Environment: Trent v. Canterbury Region

Challenges to resource management fines imposed for a 2018 ammonia leak killing aquatic life in Christchurch’s Kaputone Creek were dismissed.  Polarcold Ltd, now known as Emergent Cold Ltd, was fined $145,350; manager Russell William Trent fined $97,000.

Trent said his fine was excessive, given that the maximum fine for corporates is set at a figure twice that the maximum for individuals: $600,000 for corporates; $300,000 for individuals.

Ammonia leaked into Kaputone Creek when Trent was supervising the decommissioning of Polarcold compressors.  Some 1780 dead fish, mainly eel, were found along a five kilometre stretch.  When prosecuted under the Resource Management Act, both Polarcold and Trent pleaded guilty. There had been no prior breaches of the Act.

Trent appealed his fine, saying it was out of kilter with the fine imposed on his employer Polarcold.  His fine was 32 per cent of the maximum allowed under the Act; Polarcold’s fine was 24 per cent of its maximum.

Sentencing does not require fines to equate in a proportionate way, the Court of Appeal said.  Culpability of joint offenders is not always equal.  And the maximum penalty for individuals is not solely a maximum fine of $300,000, it said.  Individuals are also potentially liable for up to two years imprisonment. Corporates, by comparison, cannot be sent to prison.

Trent v. Canterbury Regional Council – Court of Appeal (21.04.21)

21.071

Fraud: Farina v. R.

With fourteen previous convictions for fraud-related offences, Begum Samuels Farina gained work as an accounts clerk for Horizon Radiology under a false name and then proceeded to steal from her new employer.  The High Court confirmed her sentence of ten months home detention and an order for $21,000 reparations.

The High Court was told Farina started work with Horizon’s Auckland Parnell office in September 2016.  She had authority to access Horizon’s online banking and to action client refunds.  Within six months she had on some twenty separate occasions diverted client refunds into her personal bank account.  Further refund money continued to pass into Farina’s bank account after she resigned because her bank details had not been purged from Horizon’s client bank account database.  The trial judge described her as a ‘fundamentally … dishonest person.’

Farina appealed her sentence, claiming it was excessive given the amount stolen.  Justice Toogood confirmed the period of home detention and order for reparations, for what he described as a premeditated theft by calculated means committed by a person in a position of trust.  One hundred hours community service included by the trial judge as part of Farina’s original sentence was quashed.  Community service is not commonly imposed in conjunction with sentence for a long period of home detention, Justice Toogood said.

Farina v. R. – High Court (15.04.21)

21.070

Erceg: Sain v. Erceg

Brother and sister Ivan Erceg and Vinka Sain each claim ownership of an Auckland Epsom property on Withiel Drive with a rating valuation of $5.7 million previously occupied by their late mother, Millie.  Ivan says he inherited under his mother’s will; Vinka says it was never Millie’s to give away, it was held in trust for her.

Withiel Drive was purchased by their sibling Michael in 2004, for $1.7 million.  The following year, Michael died tragically in a helicopter accident.  He died a wealthy man, after sale of Independent Liquor at a price rumoured in excess of one billion dollars.

Circumstances surrounding purchase of Withiel Drive played out in the High Court after Millie’s death in 2019.  Michael put up the cash for purchase of Withiel Drive in 2004, with title put in name of his mother Millie.  Vinka says her brother Michael made it clear at time of purchase that ownership passed to her on Millie’s death.  There is evidence supporting this: conversations Michael had with Vinka, her husband, their son and a builder who carried out renovations on Withiel Drive together with comments made by Millie herself when alive.  Vinka says that while title to Withiel Drive was in Millie’s name, Millie held the property in trust for her.

An initial court hearing saw argument over technical legal issues.

Without directly challenging evidence of a trust, Ivan claims any trust over Withiel claimed by Vinka is not enforceable.  Recent rules in the Property Law Act 2007 require a trust involving land to be in writing and signed by the person creating the trust. There was no document signed by Michael creating a trust over Withiel Drive. Associate judge Bell said the new rules did not apply; Withiel was purchased in 2004, before the 2007 rules came into effect.  The Limitation Act 2010 requires claims for breach of trust to be filed within three years of any breach.  Associate judge Bell said there are no time limits where the complaint is that a trustee wrongly converted trust assets to their own use.  There was no legal bar on Vinka bringing her claim for breach of trust.

Ivan was ordered to file a formal statement of defence.

Sain v. Erceg – High Court (14.04.21)

21.069 

Bankruptcy: Memelink v. Haines

The concurrent bankruptcy imposed on litigious Wellington debtor Harry Memelink in March 2020 was set aside because debts allegedly due were not formally proved in court.  The court hearing shone a light on tangled stratagems by Quentin Haines, Memelink’s former legal adviser, seeking to avoid forced sale of his own home.

Mr Memelink’s commercial behaviour has kept the courts busy for many years with multiple legal actions over disputed debts.  He was bankrupted in August 2018 after failing to pay a court costs order imposed following his unsuccessful negligence claim against his then lawyers: Collins and May.

Whilst bankrupt, he was bankrupted again in March 2020, this time on the application of another lawyer formerly acting for him: Quentin Haines.  This concurrent bankruptcy was set aside by the Court of Appeal; Mr Memelink’s earlier 2018 bankruptcy still stands.

The Court of Appeal was told of complicated legal manoeuvres that led to the second bankruptcy application.  Mr Haines became embroiled in Mr Memelink’s business affairs when Mr Haines took out a second mortgage over his Levin property in favour of Fico Finance.  Part of this Fico loan was advanced to Mr Memelink.  Loan repayments were guaranteed by Mr Memelink’s family trust. Following a subsequent dispute over liability for interest, Mr Memelink had his family trust buy up the Fico second mortgage and threatened to sell up Mr Haines’ Levin home.  A forced sale was blocked by court order, pending resolution of the argument between Mr Haines and Mr Memelink.  The Court of Appeal was told Mr Haines then arranged to break Mr Memelink’s family trust’s hold over the Levin property as second mortgagee.  Mr Haines had a prior first mortgage over the Levin property bought out by friendly allies and the property then sold in an arrangement which allowed Mr Haines to lease back his Levin home.  This sale by the replacement first mortgagee did not raise enough to repay the second mortgage now held by Mr Memelink’s family trust.  It was left as an unsecured creditor; the mortgage was valueless as security.

Mr Haines was then back in court seeking to bankrupt Mr Memelink on a court costs order, part of their dispute over the Fico mortgage. The Court of Appeal ruled the High Court had no grounds to bankrupt Mr Memelink.  First: the costs order claimed was incorrectly claimed as a debt owed by Mr Memelink personally; it was not, it was a debt owed by Memelink’s family trust and his trust in turn was owed a greater amount in another costs order against Mr Haines’ family trust.  Secondly: debts allegedly owed by Mr Memelink personally to other creditors which had arisen since his first bankruptcy and left unpaid were not proved in court.  It was not enough for Mr Haines lawyer to state in court that other creditors wanted to see Mr Memelink bankrupted a second time.  These debts were levies imposed by three separate body corporates.  Mr Memelink has a history of disputing levies imposed by body corporates.  The body corporates had to separately apply to court for Mr Memelink’s further bankruptcy.

Memelink v. Haines – Court of Appeal (14.04.21)

21.066

Property Sale: Ma v. Li

Yang Li claims the amended price on an agreement to sell her south Auckland rental for $1.14 million was simply a ploy to drive up the price in future negotiations.  Not so, the High Court ruled.  It led to a binding sale at that price.

Ms Li appointed LJ Hooker as agents to sell her rental property on Bremner Road, Karaka, at an asking price of $1.35 million. Close friend Eric Fang worked for Hooker.  In August 2020, he presented a signed offer from Congmei Ma, offering $1.08 million. Any increase in offer price from Ms Ma was unlikely, he said.

The High Court was told Ms Li amended the offer price to $1.14 million, initialled the amendment, and signed as vendor.  This was a ploy to attract interest from other buyers at a higher price, she said.  She had no expectation that the $1.14 million counter-offer would be presented to Ms Ma.  The counter offer was agreed and signed by Ms Ma when Mr Fang presented her with the amended sale agreement.  Ms Li denied there was a binding contract.  Mr Fang had no authority to present the $1.14 million counter offer to Ms Ma, she said.

Associate judge Andrew ruled the contract enforceable at $1.14 million.  Mr Fang acted within terms of Hooker’s listing agreement by presenting the counter-offer to Ms Ma.  Her acceptance of this counter-offer created an enforceable contract.

Ma v. Li – High Court (14.04.21)

21.067 

Family Trust: Reany v. Reaney

First use of new powers allowing receivers to take control of deadlocked family trusts was put on hold by the High Court.  In the absence of pressing commercial necessity, all affected parties must be given a chance to present their side of the story in court.

The Reaney Family Trust owns property in Pukekohe, south Auckland.  Husband and wife Anthony and Jennifer Reaney are trustees, together with Jennifer’s mother Diane.  The High Court was told all three lived together on the property; but Anthony and Jennifer are now estranged and Diane plans a move into a retirement village.  Jennifer and her mother are looking to sell the Pukekohe property.  Anthony refuses to sell, saying he will only agree once Jennifer resumes their relationship.

A February 2021 sale at an above-market valuation fell through after Anthony refused to sign the contract.  Jennifer and her mother took to the High Court, asking the court to exercise new powers in the Trusts Act to remove Anthony as trustee and appoint a receiver to take control of the Trust’s only asset: the Pukekohe property.  Anthony was given no notice of the court application.

Justice Jagose ruled a ‘without notice’ application will be heard only if absolutely necessary.  Giving Anthony notice and allowing him to give evidence would not cause ‘undue delay or prejudice,’ he ruled.  There was no evidence of a pressing commercial need to remove Anthony as trustee, expediting a sale.

Reaney v. Reaney – High Court (14.04.21)

21.068 

Sofitel Auckland: Een v. Body Corporate 384911

Disgruntled investors owning apartments in the same building as Sofitel Auckland Viaduct Harbour Hotel failed to overturn body corporate rules forcing them to contribute towards building security, part of their ongoing dispute with the Pandey family over hotel operations.

In 2011, most unit holders agreed to lease their apartments to Pandey-controlled CP Group enabling an Accor branded hotel to then operate from the site.  Revenue from hotel operations was fed back to those apartment owners agreeing to lease. This arrangement came to an end with the covid-19 pandemic and collapse of inbound tourism.

After a $4.2 million refit, CP Group then relaunched hotel operations on site as Sofitel Auckland Viaduct.  New leases were required for those unit owners wishing to have their apartments used in hotel operations.  A minority of apartment owners, between them owning 45 per cent of residential units, refused the deal on offer.

There is a decades long back-story of bad blood between CP Group and Viaduct apartment owners, many of them from Singapore and Malaysia.  Back in 2010, when the building was also under control of CP Group, apartment owners were in a legal tussle over rental arrears totalling some $3.5 million.  In 2020, Prakash Pandey had a CP subsidiary acting as the hotel apartment-leasing agent put into liquidation.  The then existing apartment hotel leases were disclaimed by the liquidator; the leases came to an abrupt end, leaving apartment owners with no revenue.  A 45 per cent minority have refused to agree new terms for use of their apartments by the hotel.  Pandey family is improperly loading hotel costs on to them through body corporate levies, they allege.  Part of a campaign to force them into signing up to new hotel lease terms, they complain.

Back in court, disgruntled apartment owners challenged a body corporate resolution forcing them to share the cost of building security.  Up to July 2020, cost of a security presence 24/7 in the hotel’s main lobby was a cost born by the hotel.  On the hotel’s re-opening, two carefully-crafted resolutions were put to body corporate apartment owners.  The first required 75 per cent support.  It stated lobby security would be resumed at no direct cost to the body corporate. This resolution did not pass; the disgruntled minority voted against, telling the High Court this resolution was perceived as a back-door attempt to force them into a leasing arrangement with the hotel on Pandey family terms.  The second resolution required only fifty per cent support.  It required the body corporate pay security costs.  The disgruntled minority did not have the votes to block this resolution.  They went to the High Court challenging this resolution under the Unit Titles Act as being unjust and inequitable.

Justice Gordon dismissed their claim.  All apartment owners get the benefit of security provided 24/7, she ruled.  The resolution was not discriminatory in its application.  The cost of about $151 per month for each apartment owner was reasonable, she said.

Een v. Body Corporate 384911 – High Court (1.04.21)

21.064 

 

Post Judgment Note: The Court of Appeal subsequently set aside the second resolution as invalid.  The resolution was unjust.  It forced hotel-level security costs for 24/7 security on a minority who did not want or need this level of security.  Security costs for residential apartments would be a fraction of this level.

Treaty Settlement: Poutu v. Attorney-General

Clumsy legal drafting saw government mistakenly write in a ten million dollar discount on price of properties being purchased by Te Atiawa as part of its $87 million Treaty settlement.  A court order was needed to correct the error, with Te Atiawa protesting government should be held to its written word.

Tribal members of Te Atiawa live primarily in Taranaki and Wellington.  In a 2014 Treaty claims settlement, Te Atiawa agreed to $87 million government compensation with 52 government owned ‘landbanked’ properties made available as part-payment in kind.  It was agreed these properties were available for purchase by Te Atiawa at market price with one exception: a twenty per cent reduction in price would apply to any purchase of the New Plymouth Courthouse; a symbolic acknowledgement of the wrongs suffered by Te Atiawa at the hands of a colonial legal system.  In negotiations however, it was clear government was looking to minimise this financial loss by requiring a twenty per cent discount on market rents when Te Atiawa leased the site back to government.

The High Court was told a drafting error in their Treaty settlement agreement saw the twenty per cent purchase discount being available not just for the Courthouse, but on purchase of all 52 landbanked properties.  Representatives of both Te Atiawa and government signed, unaware of the mistake. Four years later, government recognised the error and contacted Te Atiawa.  Government should be held strictly to terms of the contract it had signed, Te Atiawa said.

In the High Court, Justice Clark ordered the contract be rectified to correctly express their prior agreed terms.  Te Atiawa had neither noticed nor relied on the mistake, she said.  The document did not accurately reflect what all parties had agreed in pre-settlement negotiations.

The court was told that prior to the High Court hearing, Te Atiawa had already purchased most of the landbanked properties, paying market price.  But these purchases were made on the basis that it would get money back if the court ruled Te Atiawa was entitled to the stated discount.

Pouto v. Attorney-General – High Court (1.04.21)

21.065

Property Development: Luo v. Jin

With no written agreement for their multiple property developments and with movements of money between accounts not clearly documented, two Asian investors are in court arguing over who owns what.

Lin Luo and Qian Jin dispute ownership of multiple property developments in Auckland, Hamilton and Rotorua.  Legal title to the properties were taken variously in the names of Ms Luo, Mr Jin and related companies.  Their various projects kicked off in 2011, in part through a company called W & L Ltd. Ms Luo was sole shareholder and director, but acknowledges Mr Jin has a fifty per cent interest in the company. The High Court was told Mr Jin was kept off the share register because he was not a New Zealand resident at the time joint venture operations started.  Four years later, their business relationship fell apart.

A court hearing to settle ultimate ownership of all disputed properties is scheduled for later this year.  Meanwhile, Ms Luo was in court defending her right to lodge a caveat over a property on Farnworth Avenue in Rotorua registered in the name of Mr Jin.  Her caveat has the effect of blocking any dealing in the land until their dispute is sorted out.  Mr Jin says Farnworth Avenue is not part of their joint venture projects; Ms Luo says she put money into Farnworth.  Their dispute is complicated by the fact Farnworth’s subdivision and redevelopment was initially a project jointly undertaken by Mr Jin and a Mr David Lee who was then in a de facto relationship with Ms Luo.

Associate judge Gardiner ordered the caveat remain. There was evidence Ms Luo had contributed some $237,000 to Farnworth: redevelopment costs, mortgage payments and payment of rates. A full court hearing is needed to identify whether this funding was a loan (as Mr Jin claims) or a contribution to joint venture expenditure (as Ms Luo claims) entitling her to share in Farnworth profits.

Luo v. Jin – High Court (31.03.21)

21.063

Insolvent Trading: Yan v. Mainzeal Property

Ground rules for assessing damages following insolvent trading were set down by the Court of Appeal, part of long-running litigation following the 2013 collapse of Mainzeal Property leaving $117 million owed unpaid creditors.

While Mainzeal did have an independent board of directors, primary control lay with entrepreneur Richard Yan.  Liquidators found much of Mainzeal’s cash had been spirited off shore to China in return for what proved to be vague and unenforceable promises by companies associated with Mr Yan to make repayment at a later date.

In 2019, the High Court ruled Mr Yan and fellow directors Peter Gomm, Clive Tilby and Dame Jenny Shipley were liable to pay damages totalling $36 million for breach of directors’ duties.  All parties, including the liquidator, appealed; challenging different parts of the High Court ruling.

The Court of Appeal confirmed Mainzeal directors were in breach of s.135 Companies Act; ‘carrying on business in a manner likely to cause serious loss to creditors.’  But no damages were payable.  Damages for breach of s.135 required proof Mainzeal’s financial position saw a ‘net deterioration’ between the date it was clearly insolvent (2011) and the date of subsequent liquidation (2013), the court said. Arguably, Mainzeal’s net position had improved over this two year period; liquidity was improved by shareholders putting in more cash and final payment was received on completion of a number of construction contracts.

Mainzeal directors were also in breach of s.136 Companies Act; ‘incurring obligations at a time when there were no reasonable grounds to believe the company would be able to perform these obligations.’ Directors were potentially liable for damages totalling some $63.5 million for failure to comply with s.136, the court ruled.  This was ‘new debt,’ incurred after the company should have stopped trading in 2011.

The case was sent back to the High Court to decide the amount of damages Mainzeal directors should pay.  Trial judges have a discretion in assessing insolvent trading damages.

Yan v. Mainzeal Property and Construction Ltd – Court of Appeal (31.3.21)

21.060 

Overseas Investment: Land Information v. West Drury Hldgs

Foreigners holding a residence class visa must be ‘ordinarily resident’ in New Zealand to avoid being caught as an ‘overseas person’ when it comes to buying rural land in excess of five hectares. West Drury Holding, part-owned by Yin Zhufeng, paid a negotiated fine of $125,000 for breaches of the Overseas Investment Act.

In 2017, West Drury Holding Ltd purchased 23.3 hectares of rural land in south Auckland for $9.2 million.  Mr Yin held a 39 per cent shareholding in West Drury.  At the time of the purchase he was living overseas, but held immigration status as a New Zealand resident.  He was unaware that the Overseas Investment Act set out special rules for foreigners holding a New Zealand resident visa but living offshore. Government consent is need for purchases of rural land in excess of five hectares.  The fact Mr Yin, who was an ‘overseas person,’ owned more than 25 per cent of West Drury meant that West Drury was also an ‘overseas person.’

The High Court was told Mr Yin and West Drury ‘fessed up when made aware of the rules.  They co-operated with Land Information and the Overseas Investment Office.  The High Court affirmed a negotiated $125,000 penalty.

Land Information v. West Drury Holdings Ltd – High Court (31.03.21)

21.062

Govt. Grant: Trends Publishing v. Callaghan

With fraud suspected, Callaghan Innovation sued to recover a $383,000 initial instalment on a $17.2 million Science and Innovation grant made to Auckland-based David Alan Johnson and his company Trends Publishing.  Callaghan now seeks to bankrupt Johnson on a $1.2 million court costs order for legal fees incurred chasing down the money. 

Mr Johnson’s Trends Publishing International Ltd applied for a Callaghan grant after a crippling downturn in business following the 2008 Global Financial Crisis.  A subsequent audit found evidence Trends had misled Callaghan; in particular, Trends improperly categorised some of its expenses as research and development.

Their dispute escalated: Callaghan sued to recover its $383,000 initial payment; Trends counter-sued for $61 million, claiming Callaghan’s funding termination caused Trend’s failure.  End result: Trends lost in court; Justice Powell describing its case as hopeless.

He ordered Mr Johnson and his company Thecircle.co.nz Ltd pay Callaghan’s full legal costs and expert witness fees; a total of $1.2 million.  Mr Johnson and his company had managed the claim against Callaghan on Trends behalf and had paid its legal fees.

Unpaid for its $1.2 million costs order, Callaghan served a bankruptcy notice on Mr Johnson and a notice of statutory demand on Thecircle, precursors to triggering bankruptcy for Mr Johnson and liquidation for Thecircle.  Each challenged their notice, saying the failed $61 million claim had been appealed and the High Court costs order should not be enforced whilst an appeal was underway.

The mere fact of an appeal is not grounds to stop a winning litigant from enforcing a High Court order, Associate judge Andrew ruled. It can be enforced, unless the losing litigant first applies for a stay of execution, pending the result of an appeal. Neither Mr Johnson nor Thecircle had applied for a stay, the court was told.

Trends Publishing v. Callaghan Innovation – High Court (10.07.20); Callaghan Innovation v. Johnson – High Court (31.3.21)

21.061 

Maori: Mercury v. Waitangi Tribunal

Waitangi Tribunal powers to order return of land to iwi could not be used to poach land off another iwi, the High Court decided in a ruling which has ramifications for a court battle brewing over commercial control of Maori assets across the Auckland isthmus.  

Ngati Kahungunu seeks Waitangi Tribunal orders to recover land as compensation for Treaty of Waitangi breaches.  It is generally accepted that Ngati Kahungunu were treated shamefully by colonial settlers.  The iwi lost one of its major food sources when settlers illegally drained wetlands around Lakes Wairarapa and Onoke to create farmland.  Government restrictions prohibited leasing of forestry formerly under control of Ngati Kahungunu, forcing its sale as the only means of extracting economic benefit.  As compensation, Ngati Kahungunu were given land in south Waikato; land hundreds of kilometres away from the iwi’s rohe and land which was inaccessible and virtually worthless.  Some 800 hectares of this land was later compulsorily acquired for development of the Maraetai dam.  As a final insult, the level of compensation paid was reduced because creation of a lake behind the dam improved access to their remaining Maraetai land holding.

At the Waitangi Tribunal, Ngati Kahungunu is seeking compensation totalling some $800 million including return of title to Ngaumu forest and the bed of Lake Maraetai.  Mercury Energy objects; a successful claim will see it obliged to pay commercial rent to Ngati Kahungunu for use of land on which its hydro-electric assets sit.  In a preliminary report, the Tribunal indicated it is sympathetic to Ngati Kahungunu demands for ‘resumption.’  Resumption means return of land to Maori ownership.

The High Court ruled Tribunal powers to order ‘resumption’ of land currently held by state-owned organisations like Mercury Energy cannot be used to take land within the rohe of one iwi as compensation for Treaty of Waitangi breaches suffered by another iwi.  Land around Lake Maraetai sits within the rohe of Raukawa and Tuwharetoa.  Tribunal powers to order return of land to specific iwi can only be used to remedy Treaty breaches suffered by that iwi which originally occupied the land, Justice Cooke ruled.

Land privately owned cannot be subject of a ‘resumption’ order; the rules apply only to land held by the state or by state-owned organisations.

Mercury NZ Ltd v. Waitangi Tribunal – High Court (30.03.21)

21.059

Peer-to-peer Lending: Commerce Commission v. Harmoney

As a negotiating tactic, it failed. Challenged by Commerce Commission that its platform fee was an unreasonable credit charge, Harmoney asked what might be considered reasonable.  That is for the court to decide, the Commission responded. 

In 2018, the High Court ruled Harmoney’s ‘platform fee’ charged on each ‘peer-to-peer’ loan formed part of the loan contract, being part of the cost of credit.  Harmoney argued unsuccessfully that it did not make loans; it was merely a ‘match-maker’ bringing together lenders and borrowers.  This litigation is ongoing.  The Commission alleges Harmoney’s charges levied as a platform fee are unreasonable in that they exceed its costs for establishment of a loan contract.  Harmoney responded, requesting a detailed analysis by Commerce Commission as what might be a reasonable charge.  Ostensibly, this request was to narrow the issues before heading back to court.  In practice, it would enable Harmoney to sharpen its pencil in offering an out-of-court settlement.  Commerce Commission refused to play ball.  It does not have details of Harmoney’s cost structure, it said.  That is for Harmoney to disclose.  The High Court agreed.

Commerce Commission v. Harmoney Ltd – High Court (30.3.21)

21.058 

Money-Laundering: Customs Service v. Jeon

Attempting to smuggle cash out of the country should generally result in all the money being confiscated the High Court ruled, sending back to the District Court consideration of $24,800 found on a traveller flying out of Auckland for Sydney. 

Dohyun Jeon was charged with breaches of both the Customs Act and money-laundering legislation when checking in for a Sydney flight in September 2019.  He did not complete a border cash report required when taking more than $10,000 out of the country.  He belatedly made disclosure when a search of his baggage was underway.  He declared $13,700 in cash.  A total of $13,800 was found in his baggage and his wallet.  He denied having any more cash.  Another $11,000 cash was found in an envelope in his pocket.  He told Customs the money came from casino winnings, money given him by his parents and proceeds from sale of a watch.

At a District Court hearing, Jeon pleaded guilty saying the money came from employment as a project manager for property development company On Point Construction Ltd and that conviction for money-laundering would affect his work since many construction projects require project managers to first get a clean police report.

The judge discharged Leon without conviction, ordering all but $3000 be returned.  Customs appealed.  Forfeiture of only $3000 was too lenient, it said, weakening the legislation’s effectiveness.

In the High Court, Justice Wylie agreed Jeon’s offending was at the lower end of the scale; discharge without conviction could stand. But the question of forfeiture was sent back to the District Court for reconsideration.  Return of any money at all requires evidence of disproportionate hardship resulting from forfeiture.

Customs Service v. Jeon – High Court (24.03.21)

21.057

Elder Abuse: Scott v. Garnham

Sisters Jazz and Ann Scott want to know what happened to between $200,000 and $400,000 of their mother’s assets that disappeared when under control of brother Paul.  Legal action has been taken.

Mary Patricia Scott-Smith died in February 2015, diagnosed with dementia.  Her net estate was valued at some $250,000.  Circumstances in which everything was left to daughter Ann came to light in a Family Protection Act claim by sister Jazz.

The High Court was told their mother sold the Wellington family home at Seatoun in 2003, buying a new home in Strathmore Park. Six months later, Paul moved in. The financial surplus on sale of Seatoun is unaccounted for.  Five years later, Strathmore Park was sold with the proceeds shifted offshore as part of a plan for her move to Thailand with Paul and his wife Kenzie.  Six months later she was back in New Zealand, buying back her Strathmore property at the price she sold it for, but with insufficient funds to complete the purchase.  Paul said some $227,000 had been spent in the previous six months. The Strathmore re-purchase was completed with mortgage finance in the names of Paul, his mother Mary Patricia, and wife Kenzie.  All three names went on the title.  Over subsequent years, Mary Patricia lived variously with daughter Ann and also Paul.  Aged Concern intervened in 2011, after a physical altercation between Paul and his mother.  She was admitted to Wellington hospital.

Leaving everything to Ann in her 2009 will, their mother explained Paul ‘had had enough already’ and that Jazz was ‘not owed anything’ because there had been minimal contact between them.

Ann agreed Jazz was entitled to a share of their late mother’s estate, offering ten per cent.  After a Family Protection Act hearing, entitlement to a ten per cent share was confirmed.  The court ruling explicitly stated Jazz was also entitled to receive ten per cent of any recovery in legal action underway against brother Paul.

Scott v. Garnham – High Court (23.03.21)

21.056

Fraud: Taimoori v. Anmol Residential

Anmol Seth, falsely representing himself to Auckland’s Hindu community as Lord Anmol, was ordered to refund $239,320 to Mirza Taimoori, money advanced for a property development which never took place.

On social media, Mr Seth presented himself as a successful business man with interests in hotels and resorts.  His Facebook page was replete with images of expensive cars and a private jet.

The High Court was told he invited Mr Taimoori to take part in a joint venture for the development of Mr Taimoori’s property in Gray Avenue, Papatoetoe south Auckland.  The deal involved sale of Gray Avenue to Anmol Residential Ltd, a company controlled by Mr Seth.  Mr Taimoori was to put in $300,000 cash; Mr Seth to manage development of the site into three properties.  Mr Taimoori did not have the ready cash; Mr Seth steered him towards his own legal advisers who arranged a loan for Mr Taimoori.  Other than Mr Seth getting resource consent for the proposed subdivision, little progress was made over the next three years.  Evidence was given of progressively more desperate requests by Mr Taimoori for news about progress, all of which were fobbed off by Mr Seth.  Anmol Residential went into liquidation in October 2108.

Mr Taimoori sued.  Mr Seth said all cash had been used in payment of stage one preparatory expenses.  Invoices were produced, many with critical details blacked out; to protect the identity of those providing services, Mr Seth said.  After the originals were later produced in court, Justice Downs found the larger sums claimed related to entirely different property developments Mr Seth was involved in and that the largest claimed invoice for $138,000 was a complete fabrication.  Justice Downs ordered details of the forgery be passed on to police.

Mr Taimoori was awarded damages of $239,320; the money he had advanced less some minor payments returned by Mr Seth when Mr Taimoori needed funds for household expenses.  Mr Seth was in breach of a fiduciary duty owed Mr Taimoori, Justice Downs ruled.  Mr Seth held himself out as a business adviser and successful property developer, took complete control of the development, used his own legal advisers to set up Mr Taimoori’s cash contribution; all the while promising the money would be used solely to redevelop Gray Avenue.

Taimoori v. Anmol Residential Ltd & Seth – High Court (18.03.21)

21.055 

Parkview on Hagley; Unit Titles: Foreshore Equities v. Body Corporate 396688

Minority investors in Christchurch’s Parkview on Hagley successfully challenged moves by VR Group to corral hotel common area for its own benefit.

Based in Auckland, VR Group controls self-catering accommodation at venues throughout New Zealand.  Its website boasts over one thousand rooms being available.  At Parkview on Hagley, situated on Riccarton Road in Christchurch, it controls through associate company Travellers Inn Ltd 28 of the 40 apartments available for short-term accommodation.  VR Group also controls two commercial units forming part of Parkview, manages the hotel business and has its representative Arvinda Saluja chair Parkview’s Body Corporate.  Mr Saluja describes his role as ‘revenue manager’ for Parkview.

The High Court was told Parkview apartment owners were advised in early 2020 of a proposed Body Corporate resolution: eight car parks forming part of Parkview’s common property were to be leased to VR Group at a rate of fifty dollars per week per car park.  This was described as benefitting guests checking in, enabling them to park closer to reception.

Two unit owners requested further information, asking for: a valuation of the parking spaces; details of the proposed lease; a report on how the changes would affect unit owners use of the site and advice on whether Council resource consent was required.  Without responding, VR Group through Travellers Inn pushed through the Body Corporate resolution, using its majority control: 28 votes out of 40.

Minority owners banded together; objecting to the resolution, issuing a section 213 notice on the Body Corporate under the Unit Titles Act. The Body Corporate had favoured the interests of one owner, they said.  In effect, VR Group had granted a lease to itself of what was common area intended for use of all unit owners.

In the High Court, Justice Osborne struck down the lease resolution as not being ‘just and equitable.’

Foreshore Equities Ltd v. Body Corporate 396688 – High Court (16.03.21)

21.054 

Restraint of Trade: Christensen & Purdom Family Trusts v. Gordon

Within months of selling Trans-Space Industries for $1.92 million and agreeing not to set up a rival business within the next three years, Tim Gordon was selling aluminium office partitioning in direct competition.  The High Court ordered he stop immediately, with a further court hearing looming to assess damages.

Mr Gordon purchased Trans-Space in 2012.  It manufactures and supplies office partitioning. Seven years later he sold out to Trans-Space employees: Tony Christensen and Woody Purdom.  He agreed to a restraint of trade, not to compete against Trans-Space for a period of three years. The High Court was told Mr Gordon, his wife Angela and their son Joshua continued working for Trans-Space immediately following the sale. Evidence was given that Mr Gordon was actively seeking new business opportunities at that time.  He denied any plans to set up in opposition.  Within five months of signing a three year restraint of trade he agreed to buy competitor Autex PSL.  After taking control he changed the company name to Aluminate Solutions Ltd.  Mr Gordon immediately resigned from Trans-Space as an employee. Wife Angela was fired.  Son Joshua later left.

When challenged, Mr Gordon said he was not competing directly with Trans-Space.  Aluminate sold aluminium components which customers then assembled. Trans-Space was in a different line of business, he said; it manufactured and installed complete interior fit-outs.

Justice Palmer ruled Mr Gordon was in breach of the agreed restraint of trade.  Wording of the restraint prohibited ‘distribution’ of partitioning systems; distribution of components was a breach.

An injunction was issued prohibiting Mr Gordon from competing with Trans-Space.  He was ordered to hand over all profits earned.

Christensen & Purdom Family Trusts v. Gordon – High Court (16.03.21)

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Ethical Investments: Mohamed v. NZ Superannuation

Complaints that investments by Guardians of New Zealand Superannuation in the disputed territory of Western Sahara are unethical failed in the High Court.  The courts are unwilling to review broad policies of government-controlled organisations; courts will intervene if a specific decision is unlawful.

Guardians of New Zealand act as investment manager of government superannuation assets.  It manages assets totalling $44.7 billion, according to its most recent annual report.  Legislation requires Guardians to invest ethically, avoiding prejudice to New Zealand’s reputation.   

Polisario Front for Australia and New Zealand together with Western Sahara Campaign New Zealand are the public faces of local support demanding independence for Western Sahara, an area defined by the UN as a non-self-governing territory.  Previously under control of Spain, Morocco now exercises de facto control in the Western Sahara.  The area holds substantial phosphate deposits.

In June 2016, Morgan Stanley flagged OCP bonds issued by a Moroccan state-owned phosphate company as raising potential reputational concerns for investors, given political tensions surrounding phosphate mining in disputed Western Sahara.  Polisario said it was unethical for Guardians to hold OCP bonds.  Guardians had moved in and out of the OCP bond market; in 2019, it held OCP bonds for four months.  OCP bonds are on its ‘watchlist,’ Guardians told the court.

Polisario also criticised Guardians’ investments in companies operating in Western Sahara; predominately equity investments in European-based companies providing wind-based renewable energy and mining equipment, all utilised in the phosphate industry.

Guardians has developed and published a policy document; a responsible investment framework.  As an equity investor, it is in a position to engage with management in those companies where there are ethical concerns, the Guardians said. Interconnected global markets means there are very few businesses that cannot be linked in some way through supply and customer chains to undesirable ethical practices.  Too liberal an application of its responsible investment framework would exclude most investments, it said.

Judicial review procedures cannot be used to carry out a ‘merits-based’ review of Guardians’ investment decisions generally, Justice Woolford said.  Judicial review was not available as a challenge to investments in all companies that simply operated in Western Sahara.  There was no evidence that Guardians had failed to comply with its own responsible investment framework or had caused reputational damage to New Zealand. Guardians’ responsible investment framework properly complied with the New Zealand Superannuation and Retirement Income Act, Justice Woolford said.

Mohamed v. Guardians of New Zealand Superannuation – High Court (15.03.21)

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Insolvency: re Scott

Financially overstretched, Simon Francis Scott and Leone Margaret Scott of Beckenham in Christchurch have done a deal with creditors paying eighteen cents in the dollar.  The two have interests in a swathe of businesses, primarily in the hospitality sector according to Companies Office records.

In October 2020, a deal was put to creditors owed some $1.44 million.  Negotiations were put on hold when a further creditor surfaced. claiming $600,000 on guarantees for unpaid commercial rent.

The High Court was told of a reconvened creditors’ meeting two weeks later offering eighteen cents in the dollar on creditors’ claims of just over $978,000.  In the interim, claims by some creditors had been refined and the Scotts had agreed to kick in some more money.  All up, $100,000 was promised from their family trust with the Scotts paying a further $75,000 over time.

For an Insolvency Act part-payment scheme to stick, a majority of creditors owed 75 per cent of debt by value must agree, with High Court approval subsequently given.  The High Court was told two creditors out of thirteen voted against. Approval by value only just reached the 75 per cent hurdle.  In giving approval to the part-payment scheme, associate judge Lester commented proposed Insolvency Act schemes of arrangement should not be structured as a joint proposal like the Scotts; instead there should be two mirror proposals, each conditional on approval of the other.  Insolvency Act rules govern individual insolvencies, not joint insolvencies.

re Scott – High Court (15.03.21)

21.052 

Medical Practice: Glassey & Associates v. Takanini Surgery

Dr Sarah Glassey was blind-sided when she found fellow medical professionals Drs Luc Wee and Anitha Nair had gone behind her back setting up a side deal cutting her out of managing their supposedly jointly-run south Auckland medical practice.  Dr Glassey forced the business into liquidation, over their objections.

The three set up practice as Takanini Surgery Ltd in 2019.  Each was a director of the company and each owned a one-third share.  They each put in some $100,000 working capital as loans to the company. The High Court was told Dr Glassey was the primary doctor in attendance; the other two also had medical practices in Karaka and Pokeno.

Shortly after setting up business, Dr Glassey learnt her fellow professionals had jointly signed a shareholders’ agreement setting out, amongst other things, how they would vote their shares.  Between the two, they held a controlling 66 per cent interest.  Dr Glassey left the practice shortly after, saying she was cut out of management control. She sued to have Takanini Surgery Ltd put into liquidation, a strategy to recover her $100,000 working capital lent to the company.

Evidence was given that Drs Wee and Nair then transferred Takanini Surgery’s patient list to another company they owned.  Dr Glassey’s $100,000 debt was not ‘owing,’ they said.  There was an agreement repayment of shareholder advances was deferred until Takanini Surgery was profitable, they said.

Associate judge Andrew ruled Dr Glassey’s $100,000 loan was repayable on demand.  Dr Glassey had not seen and had not signed the shareholder agreement specifying a ‘non-withdrawal period.’  Since Takanini Surgery had no prospect of earning further income it was clearly insolvent; Dr Glassey as an unpaid creditor was entitled to force liquidation.

Glassey & Associates Ltd v. Takanini Surgery Ltd – High Court (15.03.21)

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Tax Debt: Inland Revenue v. NSTK Investments Ltd

Inland Revenue had Auckland property company NSTK Investments Ltd, owned by Navjot Singh Sidhu and Tanvir Kaur, restored to the Companies Register after being wound up with a replacement liquidator then appointed to find out why a $206,100 GST debt was not paid by NSTK when the company was sufficiently financial to transfer $1.17 million to shareholders and a shareholder company just prior to liquidation.

NSTK changed its name from Khanda Developments Ltd, just prior to shareholders putting it into liquidation in October 2019. Auckland-based Craig Young was appointed liquidator.  The liquidation was wrapped up six months later, with no indication of any investigation into the company and with creditors receiving no payment.

The High Court restored NSTK Investments to the companies register on Inland Revenue’s request, returning NSTK’s status to that of a company in liquidation.  Mr Young told the court he would resign as liquidator.  Insolvency specialists from KPMG have been appointed liquidators. 

Inland Revenue v. NSTK Investments Ltd – High Court (12.03.21)

21.049 

Contempt of Court: Spark v. Spud Consulting & Lester

Fines totalling $5000 were imposed on Melbourne-based consultant Mark Lester and his company Spud Consulting for contempt of court following failure to disclose information demanded by Spark in a disputed arbitration.  Spark alleges they overcharged for services provided.

Their dispute went to arbitration, with little result.  Spark claims Mr Lester and Spud Consulting Ltd are withholding information.  It got High Court orders demanding disclosure, again with little result.  Spark wants to see receipts for disputed consultancy expenditure.  Mr Lester says he cannot recall the transactions: ‘they could have been [mortgage payments], buying racehorses or putting funds into a development project as an investment,’ he said.  Mr Lester and Spud Consulting ignored an earlier court order that they pay to Spark its then court costs of some $56,700 incurred seeking disclosure.  Mr Lester said ‘payment’ has been made; $56,700 has been deducted from the amount Spud claims it is owed by Spark.

Justice Jagose fined Mr Lester and Spud Consulting $5000 for contempt of court and repeated the earlier High Court order to disclose required information.  They were ordered to pay interest on Spark’s $56,700 costs not yet paid and further ordered to pay Spark’s full legal costs in getting a contempt of court order.

Spark New Zealand v. Spud Consulting Ltd & Lester – High Court (10.03.21)

21.048 

Access Easement: Teece v. Veint

Station at Waitiri Ltd controlled by developer Tim Edney has upped the ante claiming default interest at $4500 per day from last December after US-based New Zealander David Teece failed to resolve rights to use an airstrip near Glenorchy.

Economist Dr Teece teaches at Haas School of Business, Berkeley.  In 1997, he purchased Paradise block at the foot of Lake Wakatipu, part of a larger property known as Arcadia Station.  The deal allowed use of Arcadia’s airstrip should construction of an airstrip on what was described as blocks one & two of Paradise prove unfeasible.  The two blocks did not prove suitable, but an aviation expert identified other parts of Paradise as potential sites for an airstrip.

Complications arose after 82 year old Jim Veint subsequently sold the balance of Arcadia to Edney’s Station at Waitiri for a reported sum of near $15 million.  Lodged against title to Arcadia is a caveat in favour of Dr Teece’s family trust claiming an easement over Arcadia allowing access to its airstrip.  Station at Waitiri says Mr Veint is in default by not having the caveat removed to provide clear title.  Default interest is due for late settlement, it says.

The High Court was told Dr Teece’s caveat was lodged over seventeen years ago, part of negotiations over permanent access to Arcadia’s airfield. Negotiations petered out, with no resolution.  Mr Veint said the caveat should be removed.  Dr Teece has done nothing in the interim.  He has never used Arcadia’s airfield.  Any claim has lapsed by reason of delay, Mr Veint says.

Associate judge Paulsen ruled the caveat remain, but indicated Dr Teece should move promptly to prove in court his claimed right of continued access to Arcadia’s airfield.

Teece v. Veint – High Court (9.03.21)

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Joint Venture: TDP 2018 Ltd v. Godfrey & Co Ltd

Thrown together with an overwhelming workload following the Christchurch earthquake sequence, loss adjusters Thomas Pasley and Godfreys were then over $2.7 million dollars apart in a dispute over allocation of costs when their shotgun joint venture came to an end. After seven expensive days argument in the High Court, Godfreys was ordered to pay $589,000 to balance costs.

The two businesses had informally discussed merger possibilities before the Christchurch earthquakes forced co-operation to deal with a massive workload assessing damaged properties.  The initial September 2010 quake led to some informal co-operation; the catastrophic February 2011 quake led to overnight negotiations agreeing an operational merger.

There was no formal written agreement.  The High Court was told their working relationship developed ad hoc in the face of practical realties on the ground.  It was not until three months after merger that it was agreed all invoicing would be made through Godfreys’ accounting system with net proceeds divided 62.5 per cent to Godfreys and 37.5 per cent to Thomas Pasley & Associates.  In determining ‘net proceeds’ each business was to carry its own costs, with each reimbursing the other for increased costs arising from their combined operations. Labour costs were a big component. Arguments later arose as to which staff were permanent employees (a cost to the employing business) and which were new staff or contractors (potentially assessed as increased costs of combined operations).  Demand for experienced loss adjusters had seen staff leaving to work on their own account.  Much of the High Court time was spent analysing the employment status of individual loss adjusters.  Godfreys claimed a $111,200 adjustment for managing director Mark Godfrey’s management time; it was agreed he would have overall management responsibility for joint operations and this cut into hours available for billable work, Godfreys said. This claim was disallowed.  There was never any agreement for this adjustment.

TPD 2018 Ltd v. Godfrey and Company Ltd – High Court (9.03.21)

21.046

Caveat: Katu v. Seth

Lodging caveats over title to land are a powerful legal weapon, but cannot be used when the dispute is simply about payment, as Vicki Katu found when she agreed to sell her south Auckland family home, part of a deal to bail out a failing business.

Ms Katu alleged Auckland accountant Anmol Seth acted fraudulently, welshing on payments promised as part of the sale.  The High Court was told Ms Katu’s family home in Gray Avenue, Papatoetoe, was owned jointly with her business partner Kevin Elliott.  Liquidity difficulties led them to Mr Seth who recommended they sell Gray Avenue to him, freeing up cash.  The agreed deal proposed a sale to Mr Seth with Ms Katu staying in occupation under a residential tenancy agreement.  A schedule of creditors to be paid out of net sale proceeds was agreed.  Payment of $140,000 to Ms Katu and Mr Elliott was to be deferred, paid after Mr Seth had subdivided the site, part of a new development.

Ms Katu alleges Mr Seth has not paid all scheduled creditors, as required.  She further alleges Mr Seth is lying when he claims the promised final payment of $140,000 has been paid.  A document supposedly signed by herself and Mr Elliott purporting to acknowledge receipt of the $140,000 is a forgery, she alleges.  They challenge a $40,000 fee charged by Mr Seth for what are described as liquidation expenses.

Ms Katu registered a caveat over title to Gray Avenue. Caveats give notice to the world of a claimed legal interest in the land.  Further dealings in the land are blocked.  Associate judge Bell dismissed the caveat.  Ms Katu’s dispute was about consequences of her sale of Gray Avenue, not a claim to Gray Avenue itself.  Title to land could not be blocked over what was a personal dispute over payment.

Katu v. Seth – High Court (8.03.21)

21.045

Liquidation Fees: re Pauanui Mountain Estate

Attempting to salvage something out of a problematic Pauanui subdivision, property developer Gregory Needham found all cash recovered was swallowed up by liquidator’s fees and expenses.

Based in Germany, Mr Needham ran short of cash completing a planned 66 hectare subdivision at Pauanui on the Coromandel coast. The first stage, with 42 fully serviced sites, was fully sold.  The second stage needed more working capital.  Funding in 2012 from financier John Samy saw subdividable land held by Mr Needham’s company Pauanui Mountain Estate transferred to a special-purpose company ultimately controlled by Mr Samy: Pauanui Dream Estate Ltd.  Bitter legal argument between the two resulted in a 2016 High Court ruling that Mr Needham had no management control of Pauanui Dream and was only a minority shareholder.

Meanwhile, Mr Needham put his vendor company Pauanui Mountain Estate into liquidation.  Seven years later, he was in the High Court criticising the actions of liquidator Kelera Nayacakalou.  Cash receipts in the liquidation amounted to some $107,000; the bulk of this arising from a $100,000 out-of-court settlement with Pauanui Dream Estate after Ms Nayacakalou claimed Pauanui Mountain’s land was transferred to Pauanui Dream at less than market value.

Of the $107,000 cash held, Ms Nayacakalou paid out about $57,000 in legal fees and billed $50,000 as her liquidation costs. Mr Needham challenged her fees as not being reasonable.

Conduct of a liquidation can be reviewed by the High Court.  Ms Nayacakalou’s performance raised questions: she was seriously ill for many months following surgery for a brain bleed; there were suspicions substantial hours billed at a higher rate in her name were for work done by a colleague. Her time records required some explanation.  One time sheet recorded a sixteen hour day drafting legal papers.

While Mr Needham criticised the liquidator’s $100,000 out-of-court settlement as being ‘soft,’ Associate judge Andrew ruled it was speculative as to whether there could have been any better outcome.  It is unlikely any adjustment would be made to the fee charged if there were a full review by the court, he said.  Time records supported a fee recovery in excess of that taken.

re Pauanui Mountain Estate Ltd – High Court (5.03.21)

21.044

Medical School: Roe v. Auckland University

Auckland University criteria limiting entry to its Medical School was upheld in the High Court.

Kelly Roe sued claiming she was entitled to automatic enrolment into Medical School on the basis she was a domestic student aged twenty or above and as such entitled as of right to enrol at university in a course of her choice.  This after she was denied Medical School entry for 2019 and 2020.  The High Court was told Auckland University admits 257 medical students each year.  For 2019, 864 applied; 2020 saw 903 applications.

Ms Roe was told by Auckland University that competitive entry for Medical School required her to either: complete the first year of an undergraduate health science or biomedical science degree; or have completed a fulltime degree at any New Zealand university in the last five years with a grade point average of at least six.  She did not satisfy this ‘recency’ requirement, having graduated from Waikato University back in 2006 with an MA degree.  In 2015, she enrolled in a health science degree, but withdrew after failing a paper.  She subsequently enrolled in the MPhil programme at Waikato University.  She completed this programme, but received a fail grade.

Justice Fitzgerald ruled there is nothing in the Education Act which prohibits universities from setting minimum academic criteria for determining which students will be enrolled in an oversubscribed limited entry programme.  This is consistent with the Act’s object of giving institutions as much independence as possible and is consistent with the efficient use of national resources, she said. Imposing a ‘recency’ requirement has a clear academic purpose, she said.  It ensures applicants have current expertise.

While Ms Roe was ‘eligible’ to enrol at Auckland University being a domestic student aged over twenty, she was not ‘entitled’ to consideration for entry to medical school because she did not satisfy criteria for the limited entry course.

Roe v. University of Auckland – High Court (3.03.21)

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