Fair Trading: Dieulangard v. Dyson

Befriended by a New Zealand couple and then ripped off, French osteopath Pascal Dieulangard was awarded $459,000 damages for money sunk into a non-existent Helensville property development.

Auckland property developers Jeremy and Nelly Dyson were held liable in the High Court for deceiving their French friend with a fabricated story of a property development ready to go when in fact it never got off the ground.  Mr Dieulangard was shown the Helensville site of proposed three-level apartments called the Kaipara Mill Project, together with architectural drawings, advertising and promotional pamphlets.  He was encouraged to invest being told land had been secured ready for the project, when in fact it had not. 

Evidence was given that Mr Dieulangard visited New Zealand regularly, sometimes staying with the Dysons.  He left his motor vehicle with them whilst back in France, free for them to use.  The fact Mrs Dyson speaks French made for a relaxed friendly relationship.  The Dysons co-sponsored his application for residency writing a letter in support detailing the extent of his investments.

Justice Muir ruled the Dysons were in breach of the Fair Trading Act and also in breach of fiduciary duty.  Mr Dieulangard was told they were in partnership.  The Dysons’ failure to account for partnership monies was in breach of a duty owed fellow partners.  The Dysons misleading and deceptive behaviour regarding the proposed Helensville development was in breach of the Fair Trading Act.  The Dysons did not defend the case.  

Dieulangard v. Dyson – High Court (4.03.16)

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Insolvency: Willburn Furniture v. Gledhill

Mathew Gledhill has been ordered to pay $122,400 after milking assets out of his Christchurch company Willburn Furniture and Restorations Ltd leaving creditors unpaid.

The Gledhill family’s antique furniture and restoration business received insurance payments totalling $322,000 after its central Christchurch premises were destroyed in the February 2011 earthquake.  Four years later, the company was in liquidation with no assets and creditors unpaid.  Inland Revenue was owed the most: $96,765.

The High Court was told company cash had been used by Mr Gledhill to pay personal expenses for clothing, groceries, dining out, alcohol and entertainment with additional drawings in cash.  Some of the money was traced to the purchase of a vessel called the “Calanthe” and to berth rental fees in Port Marlborough.  A Nissan Caravan van owned by the company was transferred to a new owner just three days before liquidation.  The company received no payment.  A public auction of company stock and equipment realised $33,680.  This was paid into the bank account of Mr Gledhill’s son, Cameron.  He subsequently repaid $11,000 to the company, but claimed the balance retained was from the sale of private assets and family heirlooms. The two did not defend legal action taken by Willburn liquidators to recover creditor losses.

Justice Dunningham ruled Mathew Gledhill was in breach of Companies Act directors’ duties.  He did not act in good faith, he used his powers as a director for improper purposes and he acted recklessly by taking company assets leaving creditors unpaid.  He was ordered to pay the $122,400 creditors' shortfall plus liquidation costs of $26,100.  Liquidation was a direct consequence of his breach of directors’ duties and was made more difficult by his lack of co-operation with the liquidator and his provision of conflicting and unsupported explanations for use of company cash, Her Honour said.

Cameron Gledhill was held liable to repay $22,680, breaching the Property Law Act by taking money received from the auction of company assets.

Willburn Furniture v. Gledhill – High Court (2.03.16)

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Lease: Cameron & Co v. McVicar

A Christchurch commercial tenant four years into a 15 year lease was given two months to pack up his business and his personal effects when the property was sold out from underneath him in a mortgagee sale.  Secured creditors can ignore leases given after a mortgage is set up unless they have consented.

Mr McVicar felt he had been shafted after given notice to quit his leased property at 227 Fitzgerald Avenue in Christchurch.  He took out a 15 year lease on an earthquake-damaged building in 2015 at $400 per week.  It was used as a clothing retail outlet.  He also lived in a small part of the building.  Mr McVicar used his skills as a builder to remediate some of the earthquake damage, successfully reversing a local authority demolition order.

Evidence was given the landlord cancelled his building insurance in late 2010, months prior to the February 2011 earthquake.  Secured creditors hold a $378,000 first mortgage security, registered back in 2004.

The High Court was told police were called when hostilities broke out between Mr McVicar and his landlord: the landlord complained rent was in arrears; Mr McVicar said the landlord had not reimbursed him for work done protecting and preserving the building.  Police invited lawyers acting for secured creditors to step in and sort things out.  It was in the secured creditors’ interests that lease payments be made.  The landlord could than pay interest due on the mortgage.  With a mortgagee sale looming, Mr McVicar canvassed the possibility of buying the property himself.  Nothing came of this.

With the landlord in arrears on loan repayments, secured creditors’ gave notice of a forced sale requiring Mr McVicar to vacate.  They were not bound to honour the lease.  Their mortgage security was taken before the lease was given.  They had not consented to the lease.

Associate judge Matthews said consent requires a positive affirmative act.  The creditors had notice of the lease.  Their solicitor had been given a copy.  Knowledge does not amount to consent.  Their solicitor had attempted to mediate in the dispute between landlord and tenant, but was careful to make it clear that this was not consent to the validity of the lease.  While the McVicar lease was enforceable against the landlord, it was not enforceable against the prior secured creditors who had not given consent.  The mortgagee was entitled to vacant possession on a forced sale.

Cameron & Co v. McVicar – High Court (29.02.16)

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Fair Trading: Aldrie Hldgs v. Clover Bay

Fudging the facts about a farm’s milk production cost Kaukapakapa farmer Roger Prout $250,000 damages for breach of the Fair Trading Act in negotiations leading up to the 2013 sale of his farm.  Damages initially assessed at $500,000 were cut in half because of inadequate due diligence by purchaser Pauline Laboyrie.

The High Court was told Ms Laboyrie purchased Alpine Road Farm north of Auckland after following up an advertisement on TradeMe.  She had limited farming experience, but had been in relationships with farmers in both Kaukapakapa and the Waikato.  She purchased Alpine Road Farm for $2.9 million after speaking with Mr Prout, asking some questions by phone and making a brief site visit.  No professional advice was sought on the farm’s economic viability.  No budgets were prepared. 

Justice Heath found that Mr Prout had misled Ms Laboyrie about the farm’s production levels.  In stating past output, Mr Prout did not mention total output included production from cows grazed on land leased from neighbours.  Production attributable only to cows grazing the land being sold was much less.  Justice Heath said Ms Laboyrie would not have purchased the farm had the true position been disclosed.  Mr Prout was liable for a breach of the Fair Trading Act.  He was described as a dairy farmer of some thirty year’s experience.  He is also a licensed real estate agent and operates a yacht charter business. 

Aldrie Holdings v. Clover Bay Park – High Court (24.02.16)

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Defamation: Arnold v. Fairfax

Claim and counterclaim in High Court defamation proceedings are underway between Invercargill mayor Tim Shadbolt and councillor Karen Arnold.

Ms Arnold alleges the mayor in his fortnightly newspaper columns questioned her honesty and integrity when she criticised the operation of Invercargill City Holdings, owner of the city airport and electricity supply company.  She further alleges the mayor defamed her in criticisms of her support for proposed tourist attractions featuring tuatara and kakapo.  The mayor’s column in The Southland Times dismissed one of her plans as being “a harebrained scheme to support a parrot”.

In a preliminary High Court hearing, Ms Arnold challenged Mr Shadbolt’s proposed defence in which he is arguing the comments made were not defamatory, but if held to be defamatory are protected as being honest opinion.  These two defences are inconsistent, she said.  You cannot stand behind both at the same time.

Justice Clifford ruled alternative defences are acceptable at law, even though they may appear inconsistent to a lay person.

Mr Shadbolt is countersuing alleging he was defamed in correspondence Ms Arnold sent to the Southland Times editor.  He alleges the letter maligns his independence, suggests he lies to council and that his conduct is motivated purely by animosity towards Ms Arnold.  These claims have yet to be heard.  Justice Clifford struck out that part of Mr Shadbolt’s defamation claim where Ms Arnold’s letter said she had been subject to “a rambling verbal assault”.  This phrase was not capable of a defamatory meaning, he ruled.  It describes unfocused and ineffective talk. 

Arnold v. Fairfax – High Court (23.02.16)

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