Forestry Rights: ADM International v. Kiwi Forests

 

With litigation spanning the globe, Swiss-based ship charterer ADM International Ltd failed in its Fair Trading Act claim it was misled as to the value of forestry rights in New Zealand offered up as security for two ship charters. New Zealand litigation failed because ADM never checked wording of publicly available documents.

ADM International is suing to recover unpaid hire charges totalling USD 1.2 million after British Virgin Islands charterparty Golden Shine Management Ltd defaulted on two ship charters in late 2022.

The High Court in New Zealand was told this dispute is currently subject to both litigation and an arbitration in the United Kingdom.

ADM negotiates up to three thousand ship charters every year.  A sister company undertakes due diligence on proposed charterers, with a quick 24 hour turnaround usually required on the credit-worthiness of potential customers.

Golden Shine did not get quick tick.  ADM needed more information.  After getting some extra information it required extra security.

ADM accepted as further security, New Zealand forestry rights registered in the name of Golden Shine NZ Ltd, itself ultimately owned by British Virgin Island interests.   

When it came to the crunch, ADM found these forestry rights were of little value.

It sued Kiwi Forests Investment Ltd, who granted the forestry rights, claiming status of the security had been misrepresented.  ADM alleges there is a common ownership buried within all three companies: Kiwi Forests, Golden Shine and Golden Shine (NZ).

In the High Court, Justice Blanchard stated full due diligence would have identified what the forestry right amounted to.

These rights were created after Kiwi Forests 2015 purchase of 2,300 hectares of Wairarapa forestry.

It partnered with Golden Shine (NZ) to manage carbon credits associated with the forest.

Terms of their agreement were set out in 2017 contract.

It is not mandatory to register forestry agreements on title to land.  But Climate Change Response Act requires registration where there is an agreement to manage carbon credits.

Golden Shine (NZ)’s forestry right was registered.  As is the norm, title registration consisted of a short notation on the land register maintained by Land Information, with a reference number identifying the transaction.

Again, as is the norm, the 2017 contract setting out terms of this registered forestry right was filed with Land Information, available for public inspection.

Kiwi Forests could not be considered acting in a misleading and deceptive manner when full details of the supposed security were available for public inspection, Justice Blanchard ruled.

Those undertaking land title searches are aware short notations on a title are not a full description of rights granted; underlying documents often need inspection.

ADM International SARL v. Kiwi Forests Investment Ltd – High Court (9.05.25)

25.114

Insider Trading: Huljich v. R.

 

Court of Appeal doubled Peter Huljich’s Pushpay Holdings insider trading fine to $200,000, expressing concern the trial judge was unduly lenient when sentencing business executive Huljich for insider conduct in relation to a 2018 sale of Pushpay shares; unduly lenient both to the level of the fine imposed and Huljich’s further sentence of six months curfew when home detention was a possible alternative.

Huljich’s conviction followed sale of a family trust shareholding in Pushpay Holdings Ltd, ahead of public notice being released of an expected retirement by co-founder Eliot Crowther and with it Crowther’s likely sale of some nine per cent of the company, a stake valued then at about $100 million.

At the time, Pushpay was listed on both NZX and ASX.  Pushpay sold mobile payment software, primarily used to process donations.  It was delisted in 2023, following a takeover.

Part of Huljich’s lengthy High Court trial was taken up with evidence of a family trust having amongst its assets a stake in Pushpay valued in tens of millions of dollars.  All details of the Trust, its beneficiaries, and the size of its Pushpay stake, were supressed.

There was evidence of Huljich personally seeking to distance himself from Trust operations before the Trust’s disputed selldown of Pushpay shares together with evidence he received a benefit of some four million dollars following sale of its shares.

Financial Markets Conduct Act prosecution followed a May 2018 email sent by Huljich to Trust trustees and to the Trust’s principal beneficiary advising an immediate sale of Trust’s Pushpay holdings, telling them to set up a brokerage account with Craigs Investment Partners to process the sale.

This email followed Mr Crowther’s discussions with Huljich, disclosing his intention to resign from Pushpay.  Huljich was then Pushpay’s New Zealand general manager.

When Craigs was asked to open this new account, an internal email advised that the Trust was ‘keen to trade as soon as possible.’

The High Court was told the Trust sold its Pushpay shares over a three week period ending 7 June 2018 at an average price of $4.21.

NZX and ASX trading halts were called on June 18.  Pushpay executives were concerned notice had leaked of Mr Crowther’s proposed retirement.

Trading re-opened after Mr Crowther’s nine per cent stake was sold off-market at a price of $4.04.

At the time trading was halted, Pushpay was priced at $4.18.  When trading resumed, the price closed that day at $4.27.

Financial Markets Conduct Act liability for improper insider conduct requires proof ‘material information’ was used to encourage trading in listed securities at a time when that information was not generally available to the market.

The legal test for materiality looks at the likely or hypothetical movement in share prices had the non-public information been released at the time the insider acted.

Expert evidence was given of securities market behaviour: departure of a company founder with sale of a substantial shareholding depresses market prices; requiring sale at a discount to clear the increased volume of shares offered for sale.

General movements in market prices subsequent to improper use of inside information are of no direct relevance in determining ‘materiality’ at time the insider trades.

The High Court jury’s verdict that Huljich knew the fact of Mr Crowther’s proposed retirement was ‘material information’ was upheld by the Court of Appeal.  Huljich was acting on non-public material information when advising the family trust to sell.

Huljich was fined $200,000 for improper inside conduct.

The High Court sentence that he serve six months’ community detention with a 9.00 pm to 6.00 am curfew at a specified address seven days a week was grudgingly accepted by the Court of Appeal.

Insider misconduct is a form of fraud, the Court of Appeal said.  It undermines public confidence in the integrity of the stock market.  Sentences should act as a deterrent.

The High Court imposed a curfew in place of home detention on compassionate grounds.  Reasons were supressed.

Huljich v. R – Court of Appeal (8.05.25)

25.123

Secret Commission: Spark NZ Ltd v. Bryan

 

Spark is chasing backhanders totalling $3.5 million paid by Sean Bryan’s Victory IT Ltd, being secret commissions rewarding a Spark contractor for putting work its way.

Telco Spark says it overpaid for services received, following years of invoices padded with under the table commissions paid without its knowledge or approval.

Court of Appeal ruled Mr Bryan personally liable to pay Spark $1.72 million for backhanders paid from 2016; a further court hearing is needed to deal with Limitation Act defences over liability for $1.8 million paid prior to 2016.

The court was told a corrupt arrangement to make secret payments was negotiated in 2013 between Mr Bryan and a Spark contractor.  This contractor currently has name suppression; part of an ongoing Secret Commissions Act prosecution.

The contractor negotiated a profit-sharing arrangement with Mr Bryan in which a significant share of Victory profits earned on its Spark contract was handed back to the contractor.

Spark awarded a contract in 2013 for a major upgrade to its customer services digital platform.  The successful contractor had ultimate responsibility for all testing services required by Spark, plus an active role in selecting third-party providers.

The court was told Spark was encouraged by this contractor to retain Victory as a testing service provider, despite its rates being significantly higher than competitors.  The contractor having name suppression justified approval to Spark of these premium rates on grounds Victory’s testing services were superior.

Unbeknown to Spark, this contractor would be getting a slice; kickbacks from Victory.

Over a three year period, the contractor received kickbacks totalling $3.5 million.

Invoicing inconsistences through 2015 led to questions by Spark.  Suspicions mounted with both Mr Bryan and the contractor refusing to provide adequate explanations or to disclose relevant information.

It took court orders to force disclosure of bank records.

In 2021, their invoicing dispute went to arbitration.

The arbitrator ruled Victory had acted dishonestly in paying backhanders to the contractor and that Mr Bryan had knowingly participated in the unlawful scheme.

The arbitrator dismissed explanations for the corrupt payments as being ‘a complete fabrication.’

With Victory IT Ltd in liquidation, Spark looked to recover these corrupt payments from Mr Bryan personally.

In the Court of Appeal, Mr Bryan said the arbitration ruling was not enforceable against him personally; it was against his company Victory.  Spark could recover only from Victory, he said.

The central principle of company law is that an incorporated company is a separate legal entity from its shareholders and its directors.

It is the company that is liable for actions carried out in its name.

There is an exception where management benefit directly from their company’s dishonesty; management can be sued.

As sole director and shareholder, Mr Bryan was Victory’s ‘alter ego,’ the court ruled.

He had complete control of the company.  He was the direct beneficiary of Victory’s dishonest financial arrangement.

The Court of Appeal ruled Mr Bryan personally was liable to compensate Spark for the amount paid in backhanders.

The Limitation Act bars recovery of compensation for wrongdoing more than six years prior to court action being filed.

Mr Bryan is liable to pay Spark the $1.72 million secret commissions handed over during this six year period, the Court of Appeal ruled.

Credit was given for an unpaid Victory invoice of $1.08 million, leaving Mr Bryan immediately liable to pay a net amount of some $650,000.

Mr Bryan’s liability for the remaining $1.8 million paid in backhanders requires proof at a subsequent court hearing that Spark had ‘late knowledge’ of its right to sue.  Spark claims delays in taking legal action were caused by the fraudsters unhelpful and evasive responses to earlier requests for information.

The Court of Appeal was told Spark is also taking legal action against the Spark contractor receiving these backhanders.

Spark New Zealand Ltd v. Bryan – Court of Appeal (8.05.25)

25.124

Bankruptcy: Seven Brews v. Flavell

 

Proof is required, not promises.  Graeme Pierre Flavell was bankrupted on a $51,500 debt owed liquor wholesaler Seven Brews Ltd with the High Court unmoved by Mr Flavell’s claim that given time he could pay off the debt.

The Seven Brews debt followed court action taken against Mr Flavell.  It refused an offer by Mr Flavell to make payment by instalments; an upfront payment of $2000 with monthly payments of $1500 to follow.  It would take at least three years to clear the debt, if payments were made as promised.

The High Court was told Mr Flavell has been making instalment payments to other creditors, while refusing to make any payment to Seven Brews unless it agreed to the deal on offer.

Mr Flavell told the court he had ‘current’ major creditors owed $85,600.

He claimed work prospects looked good, with his current employment in food manufacturing.  Bankruptcy would hamper overseas travel as part of this job, he said.

Bankrupts are prohibited from leaving New Zealand, but may travel with consent of Insolvency Service.

Associate Judge Paulsen decided little weight could be given to Mr Flavell’s claims to potential sources of cash sufficient to pay his debts.

Mr Flavell claims to be owed $86,500 by a company called Equinox New Zealand Ltd.

Equinox is in liquidation, insolvent.  Mr Flavell provided no evidence that Equinox liquidators had accepted from him a proof of debt, or whether Equinox’ creditors are likely to receive any payment.

Mr Flavell provided no evidence of his current employment, and no evidence of any surplus income from this job being potentially available to pay down past debts.

Insolvency Service has power to have bankrupts pay down part of pre-bankruptcy debts out of current income.  This requirement will accommodate Mr Flavell’s expressed wish to pay present debts out of future income, Judge Paulsen indicated.

Seven Brews Ltd v. Flavell – High Court (7.05.25)

25.116

Bankrupt: Wenzhou Hongliang v. Williams

 

With Insolvency Service about to close the file on bankrupt Gerald Norman Williams, unpaid creditor Wenzhou Trading had the High Court order a further investigation into Williams’ business affairs alleging he was living off assets he managed to shield from creditors.

Mr Williams automatic discharge from bankruptcy was to have been triggered on 24 November 2023, three years from the date he engaged with Insolvency Service after creditor Wenzhou Hongliang Trading Co Ltd forced him into bankruptcy.

One day prior, Wenzhou halted this automatic discharge, asking the High Court for a further investigation into Mr Williams’ financial circumstances.

Wenzhou is based in China.  It was stung in 2010 after an importation of infant milk powder went sour.  Mr Williams was one of three directors controlling a New Zealand company exporting this milk powder to China.  The product was rejected on arrival; labelling did not comply with local regulations.  Wenzhou lost the $306,000 paid in advance of shipment.

With Mr Williams’ New Zealand company in liquidation, Wenzhou funded a successful legal action by liquidators against all three directors.  Ordered to pay $900,000, two directors settled with Wenzhou.  Mr Williams did not contribute.

In 2020, Wenzhou bankrupted Mr Williams. 

Insolvency Service told the High Court it has spent some $62,400 in chargeable time investigating Mr Williams financial position, finding no assets available to pay creditors.

Mr Williams, now aged 77, was described as now retired, living solely off his pension.

Wenzhou said further investigation is needed; in particular, earlier dealings surrounding a Drury subdivision in South Auckland and sale of a property at Papamoa in the Bay of Plenty.

Wenzhou alleges profits wound up in the hands of Mr Williams’ family trust.

In the High Court, Associate Judge Taylor suspended the automatic discharge, ordering Insolvency Service carry out a more detailed investigation into Mr Williams’ financial affairs.

Wenzhou complains that Insolvency Service has failed to follow up on a 2021 court ruling requiring interests associated with Mr Williams hand over $575,000; funds arising from the Drury subdivision diverted from Mr Williams’ pocket at a time when he was insolvent.

Wenzhou Hongliang Trading Co Ltd v. MSUT Trustee Ltd – High Court (11.11.21) & Wenzhou Hongliang Trading Co Ltd v. Williams – High Court (2.05.25)

25.113

Canam Construction: Miedema Family Trust v. Petrou

 

Directors Loukas Petrou and Stephen Jones were ordered to pay $513,400 damages to Mark’s and Julie’s Miedema Family Trust for wrongly extracting cash from a Canam Construction Tauranga subsidiary part owned by the Trust at a time when the two directors were up to their neck in an unconnected Canam commercial arbitration over costs on the then troubled Auckland apartment build for Auckland Trotting Club at Greenlane’s Alexandra Park.

In 2022, the arbitrator held a Canam Construction subsidiary liable to pay Auckland Trotting some $85 million.

While preparing for this arbitration, Canam’s Bay of Plenty operations were of peripheral concern to Messrs Petrou and Jones.  But Bay of Plenty was a major concern for Canam Construction (BOP) Ltd’s minority shareholder, Mark Miedema and his family trust’s 33 per cent shareholding.

The High Court was told Mr Miedema had been lobbying for some time to have a substantial dividend paid by Canam (BOP); cash needed to purchase a family home.  No dividend was forthcoming.

Eventually, Mr Miedema took his trade skills elsewhere; taking employment with a rival construction company.  Many of his staff followed, leaving Canam (BOP) without staff and no ongoing work.

The legal dispute that followed saw Miedema Family Trust suing both Mr Petrou and Mr Jones, alleging they were party to a scheme stripping cash out of the company.

After a two week High Court hearing in late 2023, Justice Anderson ruled the two personally liable for charging overhead costs of some $2.3 million to Canam (BOP), depriving the company of resources otherwise available to pay a dividend.

Evidence was given of the Canam group operating a centralised accounting system with revenue and expenses for all subsidiaries, including Canam (BOP), passing through one bank account: the ‘treasury account.’

Each financial year, ‘head office’ costs were pro-rated across the various subsidiary companies in preparation of annual financial statements.

Mr Miedema complained a large $2.3 million ‘head office’ charge levied against Canam (BOP) on his departure from the company was in breach of the Companies Act as ‘oppressive behaviour’ by a majority shareholder.  This sum was well in excess of previous annual overhead charges.

Messrs Petrou and Jones argued that while there was a prior agreement that Canam (BOP) would not be levied its fair share of overhead expenses during its start-up period, it was agreed that reduced charges would be recovered over time.

No overhead charge was levied Canam (BOP) for its first three years.  Charges for the next three years were well below costs of head office support, they said.

The $2.3 million taken was part of the agreed catch-up, they argued.

Justice Anderson ruled there was no evidence of any catch-up agreement.

It was ‘oppressive behaviour’ affecting Miedema Family Trust as minority shareholder to later impose these increased charges, she ruled.

The two directors were ordered to pay $513,400 damages: the tax free equivalent to Trust beneficiaries of the Trust’s 33 per cent share of a notional $2.3 million dividend paid to Canam (BOP) shareholders; with this share then notionally taxed again in hands of the Trust.

To avoid ongoing clashes, Justice Anderson ordered the Trust’s shareholding in the now worthless Canam (BOP) Ltd be transferred to Mr Petrou and Mr Jones for a token one dollar payment.

But that was not the end.

Both sides were subsequently back in court claiming each side should pay the other’s legal costs and expenses.  Calculation was made difficult by the fact Miedema Family Trust abandoned some of its initial claims and lost others, while still being awarded $513,400 damages for its successful claim.

The net result: Messrs Petrou and Jones were ordered to pay the Trust a further $94,300; a contribution towards its legal costs.

The Trust claimed $507,500 in litigation fees and expenses.

Miedema Family Trust v. Petrou – High Court (31.10.24 & 1.05.25)

25.112

Mortgagee Sale: Bank of India v. Gupta

 

Partly constructed buildings left abandoned are the most difficult to sell in a mortgagee sale; a point accepted by the High Court when dismissing Herschel Gupta’s complaint that Bank of India failed to properly market a mortgagee sale of his failed South Auckland townhouse development. 

Mr Gupta was defending liability to Bank of India on a guarantee given in late 2021 for a $4.8 million loan to his property development company Kauri Investments Ltd.  There was a $2.1 million shortfall when Bank of India sold up the unfinished development in 2024.

Mr Gupta demanded the amount due on his guarantee be reduced; the Bank had failed to comply with Property Law Act requirements to take reasonable steps to get the best price, he claimed.  The Bank had sold the property hastily, at a knock down price, he said.

Kauri Investment’s initial purchase three years previously at $4.79 million was a better guide as to market value, he claimed. 

The Bank engaged Ray White Real Estate in Takanini for its mortgagee sale.

Ray White properly tested the market, Associate Judge Paulsen ruled.

It carried out a five week marketing campaign.  The property was listed on TradeMe and One Roof.  Flyers were distributed.  Details promoted on social media.  Signage placed on site.

At auction in April 2024, there were eight registered bidders; six active bidders.

The highest bid was $3.3 million.  The Bank accepted this bid, withdrawing its initial reserve set at $5.1 million.

The townhouses sold were not complete: they had been vandalised; one was damaged by fire.

The court was told abandoned commercial sites are always difficult to sell.  Purchasers cannot clearly assess what extra work is needed to complete construction.  Past vandalism indicates further vandalism is likely.  Obtaining insurance prior to settlement is difficult.

Mr Gupta’s claim current market value to be around $4.9 million was dismissed.

Prices from 2021 did not reflect a drop in market prices over the subsequent three years, Judge Paulsen said.

And the suggested $4.9 million did not itself reflect a true market price as at 2021; it was the price set in a related party sale between two companies, both controlled by Mr Gupta.

Mr Gupta was ruled liable to pay $2.1 million due on the Bank guarantee.

Bank of India v. Gupta – High Court (30.04.25)

25.110

Trust: Huang v. Chen

 

Renovate or sell: a decision splitting trustees of Auckland’s North Shore Bread of Life Christian Church, currently occupying a two storey commercial building purchased with adherents donations of over $1.5 million.  Refusing to intervene, the High Court ruled this is a commercial decision.

The building on Apollo Drive in Rosedale was purchased some eight years ago after nearly two decades of fundraising.  Intent was to renovate the building, creating an auditorium accommodating three hundred worshippers.

The High Court was told initial plans proved unworkable: in part because of cost; in part because of economic consequences following covid-19 pandemic lockdowns.

The six person board of trustees is split 50/50 over future plans.

Trust rules allow the chair to exercise a casting vote.  The two factions dispute who has been validly appointed as chair.

Each faction has legal action underway seeking to remove members of the other faction from the board of trustees.

The rift is compounded by the current pastor’s employment status.  Pastor Chen is one of the trustees.  There is an ongoing employment dispute over his position and his remuneration.

One faction, including Pastor Chen, want to see the building sold, or at least fully leased to a commercial tenant, with the proceeds used to lease a new building for Church activities.

The original purchase was funded, in part, by mortgage.  Donations from Church members are paying down this mortgage.  They question why their donations, intended to have their Church have ownership of its own land and buildings, should now be used to fund a business leasing commercial properties.

Being part of the second faction, they want to see the building retained, with a scaled down version of initial renovation plans, accommodating a smaller congregation.  Building consents have been obtained.

Differences are so entrenched that the two factions now hold separate church meetings.

Membership has declined.

With trustees deadlocked, the faction in favour of renovation asked the High Court give Trust Act approval for work to proceed.

Justice Anderson declined their application.  The Church is in a poor financial position, she said.  It is for trustees to make a commercial decision about the viability of their various options.

Justice Anderson was told trustees collectively have considered bringing in an independent advisor to assist.

Huang v. Chen – High Court (30.04.25)

25.111

Reckless Trading: Batley v. MacDonald

 

Hamilton builder John MacDonald was ordered to pay nearly $290,000 to two customers after what the High Court described as his dishonest conduct in having his building company extract deposits from them for new builds never completed.

Mr MacDonald’s claim to be a victim of circumstances with covid-19 lockdowns causing his building company to fail in 2021 was dismissed by Justice Wilkinson-Smith.  His company was trading insolvent for years prior to the pandemic.

Mr MacDonald deviously extracted deposits from these two customers just prior to liquidation, immediately using this money to meet both personal and company debts at a time when his business had been trading whilst insolvent, she ruled. 

The High Court was told Mr MacDonald was director and sole shareholder of John S MacDonald Builders Ltd.

In September 2020, his company agreed to build a new home in Cambridge for a Batley Family Trust.  Trustees signed a standard-form Registered Master Builders Contract agreeing to pay a $115,000 deposit.  This contract states the deposit can be used only to pay costs of their build.

Evidence was given of the trustees being asked to sign three weeks later what was represented as being a duplicate of their earlier contract.  What was presented as a duplicate had one critical alteration; their deposit did not have to be held in trust against payment of construction costs.  

They later learnt their money had already been siphoned off to meet other company debts and to pay Mr MacDonald’s personal expenses, including renovations at his family home.

Concrete footings for their new home were poured before work stopped with Mr MacDonald putting his company into liquidation.

The Singh family suffered a similar experience.  Trustees of their family trust paid a $172,500 deposit in late 2020 for construction of two residential units in Hamilton.

Initial agreement was for a fixed price contract, with no deposit required.

Mr MacDonald then pressed for an increase in price.  A compromise was reached; no price increase, provided a $250,000 deposit was paid in advance by instalments.

The Singhs never paid the full $250,000; they paid no further instalments beyond initial payments of $172,500 concerned when there was no sign of construction starting.

As with the Batleys, their deposit was never returned, dissipated in payment of sundry personal and business MacDonald debts.

Justice Wilkinson-Smith ruled Mr MacDonald personally liable to repay the deposits received by his company.  The company’s two customers were left as unpaid unsecured creditors.  Mr MacDonald had traded recklessly, having his company incur further liabilities at a time when it was insolvent and creditors unpaid.  This was a breach of Companies Act director’s duties.

Justice Wilkinson-Smith signalled she intended to order Mr MacDonald pay in full all legal costs incurred by the Batleys and Singhs in bringing their claim to court.

They had a strong claim, she said, not helped by Mr MacDonald fighting to the end and then stating at the last minute that he would not appear in court to defend their claims.

Indemnity costs orders are necessary to disincentivise defendants from prolonging hopeless proceedings until litigation fatigue or increasing costs forces plaintiffs to give up, she said.

The Batleys and the Singhs were invited to file in court full details of litigation costs incurred, with Mr MacDonald given an opportunity to challenge the amounts claimed.

Batley v. MacDonald – High Court (28.04.25)

25.109

Corporate Restructuring: McKay v. Bartlett

 

Entrepreneur Doug Bartlett was ordered to pay $361,000 damages following a 2015 restructuring of his nascent ‘Fun Cart’ business manufacturing shopping trollies which saw control of business assets shifted across to a new company without payment.

His commercial dream was to have major retailers across the United States use his product; a plastic moulded trolley, allowing a child ensconced inside to be separately entertained whilst an adult roamed supermarket aisles loading produce onto the upper deck.

The High Court was told his company Aisleworx Ltd needed further equity finance in 2015 after initial capital was chewed up dealing with production problems and remedying faults in the carts’ electronics.

In receivership for two years from 2017, and in liquidation since 2020, insolvency specialists have been struggling to unravel Aisleworx’ finances.

Evidence was given of Aisleworx flying on a wing and prayer; dependent almost entirely on Mr Bartlett’s entrepreneurial zeal, manufacturing contacts and business connections.

Proper financial reporting was all but non-existent, with management accounts later being reworked by Aisleworx’ liquidators in an attempt to identify the company’s financial position.

A claim by initial investor PG Admin Ltd to be owed USD 3.4 million was disallowed by Aisleworx’ liquidator.  She accepted PG’s claim in the liquidation for USD 284,000 only.

PG is controlled by Auckland-based Kerrin Harrison.

PG Admin spearheaded High Court litigation in 2023 claiming Mr Bartlett was personally liable to pay USD 3.4 million, alleging breaches of a multitude of director’s duties.

All claims were dismissed.

In an unusual move, Justice Jagose kept the case open, suggesting PG Admin reformulate its claim to concentrate on what he called the ‘real controversy:’ Aisleworx’ 2015 restructuring which saw control of Aisleworx’ assets pass to a newly-formed US subsidiary, without payment.

In evidence, Mr Bartlett admitted that at time of the 2015 restructuring Aisleworx was insolvent.  It had run out of money and was unable to meet its payroll.

New investors in 2015 demanded a separate corporate vehicle be set up to continue the now re-capitalised business.

Mr Bartlett breached his duties to Aisleworx by transferring control of business assets, both tangible and intangible, across to this new company, without payment, the High Court held.

To determine appropriate compensation, Justice Jagose indicated the best he could do is rely on the much-criticised accounting information in existence at 2015.

Mr Bartlett was ordered to pay $361,100.

Justice Jagose ruled this compensation be paid to Aisleworx Ltd, now in liquidation, insolvent.  In addition, Mr Bartlett is liable for interest payable from 2015 to date payment is made.

McKay v. Bartlett – High Court (22.12.23 & 17.04.25)

25.108

Construction: Arnerich v. DHC Assets Ltd

 

More than a decade after Antony Arnerich’s Vaco Investments sold a newly constructed West Auckland commercial building customised for incoming tenant ASB Bank, he is arguing the toss over damages claimed by DHC Assets for construction cost overruns.  Lack of coherence between an earlier arbitration and later litigation in which Mr Arnerich was ordered to pay $1.18 million to DHC has led to two separate High Court hearings and now an almost-conclusive Court of Appeal ruling.

DHC Assets Ltd signed up with Mr Arnerich’s Vaco Investments (Lincoln Road) Ltd in 2011 to build the two-storey commercial building.  DHC has seen multiple changes in shareholders and directors over the last decade, but one continuing presence as director has been Clearwater Construction’s Mike Sullivan. 

DHC’s main complaint is that Mr Arnerich transferred cash out of Vaco Investments to family interests at a time when payments due under its construction contract were not finalised.  Mr Arnerich subsequently put Vaco Investments into liquidation.

Vaco sold its completed building in April 2013 for $8.4 million, with $2.3 million then transferred to Mr Arnerich, family members and his family trust.

Mr Arnerich fiercely contests much of what DHC claims is still due.

In 2019, the High Court ruled Mr Arnerich liable for breach of director’s duties for extracting cash from his company when the full extent of company liabilities was not yet sorted.

He was ordered to pay DHC some $367,000; the amount Vaco was ordered to pay DHC after an earlier Construction Contracts Act arbitration.  At the arbitration, DHC claimed it was owed $1.08 million in total.

What followed was multiple High Court hearings and subsequent appeals seeking to identify what DHC was owed.

The Court of Appeal ruled their arbitration provisional only; contractual claims not covered by the arbitration could be litigated.

With default interest in their construction contract for late payment running at 12.4 per cent compounding monthly, damages claimed began to escalate substantially.

With Vaco Investments now in liquidation, DHC argued Mr Arnerich personally was liable for these extra payments; if his company couldn’t pay, then the amount should be added to his personal liability for breaching his duties as a director, it said.

Prolonged litigation has seen argument over what costs are, or are not, covered by their contract and how interest is to be calculated.

Mr Arnerich personally is liable to pay DHC $1.18 million, the Court of Appeal ruled.

A subsidiary issue was payments by ASB to Vaco Investments for contract variations carried out during the build, at ASB’s request as incoming tenant.

It was agreed Vaco would pass these payments on to DHC; part of a side deal standing outside the main contract.

ASB paid in full for its contract variations.  Not all payments were passed on.  This is a debt still due to DHC.

If both sides cannot agree on the extent of ASB payments yet to be passed on, it is back to the High Court said the Court of Appeal.

Arnerich v. DHC Assets Ltd – Court of Appeal (9.04.25)

25.107

Bankruptcy: Makele v. Tugaga

 

In Kafka’s novel The Trial, Josef K is forced to defend himself against an authoritarian regime with no knowledge of the allegations he faces.  A far cry from our liberal democracy, where those appearing before a judge must be told.

Facing a High Court bankruptcy hearing, Fiona Tugaga argued, unsuccessfully, that the hearing could not go ahead because she had not been given prior notice.

The High Court did not believe her story that she was not the person served with court papers.

The bankruptcy application was brought by former tenant Rob Makele, enforcing a $21,200 Tenancy Tribunal order.

Evidence was given that Mr Makele’s process server handed a bankruptcy notice to a woman at Ms Tugaga’s home in August 2024.  These Insolvency Act notices are precursors to bankruptcy applications.  Bankruptcy follows if the claimed debt is not paid.

Four months later, the same process server served formal notice of a scheduled bankruptcy hearing on the same woman at the same address.

He said in evidence that on each occasion the woman receiving the documents acknowledged that her name was Fiona Tugaga.

The process server pointed to Ms Tugaga in court, saying this was the person served on each occasion.

Ms Tugaga said that at both times she was at her sister’s place.  The process server must have been speaking to her gardener, she claimed.  She had never seen the documents, Ms Tugaga said.

She produced eftpos receipts indicating she was with her sister or shopping each time the process server was at her place.

Associate Judge Cogswell questioned credibility of the eftpos evidence; the receipts produced were from two separate eftpos cards, neither being a card owned by Ms Tugaga.

He questioned why Ms Tugaga’s sister was not called to give evidence of their supposed meetings.

Judge Cogswell ruled the bankruptcy papers validly served.

A bankruptcy hearing was timetabled for five weeks later.

Such hearings are vacated if the debt is paid.

Makele v. Tugaga – High Court (9.04.25)

25.104

Rent Review: A&H Kumeu Ltd v. Kumeu Playschool

 

The maths went well beyond any understanding expected of infants at Kumeu Childcare, but Childcare’s interpretation of how rent increases should be calculated was mathematically incoherent, the High Court ruled.

Harinder Bedi’s company A&H (Kumeu) Ltd, trading as Kumeu Childcare, operates in West Auckland.  As tenant, it disputed landlord calculations for rent increases post-2022.

Kumeu Childcare argued for a 2.2 per cent rent increase supposedly achieved by calculating a percentage of annual percentage changes in the CPI.  The correct calculation required assessment of the percentage increase in raw index figures.

As it turned out, Kumeu Childcare in fact incorrectly applied the incorrect formula it championed; if its incorrect formula was applied as Kumeu Childcare intended, it would be in for a 22 per cent rent increase.  This figure is markedly more than the 7.2 per cent increase demanded by its landlord’s correct formula. 

Media coverage of price inflation (or rarely, deflation) concentrates on any percentage change in index figures since the last reporting period, be it quarterly or yearly.  Left unreported, is the index change; the raw figures representing price changes over the period chosen, be they up or down.

Confusion between the two was at the heart of the Kumeu rent review dispute.

An annual rent review clause in Kumeu Childcare’s lease allowed rent to increase by the ‘amount of the proportionate increase in the consumer price index.’

Their rent dispute went to arbitration, with the arbitrator agreeing with the landlord: prices making up the index had increased over the 2022 year by 7.2 per cent.

In the High Court, Kumeu Childcare argued this calculation was fundamentally wrong.  The word ‘proportionate’ in their lease required an assessment of the percentage difference between the published annual percentage change at end of year 2021 (being a 5.9 per cent change over the previous year) with the percentage annual change at end 2022 (being 7.2 per cent).

Not so, ruled Justice Becroft.

The arbitrator’s calculation correctly relied on raw figures in the index, resulting in a new annual rental of some $307,000.

A&H (Kumeu) Ltd v. Kumeu Playschool Ltd – High Court (9.04.25)

25.106