before selling in 2014.  Ms Wren lived briefly at the property for about seven months, before moving to the United Kingdom, putting tenants in place.  Nearly four years later, tenants advised of water leaks in two areas.  A subsequent building assessment identified water ingress which appeared to be the result of a deck installed at the time Ms Boughen was owner.  This assessment also identified fire damage in the roof cavity.  Ms Wren alleged the quality and soundness of the house was misrepresented at time of sale.      

Justice Gendall ruled Ms Boughen made no misrepresentations about water ingress.  She never met Ms Wren before the sale was concluded.  In addition, complaints about repairs required to framing, joists and floors had to be measured against the fact that the house was over one hundred years old, he said.

As regards fire damage, the court was told Council records noted the upper-storey had been gutted in a fire on an unspecified date prior to 1961.  Ms Boughen said that after being sued, she had learnt from a former Maarama Crescent neighbour that there had been a further fire around 1982.

Ms Boughen told the court she was ignorant of any past fire damage at the time she sold.  This was questioned by Ms Wren as purchaser; Ms Boughen had replaced the roof just prior to selling and a ceiling manhole providing access to the roof cavity had been sealed and covered over to prevent access.

Justice Gendall ruled both sides had entered into the contract unaware of the roof damage; they had made a common mistake.  The Contract and Commercial Law Act allows damages where a mistake has led to a ‘substantially unequal exchange of values.’  As a rule of thumb, a purchaser must have overpaid by at least ten per cent before the rule kicks in.

There was conflicting expert evidence as to whether the fire damage was structural or cosmetic.  Justice Gendall awarded $130,000 for cost of repair.

Wrenn v. Boughen – High Court (6.09.23)

23.151

Contract: Delamere v. Liu

 

Former Minister of Immigration Tuariki Delamere was ordered to repay a $350,000 term deposit held on behalf of client Yingheng Liu, part of funds provided by Liu for his ultimately unsuccessful application for fast-track permanent residence on the Business (Entrepreneur Plus) scheme.   

Delamere claimed the money was part of a joint venture with Liu in which Liu invested in his immigration business and agreed to source potential clients from China.

The Court of Appeal was told Mr Liu completed his secondary and university studies in New Zealand on a student visa.  Returning to China, he became general manager of his parents’ company manufacturing railway signals.

Seeking New Zealand permanent residency in 2012, Mr Delamere put in place a proposal to have Mr Liu invest in his immigration consultancy as a business investor.  A series of agreements set out terms of Mr Delamere’s immigration assistance, business financing by Mr Liu and a client sourcing agreement under which Mr Liu would receive a bounty for each new client introduced.

Mr Liu’s application for permanent residence was unsuccessful.  The business proposal envisaged shuffling staff from one of Mr Delamere’s existing offices to a new office set up in Auckland suburb Botany.  This did not satisfy visa requirements that an incoming entrepreneur fund creation of new jobs.

Part of the initial financing agreement saw $350,000 placed on term deposit.  Mr Liu was to be sole signatory on the account with accrued income credited to Mr Liu.  The court was told that, contrary to their agreement, the term deposit was set up without Mr Liu being sole signatory and funds had been drawn down to meet expenses of Mr Delamere’s business.

After failing to get permanent residency, Mr Liu sued to recover his $350,000.

The Court of Appeal confirmed a High Court ruling there was an implied understanding that Mr Liu’s $350,000 would be repaid if his visa application failed.

Mr Delamere’s claim that money was not due, being part of a joint venture business arrangement, was dismissed.  The series of agreements were interrelated, but not interdependent; signed between different parties for immigration services, a business investment and sourcing of future clients.  They could not be viewed collectively as evidence of a joint enterprise.

Interest and costs added to the $350,000 saw Mr Delamere ordered to pay about $460,000.

Delamere v. Liu – Court of Appeal (6.09.23)

23.150

Lawyer: Tennet v. Wellington Standards Cttee

 

Having narrowly missed being struck off for dishonesty after inflating cost of a client’s pre-sentence alcohol and drug assessment report, Wellington lawyer Chris Tennet had his period of suspension from practice reduced to nine months on appeal to the High Court.

The Lawyers Disciplinary Tribunal was told Christopher James Tennet’s client came from a ‘prominent’ criminal family.  She has an extensive list of prior convictions.  She had a chaotic personal life including prostitution, illicit substance use, excessive alcohol use and a violent partner who was a previous client of Mr Tennet.  

The disciplinary complaint followed Mr Tennet’s actions in obtaining her pre-sentencing report at a cost of $1200 and billing his client claiming the cost was $3450.  She never paid.  Neither did her violent partner who had previously indicated that he would cover her legal costs.   

In recent years, Mr Tennet has been disciplined and fined on three separate occasions for improper professional behaviour, including correspondence with Corrections described as ‘harassing’ and personal attacks on an employee of Legal Aid Services described as ‘prolonged bullying.’

The Disciplinary Tribunal said Mr Tennet hit out at those he thought he could hurt with impunity.  It imposed a twelve month suspension from practice for misconduct; his falsification of cost for the pre-sentence report.

On appeal, Justice McQueen reduced the period of suspension to nine months taking into account Mr Tennet’s decades long record of practice as a criminal barrister, allowing him an opportunity for redemption.

Any lawyer suspended for more than six months must apply for a new practising certificate when returning to work, with evidence of steps taken towards rehabilitation and professional development to prevent any recurrence of past misconduct.

Tennet v. Wellington Standards Committee 2 – High Court (6.09.23)

23.149

Asset Forfeiture: Commissioner of Police v. Duncan

 

Criminal proceeds recovery orders stalk offenders for the rest of their lives.  A $1.8 million profit forfeiture order made in 2011 was enforced twelve years later over protestations by convicted drug dealer Royce Allan Duncan that money recently seized by police was a bequest from his father.

Duncan was released on parole in 2018, part-way through a fifteen year sentence for serious drug-related offending.  The High Court was told a 2021 police raid on his Tauranga home unearthed $37,222 cash, a pistol and ammunition, plus small quantities of drugs.

A Criminal Proceeds (Recovery) Act application by police back in 2011 resulted in a profit forfeiture order against Duncan for $1.87 million.  Only $304,800 was recovered subsequently from a forced sale of his assets.  A $1.56 million shortfall remained.

The original 2011 forfeiture order had shelf life of six years; enforcement beyond that time requires court approval.  Justice Powell approved further enforcement in 2023 to allow confiscation of the $37,222 cash recently seized.  It was irrelevant that the money was claimed to be a bequest, he said.

Commissioner of Police v. Duncan – High Court (5.09.23)

23.148

WorkSafe: Sullivan v. R

 

Steve Sullivan has thirty years’ experience marine engineering in Nelson.  As managing director and substantial shareholder of Aimex Ltd he is now serving a twenty month prison term for perverting the course of justice after misleading WorkSafe staff investigating an industrial accident on site.  

In July 2019, an Aimex employee passed out, overcome by fumes while working alone in a confined space inside a boat’s hull.  He suffered brain damage.  Five days earlier, a different employee on the same job had become light-headed in similar circumstances but climbed out of the hull aware he was at risk.  He completed a Health & Safety incident report and was told to go home and rest.

Aimex Ltd was prosecuted for a breach of Health and Safety at Work Act.  WorkSafe was told that other than its report on the employee found unconscious, Aimex held no reports of similar incidents in the past.  The incident report about the event five days previously was destroyed by an Aimex employee.  This supposedly clean record resulted in a reduced fine for Aimex.

After Aimex’ sentencing, a newly appointed chief operating officer came to learn of the existence of the prior report and its suppression.  He confronted Sullivan as managing director, learning ‘as far as [Sullivan] was concerned, once the incident report was destroyed, it never existed.’  The new chief operating officer consulted his lawyers then made a protected disclosure statement to WorkSafe as a whistleblower and resigned from Aimex.

Sullivan appealed his twenty months imprisonment for perverting the course of justice as being manifestly excessive.  Justice Grice said the offence strikes at the heart of the administration of justice, requiring a deterrent sentence.  The appeal was dismissed.

Sullivan v. R. – High Court (4.09.23)

23.147

Management Contract: Ena Holdings v. Admiralty Lodge Motel

 

Brian Johnson sold management rights for Admiralty Lodge motel on Whitianga’s Buffalo Beach for $950,000 in late 2019 being aware revenue was about to plummet.  Buyers Vinod Sharma and Ena Chaudrey claim damages, saying Admiralty management rights they purchased proved worthless. 

When the motel was constructed, resource consent prohibited Admiralty unit owners from living in their units permanently.  Owners gave Mr Johnson’s company the job of managing lets and maintaining the site.  In 2019, the Admiralty body corporate got council consent allowing permanent occupation by owners.  This looked to be an existential crisis for Mr Johnson’s management contract; owners were likely to take up personal residence, no longer renting out their unit.

Evidence was given that Mr Johnson’s company, Admiralty Lodge Motel (2016) Ltd, negotiated a ten year extension of its management rights in August 2019.  Three months later, these management rights were up for sale.  Dr Sharma and Ms Chaudrey bought the rights for $950,000 with a later agreement that $475,000 of the purchase price would be a vendor loan secured over the Admiralty apartment owned as part of the management contract.  Dr Sharma has extensive experience in the hospitality industry, having involvement in VR Group and Kiwi Hospitality LLC.    

The two allege comments about future profitability made by Mr Johnson during negotiations breached both the Fair Trading Act and the Contract and Commercial Law Act.  Each side sued the other; Dr Sharma and Ms Chaudrey alleging misrepresentation; Mr Johnson seeking to enforce his $475,000 vendor loan.

Following a ruling under its fast-track summary judgement procedure, the High Court ordered payment of the $475,000 loan.  This was put on hold by the Court of Appeal.

The Court of Appeal said there is too much unresolved evidence to allow a fast-track decision.  In particular, a need to identify what exactly Mr Johnson said about future profitability and the extent to which there had been appropriate disclosure about motel units potentially being removed from the rental pool.

Ena Holdings Ltd v. Admiralty Lodge Motel (2016) Ltd – Court of Appeal (31.08.23)

23.146

Debt: Keung v. Connolly

 

Desperately short of cash, Christchurch property developer Seng Bou Keung borrowed $90,000 from his then girlfriend and then failed to make full repayment, conjuring up a story that she had agreed to put money into a property development.

Mr Keung, also known as Paul Keung, is recorded on Insolvency Service’s bankruptcy register as having been bankrupted twice: in 1997 and 2010.

The High Court was told Mr Keung was under severe financial pressure in late 2020.  Girlfriend Leisha Connolly came to the rescue giving him $90,000.  The two had been in a relationship since late 2018.  This relationship came to an end shortly after payment of the $90,000.  A dispute over repayment led to a District Court trial and a subsequent High Court appeal.

The trial judge ruled this $90,000 payment was a loan.  Mr Keung had made some repayments.  He was ordered to pay the balance of $49,000.

The High Court confirmed it was a loan, with $49,000 still owed.  Email exchanges subsequent to payment of the $90,000 made it clear it was a loan.  Mr Keung’s protestations that he did not need a loan as he was not under financial pressure at the time were dismissed at trial as ‘totally implausible’ and ‘bordering on farcical.’  His claim that partial repayments were in fact a salary paid Ms Connolly in respect of their supposed joint venture property development was not supported by any evidence.

His further claim that Ms Connolly would be repaid later, having agreed her money was part of a joint venture in development of a property in the Christchurch suburb of Somerfield was dismissed as lacking any evidence in support.

Mr Keung said coding on his bank statement describing the $90,000 payment as an ‘investment’ was evidence that Ms Connolly was making a joint venture investment.  She said this wording was used instead of ‘loan’ at Mr Keung’s insistence; he wanted to hide existence of the loan should banks look at his bank statements as part of their due diligence when he was seeking bank finance.

Keung v. Connolly – High Court (29.08.23)

23.145

Guarantee: Heartland Bank v. Burton

 

Ordered to pay $1.2 million on a guarantee of his company’s borrowings from Heartland Bank, David Burton failed in his claim that the Bank was at fault for not letting him know that fellow director Justin Paul was exceeding previously agreed overdraft limits. 

There is no general rule that banks must keep guarantors apprised of their company’s solvency, Justice Andrew ruled.  And Mr Burton, as a director, was expected to keep abreast of his company’s financial position.

Auckland Concrete Ltd, owned by interests associated with Mr Burton, went into liquidation insolvent in April 2023.  The liquidators’ initial report quotes Mr Burton as saying underpricing on construction contracts and unbudgeted increases in material and labour costs led to the company’s failure.  Mr Burton alleges former director Justin Paul was to blame.  Mr Paul resigned as director in 2021, leaving Mr Burton as sole director.

Both had signed guarantees in support of Auckland Concrete’s borrowing from Heartland Bank.

The High Court was that in early 2021 Heartland was keeping a close watch on Auckland Concrete’s account.  Successive emails to Mr Paul expressed concern about borrowings in excess of the company’s agreed overdraft limit.  Small increases in the limit were agreed periodically, and then promptly again exceeded.

Evidence was given that Mr Burton around this time was stepping back from day-to-day management.  Mr Paul was interested in buying him out.

Mr Burton claimed Heartland’s failure to keep him advised as guarantor about the increasing overdraft meant that he was personally liable for only the amount agreed when he signed the guarantee: $748,000.  Mr Burton had his family trust pay this amount to Heartland Bank.  Liability for further payment was disputed.

Justice Andrew dismissed Mr Burton’s claim that Heartland Bank was in breach of its duties under the Credit Contracts and Consumer Finance Act by failing to tell him of increased borrowing limits agreed with Mr Paul.  The Act applies to consumer credit transactions; Auckland Concrete’s borrowings were a commercial loan.

Separately, Justice Andrew dismissed a claim that Heartland owed a general duty to Mr Burton requiring ongoing disclosure of changes to borrowing limits.  The loan contract guaranteed by Mr Burton explicitly contemplated changes.

Heartland Bank v. Burton – High Court (28.08.23)

23.143

Contract: Kingsbeer Transport v. Martin-Brower

 

McDonalds demands high standards from its suppliers, not reciprocated when it left a Tauranga trucking company high and dry without formalising a contract for regular stock delivery runs across Bay of Plenty.  The Court of Appeal ruled Kingsbeer Transport is entitled to compensation for loss of profits on an abandoned contract.  Damages are yet to determined; Kingsbeer claims some $678,000.

Kingsbeer Transport Ltd, operated out of Te Puke by Tony and Nicky Kingsbeer, was contracted for supply runs from Auckland to McDonalds outlets in both Gisborne and Whakatane when offered the opportunity in early 2018 to take up the Rotorua run as well.

It thought a deal had been agreed with McDonald’s then distribution manager Andy Millin promising a long-term five year contract and an agreement to meet short term truck-leasing costs while Kingsbeer had a further refrigerated truck and trailer constructed.  Mr Millin was McDonalds most senior manager in New Zealand.

McDonalds New Zealand, controlled out of Australia and under the watchful eye of head office in Chicago, was in the middle of a staff reorganisation.  Mr Millin was made redundant.  The court was told Kingsbeer was left hanging; picking up the Rotorua contract, incurring substantial short-term leasing costs and making no headway in email conversations with McDonalds about progress on a formal contract.  Kingsbeer needed surety of a long-term contract in order to get some $500,000 finance for an extra truck and trailer.  In addition, there was haggling over the per kilometre rate to be paid for the job.

Frustrated and running into cashflow problems, Kingsbeer bailed out several months later, abandoning the Rotorua contract and suing for breach of contract.

After a High Court hearing, the trial judge ruled Mr Millin had no authority to conclude any contract with Kingsbeer; approval was required from Australia.  Kingsbeer’s claim was dismissed.

The Court of Appeal ruled that while Mr Millin had no actual authority to make the contract, he had ostensible authority: McDonald’s had previously accepted actions taken by Mr Millin outside his actual authority and consequently had to accept the Rotorua Kingsbeer contract as being similar to past practice by McDonalds for the selection and management of contractors.

The Court of Appeal ruled Kingsbeer did have a five year contract for the Rotorua run which it was justified in abandoning when McDonalds did not follow up with a formal contract needed to get funding for an extra vehicle.  The court also ruled Kingsbeer was promised up to $50,000 to cover short-term leasing costs.  Kingsbeer says it spent $91,200 on short-term costs.

The case was sent back to the High Court to assess damages.

Kingsbeer has wound up its business and sold its trucks after giving notice that it was also quitting its Whakatane and Gisborne runs.

Kingsbeer Transport Ltd v. Martin-Brower New Zealand – Court of Appeal (23.08.23)

23.143

Accounting Information: Johnson v. Johnson

 

They separated in 2014 and have kept lawyers very busy with a multitude of claims and accusations.  Maria Johnson has been ordered to pay $1.13 million to former spouse Craig; he asked for a suspended arrest warrant as leverage when seeking information about her business assets.

Before separation, the two jointly invested in a number of preschool businesses.  As part of their relationship property settlement, they agreed to divvy up the seven schools owned by their company, Little School Ltd: Ms Johnson took control of five; Mr Johnson two.

The market value of these schools is in dispute.

Armed with a court ruling in his favour for $1.13 million, Mr Johnson applied for a court-ordered examination of his former spouse’s net worth.  Court examinations on oath are used to identify assets that can be seized in payment of court judgments.

Included in the assets disclosed was Ms Johnson’s shareholding in Little School Ltd.  Mr Johnson questioned the value disclosed; it was the same dollar amount as an earlier December 2021 valuation he was aware of.  He asked to see the financial information used to derive the share value.  Ms Johnson refused.  The asset she owns is shares in the company; the company itself is a separate legal entity and it is not under examination in court, she said.

Further, her former spouse is seeking information about profitability for a collateral purpose, she said.  He is a business rival, operating his own preschool business.

Financial information about the company is necessary to determine an appropriate value for the company’s shares, Justice Gwyn ruled.  She ordered this information be disclosed for analysis by an accountant nominated by Mr Johnson’s lawyer.  Mr Johnson personally is not allowed access.

To ensure disclosure, Mr Johnson asked an arrest order be made, suspended pending production of the required accounting information within two weeks.  Justice Gwyn said it is for the court to decide later on any arrest if the required information is not provided.

Johnson v. Johnson – High Court (22.08.23)

23.142