Family Trust: Hawkins v. Hawkins

Payment of an $100,000 inheritance into a family trust by a Christchurch bankrupt will be of interest to Insolvency Service.  Any inheritance arising whilst bankrupt is ‘after-acquired’ property which goes to pay prior bankruptcy creditors.

Associate judge Lester indicated details of litigation between trustees of a Canterbury family trust should be copied to Insolvency Service.  The litigation revealed funding for purchase of a Picton Avenue property in Christchurch came in part from an inheritance that should have been disclosed to Insolvency Service.

Errol Hawkins together with his wife Denise were bankrupted in 2009.  The High Court was told they set up a family trust shortly after, with three named trustees: son Samuel, daughter Angela and a corporate trustee: St Martins Law Ltd. Samuel and Angela were to later disagree over whether a trust in fact existed and how it operated.  The evidence was that their parents subsequently used trust assets as if they were their own and the trustees were only called into action when legal documents had to be signed on behalf of the Trust.

The Trust’s first major transaction was to purchase a section in Timaru costing some $42,000.  This was funded with a $45,000 ACC payment received by mother Denise. She was bankrupt at the time, but the ACC payment did not have to be surrendered to Insolvency Service.  It is now disputed whether her $45,000 payment to the Trust was a loan or a gift.  On the death of Errol’s mother about a year later, Errol arranged for the Trust to purchase her Picton Avenue home as accommodation for himself and wife Denise. Errol was still bankrupt at the time. The purchase was funded by his estate inheritance and a bank loan taken in Samuel’s name with guarantees from all three trustees.  Picton Avenue was sold in 2016 to fund a planned purchase by Errol and Denise of South New Brighton Motor Camp.

The trustees fell out with arguments over how the motor camp purchase should be financed with proceeds from sale of Picton Avenue.  Two trustees, Angela and St Martins Law, wanted to see trust monies advanced as a loan; Samuel instead used the funds to capitalise a company owned by himself, his wife and his father with this company purchasing the camp ground. 

Samuel was sued for breach of trust.  In response, Samuel denied a trust ever existed; the Trust was a sham and did not represent the factual realties, he said.

At a preliminary High Court hearing, Judge Lester ruled detailed evidence in court was needed to determine circumstances surrounding the creation and the operation of the supposed Trust.  He suggested Insolvency Service be notified immediately of circumstances surrounding Errol’s inheritance from his mother’s estate at the time when he was bankrupt.

Hawkins v. Hawkins – High Court (17.06.21)

21.101

Receivership: Jackson v. Kerr

Receivers of George Kerr’s Pyne Holdings Ltd were entitled to see all the paper work relating to his negotiations with BNZ over a disputed debt, even though they were in fact appointed by BNZ as receivers of Pyne Holdings.  In a classic example of legal schizophrenia; receivers act independently of their appointing creditor while at the same time getting in cash for the benefit of that same creditor.

In April 2021, Bank of New Zealand put Mr Kerr’s Pyne Holdings Ltd into receivership claiming some $67.7 million.  Mr Kerr disputes how much is owed.  Receivers from Calibre Partners were rebuffed when they demanded access to all Pyne Holdings’ records.  It was wrong that BNZ-appointed receivers should see company documents and legal advice setting out negotiating strategies in Pyne’s dispute with BNZ, Mr Kerr said.

The courts recognise legal professional privilege over lawyer/client discussions arising in the course of a dispute.  Holding that advice confidential means a client is more likely to make frank admissions, putting legal advisers in the best position to give proper advice. 

Where loan documents create a security over all assets, company receivers have a statutory right of access to all company records under the Receiverships Act, Justice Walker ruled.  As outsiders, receivers need information to sort out a company’s financial position.  BNZ has security over all Pyne Holdings ‘personal property.’  That includes all written records and files, including legal advice received.         

While the receivers could have access to all company documents, BNZ had no absolute right to see this information, Justice Walker cautioned.  The receivers act independently.  It is their decision, while acting in the best interests of Pyne Holdings, to determine how otherwise legally privileged information is used: to settle, to sue or to abandon any claim against BNZ.

Calibre Partners told the High Court it would not disclose to BNZ any legally privileged documents it accessed.  The High Court was told Mr Kerr currently lives in the United Kingdom.

Jackson v. Kerr – High Court (15.06.21)

21.100

Fraud: Estate of Micheal Kidd v. van Heeren

For readers of Dickens, the litigation rivals Jarndyce v. Jarndyce. Michael Kidd sued business partner Alexander Pieter van Herren for fraud in 1996. Twenty five years later Mr Kidd is dead, the case unresolved and the sum of $US 25 million sits in court being run down in payment of legal expenses and expert witness fees.

It took nearly twenty years of litigation through both the South Africa and New Zealand courts for Mr Kidd to get a court ruling that he had been defrauded by Mr van Heeren in his operation of their international steel trading partnership.  The New Zealand High Court ordered an interim payment into court of $US 25 million pending a further court hearing over damages.  There was a six year delay before Mr van Heeren paid this money into court, a delay exacerbated by what the Court of Appeal called attempts by Mr van Heeren to wriggle and twist at every turn resisting liability being sheeted home and any accounting for his wrongdoing.  Mr Kidd died two weeks after payment into court.  Executors of Mr Kidd’s estate want access to this money. Mr van Heeren says $US 25 million is an extravagant assessment of how much is owed; it could be as little as $US 2.6 million, he says.  The final figure for damages has yet to be established.

Meanwhile, Mr Kidd’s estate is accruing huge liabilities. The Court of Appeal was told Mr Kidd had borrowed against his expected court winnings from a litigation funder: LCM Operations Pty Ltd.  Initial borrowings of $US 4.3 million had ballooned out to some $US 17.25 million.  LCM is charging interest at thirty per cent, compounding annually.

Back in the New Zealand courts, Mr Kidd’s executor asked for an early release of the funds held in court.  While sympathetic to the executor’s position, the Court of Appeal ruled there were too many unresolved issues to second-guess what might be the full damages payable to Mr Kidd’s estate.  The court likened the litigation to a game of musical chairs in which the participant with the greater stamina not only wins the game but also gets to take home all the chairs.

The money remains in court.

Estate of Michael Kidd v. van Heeren – Court of Appeal (11.06.21)

21.098 

Professional Negligence: CBL Insurance v. PwC

CBL Insurance liquidators’ $278 million claim against PwC was struck out by the High Court as being frivolous; PwC’s contract to provide actuarial services limited its potential liability to just over five million dollars: five times fees earned.

CBL Insurance Ltd was pushed into liquidation insolvent in February 2018.  Liquidators McGrathNicol filed a claim against fellow professional services firm PriceWaterhouseCoopers alleging negligence in PwC’s actuarial assessment of CBL’s long-tail liabilities.  In particular, liquidators allege CBL systematically under-priced premiums on cover offered for builders’ liability on French construction contracts and that it was unreasonably optimistic in reserving for potential claims.  Years of under-reserving resulted in CBL reporting inflated profits for the years 2013 – 2016.  In fact, no profits were earned, the liquidators allege.  PwC provided actuarial services to CBL, issuing solvency certificates in support of CBL’s continued registration as an insurer.

At a preliminary High Court hearing, PwC had the negligence claim struck out as being frivolous, vexatious and an abuse of process.  Justice Gault ruled the plain meaning of PwC’s contract with CBL Insurance limited potential liability to five times fees charged.  A claim for $278 million was ridiculous when PwC fees for the period in question totalled some $1.1 million.

Liquidators were given leave to re-formulated their claim for a lesser amount.

Also struck out was legal action taken against both a PwC partner and an employee who personally signed off on the allegedly negligent solvency certificates.  In the PwC contract, CBL Insurance had agreed in no circumstances would it sue either PwC staff personally or any contractors employed by PwC to carry out its work.

CBL Insurance Ltd v. PriceWaterhouseCoopers – High Court (11.06.21)

21.099

Harassment: Elliot v. Vandenberg

Self-proclaimed as the ‘best non-qualified legal bro in the biz’ and claiming to have never lost a case, Stephen Raniera Rangi Elliot was ordered to stop harassing Napier gym owner Kerri Vandenberg.

The High Court was told Ms Vandenberg obtained a Harrassment Act restraining order against Mr Elliot and his partner Kirsten Parcell after a falling out between the two women; Ms Parcell was previously employed at Ms Vandenberg’s gym.  Mr Elliot acted as her advocate in a personal grievance claim.

Ms Vandenberg’s harassment claim arose from a pattern of some 24 communications over a fifteen month period starting June 2018: most being email messages from Mr Elliot to Ms Vandenberg, her lawyers and her business associates; some being social media posts by Ms Parcell.  One email labelled her lawyer as ‘another greedy, lying lawyer.’  In another, Mr Elliot stated ‘the way I make money is through litigations.’ An email to Ms Vandenberg’s business associates described her as a ‘very nasty individual’ and ridiculed her physical appearance.  A social media post incorrectly stated Ms Vandenberg was wanted by Napier police for questioning

Mr Elliot appealed the restraining order.  A Human Rights Commission mediation had settled all claims, he said.  The High Court was told this mediation arose from a complaint by Mr Elliot about circumstances in which he was refused membership of Ms Vandenberg’s gym and threatened with trespass should he return.  Mediation led to a confidential settlement with Mr Elliot to receive an undisclosed amount.  This settlement was described as being ‘an absolute bar to any further or other claim.’

This full and final settlement applied only to circumstances surrounding Mr Elliot’s gym membership, Justice Osborne ruled.  The District Court ruling that Mr Elliot had harassed Ms Vandenberg stood, he said.  The court was told she now lives in Australia.

Elliot v. Vandenberg – High Court (10.06.21)

21.097

Defamation: Staples v. Freeman

Heavy-handed debt collecting led to a defamation action and a High Court order to pay $350,000 aggravated damages.

The story begins with Malcolm Gibson’s employment as a quantity surveyor in 2013 by Claims Resolution Service Ltd, a company set up by Bryan Staples to help Canterbury homeowners resolve earthquake insurance claims.  Mr Gibson misrepresented his qualifications.  When Mr Staples found out, he refused to pay Mr Gibson’s invoices totalling some $170,000 saying the work done was of no commercial value.  Mr Gibson responded by selling his alleged $170,000 debt to Ironclad Securities Ltd for the sum of one dollar.  Ironclad’s recovery methods involved confronting Mr Staples and threatening to kill him if he did not pay within seven days.  Justice Doogue described what followed as an extortion attempt with a publicity campaign alleging Mr Staples used his company to defraud, mislead and cheat people.  A Facebook page controlled by Richard Freeman published posts stating Mr Staples was a conman, ripping off innocent people while acting as a bully and threatening the media.  When sued for defamation, Mr Freeman sent documents repeating these allegations to member of parliament Winston Peters.  Justice Doogue said this was a deliberate attempt to have Mr Peters repeat the allegations in parliament under protection of parliamentary privilege.  Mr Peters repeated in parliament, almost word for word, the allegations made previously by Mr Freeman.

Statements made in parliament have absolute protection from defamation claims.  But the simple act of a private citizen forwarding defamatory material to a third party is at law a ‘publication’ creating liability in defamation.  Justice Doogue ruled Mr Freeman liable in defamation for ‘publishing’ the comments to Mr Peters. Mr Freeman was also liable in defamation for the Facebook posts.

Mr Freeman did not defend the court case.  Ironclad Securities was removed from the companies register in 2016.

Staples v. Freeman – High Court (4.06.21)

21.096

Property Sale: Angurala v. Fernandes

Evidence of a red hot property market; two purchasers each claiming to have purchased the same Auckland property.

Eugene Fernandes claimed she is the rightful purchaser of a Mt Roskill property with Keemati and Manpreet Angurala agreeing to sell for $1.53 million cash in a contract signed on 12 March 2021.  There was an existing contract in place; a conditional sale to a Mr Singh for $1.6 million.

Ms Fernandes was to tell the High Court that the Anguralas had made a $535,000 capital profit in little more than a year of ownership and that she in turn had plans to make at least a $300,000 profit redeveloping the site. 

The High Court was told Mr Singh’s prior $1.6 million contract was negotiated through real estate agent Harcourts.  He had three days to arrange finance.  This finance condition expired on 12 March.  On the evening of 12 March, an agent from Barfoot and Thompson told the Anguralas that the Singh contract was at an end; finance had not been arranged.  She presented a $1.53 million cash offer from Ms Fernanades which they signed. Barfoots had no listing agreement, leaving their commission at risk.  Barfoots had the Anguralas sign a listing agreement next day.

Several days later, Ms Fernandes registered a caveat against the Mt Roskill property to block any transfer to Mr Singh.

Justice Hinton approved transfer of title to Mr Singh.  His prior contract still stood.  While the finance condition was not satisfied until one day after the 12 March date specified in his $1.6 million contract, standard contract terms required written notice of cancellation before his contract was at an end.  No written notice had been given at the time of the second sale to Ms Fernandes.

Terms of the court order require the Fernandes caveat to be reinstated after transfer of title to Mr Singh, complicating Mr Singh’s plans for the property.  The Anguralas, Mr Singh, Ms Fernandes, Harcourts and Barfoot & Thompson all have an interest in how the double sale is resolved. 

Angurala v. Fernandes – High Court (4.06.21)

21.095 

Forestry: Nottingham Forest v. Unison

Unison Networks was awarded $195,000 damages from Hawkes Bay forestry companies following repeated power outages caused by trees falling across transmission lines running up Esk valley.

Unison’s network runs through some of the most heavily plantation-forested areas in New Zealand: Rotorua, through Taupo to Hawkes Bay. Its Esk feeder, running about 500 metres through a plantation of pinus radiata, suffered a series of outages from 2010 following tree strikes. Managing the forest, Forestry Management (NZ) Ltd refused to clear trees closest to transmission lines unless Unison paid.  Unison sued.

The Court of Appeal ruled forestry companies are liable in the tort of nuisance for outages caused by persistent tree strikes. In Esk valley, Unison’s transmission lines ran through the forest along a cleared thirty metre wide corridor. Planted out in 1994, the trees had grown to nearly forty metres in height.  Wind storms and snowfalls periodically pushed down trees.  Those trees planted on a slope had fallen over the transmission line, causing multiple outages over several years; the worst, a six day outage in 2016 affecting some 380 customers.

There was no need to prove Forestry Management was ‘at fault,’ the court ruled.  It was strictly liable.  The continuing occurrence of tree strikes amounted to a legal nuisance.

Nottingham Forest Trustee Ltd v. Unison Networks Ltd – Court of Appeal (3.06.21)

21.094

Construction: George Grant Engineering v. Fabrication & Pipe

Claiming poor welding on steel fabrication at a Bupa retirement village under construction in Hamilton cost it some $320,000, engineering firm George Grant Engineering sued Fabrication & Pipe Services, without success.  Fabrication’s standard terms excluded all liability and were enforceable despite the contract being signed after work started. 

The High Court was told South Auckland engineers George Grant Engineering Ltd contracted to supply and erect steel framework for a Bupa village at Te Rapa.  Its original welding contractor pulled out at the last minute.  Hamilton welder Fabrication & Pipe Services Ltd was called in as a late replacement.

It took time for paper work to catch up with the job. On 17 January, Grant Engineering offered by email to pay $65 per hour for a Fabrication welder.  One day later, Fabrication agreed, sending by email a ‘credit application’ for completion.  Included in the email was Fabrication’s terms of trade, including an extensive exclusion clause excluding all liability by Fabrication for any losses. The email narrative made no mention of these terms of trade.

By 21 January, a Fabrication welder was on the job. Only after follow-up by Fabrication office staff did Grant Engineering return a signed credit account application on 31 January with the terms of trade attached.  The signed credit application included a statement confirming Grant Engineering had read and agreed to the terms of trade.  When suing for remediation costs of some $320,000 Grant Engineering said the exclusion clause had never been brought to its attention and it did not form part of their contract.

Fabrication disputed whether its welder’s work was not up to agreed specifications, but said the exclusion clause blocked legal action by Grant Engineering in any event.

The exclusion clause was part of the contract, Associate judge Andrew ruled.  Grant Engineering did have notice of the exclusion clause when receiving the emailed request to complete a credit application.  This was confirmed when the signed credit application was later returned to Fabrication.

George Grant Engineering Ltd v. Fabrication & Pipe Services Ltd – High Court (2.06.21)

21.093

Right-of-Way: Cornes v. Village Residential

Arguments over an upgrade for a Havelock North residential right-of-way proved fruitless as David Cornes and Rei Jones attempted to block redevelopment of a two hectare block of land sitting between them and Lucknow Road.

Hawkes Bay developer Village Residential Ltd has Hastings District Council approval to redevelop the two hectare Lucknow Road property, with subdivision into five separate lots.  Council consent required the right-of-way shared with Cornes and Jones to be upgraded as part of the development; it was in a state of disrepair, primarily disintegrating seal and loose metal.  Cornes and Jones objected to the proposed Village development, annoyed it would affect their privacy.  The court was told Mr Cornes at times parked his car on the right-of-way, attempting to impede contractors’ access.

Legal challenge to the development centred on wording of the easement creating the right-of-way.  Cornes and Jones said standard rules in the Property Law Act create mutual obligations to ‘maintain and repair’ rights-of-way.  That does not extend to an upgrade, they said.  Attempts to upgrade should be treated as a trespass and blocked by the court, they claimed.

Upgrading an existing right-of-way was compatible with Property Law Act rules for maintenance and repair, the Court of Appeal ruled.  Village Residential was allowed to upgrade the Lucknow Road right-of-way as required by Hastings District.

Terms of the right-of-way require Cornes and Jones to pay half the upgrade cost.  This creates an unfair burden, the court said, given that three of the newly subdivided properties would become entitled to use it.  It would be wise for Village Residential to negotiate with Cornes and Jones for a modification of payment obligations, the Court of Appeal warned.

Cornes & Jones v. Village Residential Ltd – Court of Appeal (31.05.21)

21.092 

Environment: Gifford v. District Court

The High Court gave Blenheim waste dump operator Mike Gifford the green light to challenge resource management charges laid by Marlborough District Council before he fronts up to any criminal prosecution; part of growing judicial control over potential misuse by local authorities of their ever-increasing powers to prosecute.

Power to prosecute lies with the state, commonly exercised by police.  Police procedures see decisions to prosecute reviewed, minimising the chances of prosecutions in pursuit of personally motivated vendettas.  With increased regulatory controls on business being passed over to government departments and local authorities, all backed by the power to prosecute, courts have stepped in to regulate use of their discretions to prosecute, allowing pre-trial judicial review of prosecutions.   

Marlborough District’s allegations that Mr Gifford failed to properly manage a landfill site at Redwood Pass south of Blenheim were given extensive publicity.  It filed criminal charges under the Resource Management Act.  Specifically, Marlborough District alleges a failure to properly contain grape marc dumped as a residue from wine production.  It is alleged marc has leached into both ground water and nearby Pukapuka Stream.

Mr Gifford has elected trial by jury on the resource management criminal charges.  Before any criminal trial, he asked the High Court to review the decision to prosecute. Charges should never have been laid, he said.  Council inspectors did not do their job properly and he should not face criminal charges to prove otherwise, he claims.

As a general rule, courts will not review before trial any decision to prosecute.  Criminal law allows an appeal as of right, if convicted.  The Attorney-General applied to have Mr Gifford’s judicial review application struck out.  Justice Isac declined.  It is unattractive that a citizen should have to either plead guilty or be convicted of an offence, and all that goes with that, before they can challenge the lawfulness of a prosecution, he said.

A full review of Marlborough District’s decision to prosecute has yet to be heard.

Gifford v. District Court – High Court (31.05.21)

21.091

Forestry: Kauapepe Forest v. Scott

Murray Ferris’ company was entitled to $162,000 for the value of trees planted out on a Northland forestry site, after left waiting for over five years with Mangamuka owners failing to sign paperwork extending existing forestry rights.

Forestry company Kauapepe Forest Ltd, controlled by Mr Ferris, acquired forestry rights over 488 hectares in 2010, buying trees ready for harvest.  This forestry right was to expire in 2020.  Kauapepe Forest clear-felled the site over the next four years.  In anticipation of replanting, Mr Ferris discussed with landowner Peter Scott the possibility of extending the forestry right for twenty years beyond 2020; sufficient time for the next harvest cycle.  The two agreed with a handshake, leaving it to lawyers to finalise the paper work.

The High Court was told Mr Scott was at that time finalising a relationship property settlement after separation from his then spouse.  This resulted in land beneath the trees being transferred to a family trust.  Mr Scott was no longer sole owner of the land; he became co-owner with fellow trustee Thomas Cowlishaw.  As co-owners, both had to sign off on the forestry right extension. Mr Cowlishaw refused to sign.  He first required an investigation into Kauapepe Forest’s financial stability, Mr Scott told the court.

Meanwhile, Kauapepe Forest had upgraded forestry roads, sprayed the logging slash with herbicide and replanted; Mr Ferris presuming all along that the paper work would be finalised.  Lawyers acting for Mr Scott prepared the necessary forestry right extension, but Mr Cowlishaw refused to sign.  Mr Scott told the High Court he was considering a court application to have Mr Cowlishaw removed as trustee of his family trust.

Frustrated at lack of progress, Kauapepe Forest sued. Justice Woolford awarded damages. Mr Scott had represented that an extension beyond 2020 would be formalised and Kauapepe Forest had incurred considerable expense relying on a promise that was not honoured.  Damages of $162,000 were calculated on the current market value of the trees planted.  This was some $17,500 greater than the replanting costs.

Kauapepe Forest Ltd v. Scott – High Court (27.05.21)

21.090

Family Trust: Tunku Family Trust v. Ballantyne

Convicted murderer Anthony Ballantyne was removed as trustee of his family trust by court order, part of a deal awarding him a half share of trust assets.

Ballantyne was sentenced to life imprisonment for the 2015 murder of acquaintance Ivan Kapluggin after an evening socialising at Ballantyne’s Whangamata home.  The Achilles Avenue property in Whangamata is owned by a family trust: the Tunku Family Trust.  The Trust also owns a property at MacDonald Road in Hamilton, occupied by former spouse, Eugenia.  Ballantyne is one of three trustees; Eugenia Ballantyne is also a trustee, along with third trustee Wallace Jones.

The High Court was told rates on Achilles Avenue have not been paid since Ballantyne was convicted and local council is threatening a forced sale.  The property has been valued variously at between $1.05 and $1.5 million.  From prison, Ballantyne agreed to a sale, but the remaining trustees foresaw difficulties in getting legal documents signed while he is behind bars; current rules require detailed in person identification procedures when selling property.  Requests he resign as trustee have been refused.

Justice Davison approved Anthony Ballantyne’s removal as trustee.  Ballantyne’s inability to actively carry out duties as trustee meant trust property was ‘endangered.’  The two remaining trustees are free to complete a sale and deal with the proceeds. Along with sale of Achilles Avenue, the court approved a rearrangement of Trust assets with half the Trust's net value being paid to Mr Ballantyne. 

Ballantyne had told the court he was willing to ‘step down’ as trustee during the sale process, provided he was reinstated afterwards. He is a discretionary beneficiary of the Tunku Trust.  His removal as trustee means he has no say in future trust decisions.

Tunku Family Trust v. Ballantyne – High Court (26.05.21)

21.089

Fraud: Specialist Roofing v. Hollis

Katarina Cherie Hollis declared bankruptcy while in prison for theft of nearly one million dollars from Gisborne employer Specialist Roofing Solutions Ltd.  Since she had shared some of her ill-gotten gains with her partner and with her mother, a High Court case was needed to identify the amount Specialist Roofing could claim in her bankruptcy.

The High Court was told Hollis stole some $969,500 from Specialist Roofing while working as a part-time office administrator between March 2016 and August 2109.  Thefts started within six months of her going on the payroll.  The fraud was picked up by accountants preparing Specialist Roofing’s tax accounts.

In a subsequent High Court civil case, Justice Gault ruled Hollis was liable to pay damages totalling $969,513 for breach of duties as an employee; this amount to be reduced by an undisclosed out-of-court settlement with Hollis’ mother Anne Marie Hollis and any recoveries made from Hollis’ partner Jason Peach.  Specialist Roofing could trace only $7500 of its money as going to Peach, but suspected he had received more of the stolen funds than this amount.  Peach was ordered to pay Specialist Roofing $7500. Neither Katarina Hollis nor Jason Peach defended Specialist Roofing’s claim.

Hollis claims to have no assets.  Part of Insolvency Act bankruptcy procedures is intended to track down any assets available to meet creditor claims.

Specialist Roofing Solutions Ltd v. Hollis – High Court (26.05.21)

21.088

Estate: Comins v. Public Trust

Advancing $50,000 to one daughter to help purchase a home created confusion after father Ian Cameron died, leading to a dispute between sisters over whether this was a gift or a loan.

In 2003, parents put $50,000 towards daughter Brenda’s purchase of a Masterton home.  The transaction was not documented.

The High Court was told that her father Ian Cameron died in May 2019, ten days after the death of his spouse.  Ian’s will stated that the $50,000 given Brenda was a loan to be set off against her share of the estate.  If a loan, this would increase the amount going to Brenda’s sister, Sheryl; both were to share the estate balance 50/50.  Brenda denied there had ever been a loan; it was a gift, she said.

The High Court was told statements made by Ian some three years after the Masterton purchase indicated repayment was not required. There had never been a demand for interest, or for repayment of the money.  In contrast, Ian’s earlier 2010 will and final 2016 will both stated the $50,000 was a loan.

Justice Mallon ruled this evidence indicated Ian’s intention was to make a $50,000 interest-free loan, not repayable in his lifetime.  Specific wording in his 2016 will applied; the $50,000 loan fell due on his death and was to be taken into account when dividing up his estate.

This ruling increased the value of assets in Ian’s estate by $50,000 to about $227,000.

Comins v. Public Trust – High Court (25.05.21)

21.087

Class Action: Claims Resolution v. Pfisterer

Class action promoters promising ‘no win, no fee’ on insurance claims are always on to a winner; any increased payouts over insurers’ typical low-ball opening offers will count as a win ensuring they get paid.

Legal argument over ‘no win, no fee’ contracts was fought out in Lucia Pfisterer’s claim against Christchurch-based Claims Resolution Service Ltd when she challenged its work on a claim for her earthquake damaged Opawa property.

Like many insured Canterbury homeowners, she struggled in dealings with Earthquake Commission and Southern Response over insurance entitlements.  An initial 2013 assessment offered $117,000, later increased to $321,800.  A supposedly negotiated settlement two days before a scheduled 2016 court hearing saw Southern Response offer to pay $642,000 plus an extra $303,000 for enhanced foundations if a decision was made to rebuild.  After apparently agreeing to this offer, Ms Pfisterer backed out, saying she had been pressured into the pre-trial settlement. Southern Response left the file open. After hiring new lawyers, she later reached a final settlement with Southern Response on much the same terms as the aborted pre-trial agreement.

Ms Pfisterer refused to pay the $93,700 legal bill incurred by Claims Resolution for lawyers Grant Shand preparing for the cancelled High Court hearing and negotiating the aborted settlement.  She alleged Claims Resolution had misrepresented details of the ‘no win, no fee’ deal, had a sweetheart deal with lawyers Grant Shand which worked to her disadvantage and that she had never agreed to her insurance dispute going to court.

When signing up, Ms Pfisterer was aware Claims Resolution was offering a ‘one-stop shop’ from damage assessment through to claim settlement with the possibility of litigation, Justice Hinton said.  She paid, when asked, the court filing fee for her claim against Southern Response and received without complaint a copy of the claim filed in court.

Ms Pfisterer was not prejudiced by the close working relationship between Claims Resolution and Grant Shand, Justice Hinton ruled.  In return for the steady flow of work, Grant Shand agreed to reduce legal fees charged. Claims Resolution clients were free to engage their own lawyers; some did.

Grant Shand did breach professional obligations owed Ms Pfisterer as client when it continued dealing with Southern Response after suggesting her change of mind over the aborted settlement meant she should get new lawyers.  Grant Shand was not liable to pay damages, Justice Hinton ruled.  Grant Shand’s actions in wrongly continuing to negotiate did not cost Ms Pfisterer; her new lawyers finalised negotiations.

Ms Pfisterer was ordered to pay the $93,750 legal fees billed Claims Resolution by Grant Shand.  She did not challenge Claims Resolution’s entitlement to an eight per cent commission on her insurance recovery as being a ‘win.’

Claims Resolution Service Ltd v. Pfisterer – High Court (21.05.21)

21.086

Bankruptcy: re Burchell

Failing to recognise that neither Insolvency Service nor Inland Revenue had any intention of delaying his discharge from bankruptcy, Llewellyn William Burchell in court proceeded to accuse them of assault and harassment, all part of a conspiracy.  He accused the trial judge of bias.  Despite making it hard for himself, Burchell was discharged from a bankruptcy which had run for a decade; all his own fault.  

The High Court was told Burchell was bankrupted by Inland Revenue in 2011 on a $34,000 tax debt.  It was his second bankruptcy. As a general rule, bankrupts are automatically discharged from bankruptcy after three years.  The three years start running from the date a ‘statement of affairs’ is provided to Insolvency Service.  In the form of a checklist, this sets out a bankrupt’s financial circumstances: assets and debts.  Burchell never properly completed a statement of affairs following his 2011 bankruptcy. While acknowledging he owned property, he refused to provide details of what it was and where it was.  In answer to a question seeking to establish levels of household income he answered a question about his spouse’s income with the retort: ‘none of your business.’  Personal details like IRD number were left out.  He protested, without success, police seizure of motorcyles he owned, seized at Insolvency Service request.    

Evidence was given that Burchell chose to pursue unsuccessful legal actions against both Insolvency Service and Inland Revenue rather than provide the full information required in his statement of affairs. Ten years later, the three year time clock for automatic discharge had yet to start ticking.

Burchell applied to the High Court for his discharge from bankruptcy.  Associate judge Bell commented Burchell had failed to comply with Insolvency Act rules requiring public notice of any application for early discharge.  Burchell alleged Insolvency Service had conspired with media outlets to block advertising.

When approving the discharge from his second bankruptcy effective May 2021, Judge Bell described Burchell as being aggressive and rude, short on social skills and harbouring groundless conspiracy theories. Burchell is unlikely to be much of a credit risk for the public, Judge Bell said.  In insolvency law, the risk comes from beguiling rogues.  Burchell is not one of them, he said.

re Burchell – High Court (21.05.21)

21.085

Relationship Property: Hare v. Aitchison

Eighteen months after Craig Aitchison died, his mother is trying to force a sale of his Christchurch home currently occupied by former partner Sonya Hare.  The two women are arguing over who has control of Craig’s estate.

Craig died in November 2020, leaving no will. Default rules in the Administration Act see inheritance on intestacy going primarily to any surviving spouse. The definition of spouse includes any partner in a long-term de facto relationship.  Sonya says she and Craig were in a relationship for more than three years; Craig’s mother disputes this.

The High Court was told Craig’s estate has a current value of around $300,00: equity in his Mortlake Street home in Christchurch suburb Islington plus cash held in a lawyer’s trust account.  After Craig’s death, his mother applied for and was granted Letters of Administration by the High Court to administer her late son’s estate. In so doing, she told the court Craig was not survived by any de facto partner.  Sonya says Craig’s mother will not accept that she and Craig were in a de facto relationship.  She obtained a freezing order over estate assets from the High Court.

With estate assets frozen, the two will next be in court arguing whether Sonya’s relationship with Craig did amount to a long-term de facto relationship.  If proved, Sonya will inherit the bulk of Craig’s estate.

Hare v. Aitchison – High Court (21.05.21)

21.084

Insurance: Church Property Trustees v. Carrell

Christchurch Anglican Diocese received a windfall $9.8 million gain on its insurance payout following the 2010 and 2011 earthquakes after a GST miscalculation.  High Court approval was needed to approve a pro rata allocation of the surplus to church parishes and schools suffering earthquake damage.

Entitlement to share in the $9.8 million surplus was left hanging because of the way Christchurch Diocese arranged insurance. Church Property Trustees manages diocesan assets across Canterbury and Westland.  It is paid a management fee from rents, interest and dividends on diocesan investments.  The High Court was told building and content insurance for diocesan churches and schools was covered by a global policy, in the name of Property Trustees but for the benefit of specific diocesan property.  As a matter of practical necessity, Church Property paid annual premiums out of its funds, later seeking reimbursement from individual parishes.

After the 2011 earthquake, Property Trustees received an insurance payout totalling some $183 million, including an allowance for payment of GST.  It was later discovered that no GST was payable.  Under terms of the payout, Property Trustees was entitled to keep this over-payment; it did not have to be refunded to the insurer.  This left Property Trustees holding surplus insurance monies relating to assets it did not own; it holds diocesan assets in trust. The High Court was asked to approve a proposed distribution.

First, reimbursement was made to those parishes which made ‘free will offerings’ towards premium renewals in the year following the earthquake series.  Cost of earthquake insurance rose dramatically after the quake.  For 2012/2013, parishes voluntarily contributed $241,000 of an annual premium renewal for property insurance then exceeding $1.1 million. Property Trustees initially sourced this $1.1 million payment out of its insurance recovery; it was the only source of ready cash at the time.   Justice Mander ruled Property Trustees could dip into the insurance surplus to recover this $1.1 million cost as reimbursement for the expense incurred, but it was appropriate to then repay the $241,000 contributed by individual parishes.  Property Trustees should not recover its costs without reimbursing parishes that later contributed, he said.

Second, the remaining money was added to individual trusts held by Property Trustees on behalf of each diocesan property damaged in the earthquakes, divided according to the value of their claims.  The insurance payout was triggered by losses parishes and schools suffered.  The fortuitous surplus should be divided between them according to the value of claims each made, Justice Mander ruled.

Church Property Trustees v. Carrell – High Court (20.05.21)

21.083

covid-19: BNZ v. Matsis

Accelerating the sale process and accepting a reduced price for a business in receivership during the covid-19 national lockdown did not mean receivers PwC failed to sell for the best price; they obtained the best price reasonably obtainable in the circumstances, the High Court ruled.

Lower Hutt-based artisan cheese maker Zany Zeus Ltd was tipped into receivership by Bank of New Zealand in December 2019.  Michael Matsis, director and majority shareholder of Zany had guaranteed Zany’s BNZ debt to a total of two million dollars. When sued by BNZ on the guarantee he said he was not liable; if receivers had sold the business for full value he would have had nothing to pay, he said.  The business was sold for $1.8 million.

PriceWaterhouseCoopers were appointed receivers.  They told the High Court Zany Zeus Ltd was put up for sale in early 2020.  Business interests associated with Gerald McDougall put in the best bid at $3.5 million, but this bid was subject to substantial conditions.  Before any sale was concluded, government put the entire country into lockdown.  This seriously affected Zany Zeus’ profitability; about 65% of its customer base was in the hospitality sector, also forced to shut down.  PwC considered closing down Zany Zeus’ operations and selling off assets piecemeal; the receivers could not continue to trade the business at what would be a continuing loss during an indeterminate lockdown.  Valuers assessed Zany Zeus’ assets at some $960,000 on a break-up value.

Evidence was given that PwC then again approached Mr McDougall.  After some negotiations, sale of the business as a going concern was clinched at $1.8 million, with the previously negotiated conditions dropped.

Associate judge Johnston ruled Mr Mastis was liable on his BNZ guarantee of Zany Zeus’ borrowing.  This figure is yet to be finalised.  The manner in which receivers concluded the sale during the covid-19 lockdown complied with their legal obligation to get the best price for assets covered by the BNZ security.

BNZ v. Matsis – High Court (19.05.21)

21.082

Export: Settlers Honey v. First Honey

Bank accounts of Wairarapa beekeeper First Honey NZ Ltd controlled by Daniel Watson have been frozen following a High Court ruling there was an arguable case that First Honey wrongfully got its hands on $648,250 export sale proceeds remitted from the US; funds claimed by Whanganui honey exporter, Settlers Honey Ltd.

Henry Mathews, Settlers Honey’ director, claims First Honey NZ has no right to the money and alleges his money is at risk; First Honey is in financial difficulty, he alleges.

The High Court was told of a deal in late 2020 where US-based First Honey US purchased a shipping container load of medical grade manuka honey from Settlers Honey at a price of $648,254.  It was agreed Mr Watson’s First Honey NZ would get a commission calculated at one dollar per kilogram for arranging the export deal.  There is a family connection between First Honey NZ and First Honey US.  Mr Watson’s brother-in-law manages First Honey US.  Settlers Honey billed First Honey US as its customer.  No payment was received.  Enquiries identified that First Honey US had made payment; not to Settlers Honey, but to First Honey NZ who refused to hand over the funds.  It claimed a set-off; First Honey NZ says it is owed money by Settlers Honey.

Ordering First Honey NZ’s bank accounts with ANZ and ASB frozen, Justice Campbell ruled there was an arguable case that First Honey NZ went beyond its authority as an export agent by arranging to receive payment from the US and by retaining the money.

When agents act as brokers to arrange a deal, there is no general legal rule that the agent also has authority to collect payment. 

A further court hearing is needed to determine whether First Honey NZ did have authority to receive the $648,254 and for First Honey NZ to prove its claimed set off against Settlers Honey.

Settlers Honey Ltd v. First Honey NZ Ltd – High Court (14.05.21)

21.081

 

Post judgment note: One week later, the freezing order was lifted by order of the High Court with the proviso First Honey NZ was to first provide pre-trial financial security in favour of Settlers Honey sufficient to meet Settlers' claim should it be successful. 

Chorus: Creative Development v. Chorus

Consequences of Chorus putting on the charm, using grossly misleading flattery to garner support from potential business partners in rolling out a national fibre network, featured in unsuccessful litigation by Marlborough-based Creative Development Solutions when alleging Chorus stole its intellectual property.

Creative Solutions, part-owned by former journalist and member of parliament Brendon Burns, joined forces with Marlborough District Council on plans to get fast broadband in place across Marlborough.  Learning that Chorus had withdrawn from Crown Fibre’s initial bidding round for rural Marlborough’s network coverage, Creative Solutions met with Chorus in early 2018.  It was intended the two would jointly progress a bid for the Marlborough network. Creative required Chorus sign a non-disclosure agreement to protect what it perceived to be confidential and commercially sensitive information. Creative sued when Chorus later turned around and bid separately for the rural Marlborough franchise; Chorus had stolen Creative’s confidential information and used it to formulate a bid, Creative alleged.  Neither Creative nor Chorus were successful in their bids.

The High Court ruled that the supposedly confidential information provided to Chorus by Creative added little to Chorus’ existing accumulated knowledge and experience, and that information which was new was of little commercial value.  Creative failed in attempts to overturn this ruling on appeal.

In the High Court, the trial judge referred to ‘substantial posturing’ by both sides during negotiations.  Chorus talked up the benefits Creative Solutions could bring to the project, such that Creative came to over-value its own expertise and the information it held.  Behind the scenes, Chorus was dismissive. Chorus also turned on the charm with Marlborough District Council in the then belief that Council would provide significant financial funding for the project.

Creative Solutions was forced into liquidation by Chorus in December 2020 for unpaid court costs following the High Court trial. Prior to the High Court trial, Creative Solutions turned down an offer intended to avert litigation: $750,000 in full and final settlement.

Creative Development Solutions Ltd v. Chorus New Zealand Ltd – Court of Appeal (13.05.21)

21.080

 

Construction Liability: BNZ v. Wellington City

 Forced to vacate its Wellington head office after the 2016 Kaikoura earthquake, BNZ claims $101 million damages from Wellington City alleging council negligence when issuing a compliance certificate.  First round, in the High Court, saw Wellington City drag engineering consultants Beca Carter into the litigation as a third party, potentially liable.  Beca Carter challenges new rules governing time limits on negligence claims against third parties which can see claims surfacing decades after the event.

The massive number of ‘leaky building’ claims filed against local councils in the last two decades has seen council insurers in court arguing the boundaries for potential shared liability between councils, builders, sub-contractors, suppliers, engineers and architects.  Commonly, it is local councils sued as primary defendant; they have the ‘deepest pockets’ and are best placed to pay damages.  Councils, in turn, take parallel legal action against those in the construction industry allegedly to blame, forcing them into the litigation as third parties being called to contribute.  Complications subsequently led to law changes setting out time limits within which claims could be filed in court.

Construction law has a ten-year ‘longstop’ rule, blocking claims more than a decade after damage leading to a claim.  Beca Carter says any claims demanding contributions from third parties also fall within this ten-year rule, with the ten years calculated on the same time line as that applying to the primary defendant.  Not so, ruled Justice Clark.  The Limitation Act sets a different start date and a different time period for claims against third parties; claims against third parties are barred two years after liability of the primary defendant is quantified by ‘agreement or court judgment.’  With the slow pace of complex cases, this can have the effect of leaving third parties on the hook to pay damages decades after damage first arose.

Completed in late 2010, Bank of New Zealand’s Wellington head office on Waterloo Quay was designed to the Bank’s specific requirements. It is now being demolished; damaged beyond economic repair by the 2016 Kaikoura earthquake.  BNZ alleges Wellington City was negligent in granting a building consent and also negligent in its inspection and granting of a code compliance certificate.  Beca Carter drew up the engineering design and monitored construction carried out by Fletcher Construction.

Beca Carter failed in its attempts to have Wellington City’s third party claim thrown out.  Wellington City has two years from the time BNZ’s claim is finalised to file a third party claim against Beca Carter.  Its Beca Carter third party claim was filed well before this time; it is yet to join battle against BNZ.

Further court hearings are necessary to establish if either of Wellington City or Beca Carter were negligent.

BNZ Branch Properties Ltd v. Wellington City – High Court (12.05.21)

21.079

Fraud: R.v. Bracken

Gisborne farmer John Richard Bracken was sentenced to eight years six months imprisonment for a $17.3 million GST fraud, the biggest tax fraud ever uncovered by Inland Revenue.

An employee of Bracken’s business, Bracken Enterprises Ltd, blew the whistle, alerting authorities to the fraud created by a paper trail documenting fictitious transactions.

The High Court was told Bracken operated a sheep and dry stock farm at Matawai, near Gisborne.  He also ran an export business, with timber, milk, honey and bottled water sent to customers in the Pacific Islands.  The fact zero GST is charged on exports was the central feature of the fraud.  Over a four year period, Bracken concocted invoices for fictitious purchases of goods totalling $133 million, claiming the GST component of these non-existent purchases as a GST credit.  This fraud generated fraudulent GST refunds totalling $17.3 million.  Police have commenced action under the Criminal Proceeds (Recovery) Act to seize Bracken’s assets.

The fraud was masked by Bracken’s use of circular payments through Bracken Enterprises’ bank account.  He withdrew sums from the account, either in cash or by bank cheque, to create the illusion of a payment to suppliers, and then almost immediately re-deposited money back into the account.  Fictitious supply invoices were forged to match the line item on bank statements for amounts withdrawn.  These false invoices were forged in the names of real businesses, many of which did in fact supply goods to Bracken.  A fictitious export sale of the fictitiously purchased goods was then established by creating a forged export contract.  In this way, Bracken generated a GST credit for goods never purchased and then disposed of the non-existent goods without having to account for GST on the sale through the pretence of having exported these non-existent goods.  Exports are zero-rated for GST.

Evidence was given that Bracken has prior convictions for accident compensation fraud and for breaches of the Resource Management Act.

R. v. Bracken – High Court (11.05.21)

21.078 

Right-of-way: Austin v. Rentrezi 2 Ltd

Developers Pragma Homes and Rentrezi were ordered to pay $20,000 damages for nuisance and trespass after disrupting use of a residential right-of-way when constructing new houses on Hillary Street in Chedworth, Hamilton.

Norman and Margaret Austin challenged use of a shared right-of-way following the 2018 subdivision and development of neighbouring land.  From the time of their Hillary Street purchase thirty-two years previously, the Austins had enjoyed exclusive use of the existing right-of-way.  It was only after other sections down the right-of-way were later subdivided and built on did the relatively narrow access way with its dog-leg corner come to be used by multiple owners now living in six different properties.

The Austins fought plans for subdivision from the off. They objected, without success, to Hamilton City Council giving consent to redevelopment of the neighbouring land. In court, they argued, again without success, that neighbours in the newly subdivided properties had no right to use the right-of-way for access.  They then argued neighbours use of the right-of way was excessive, amounting to a legal nuisance; claiming damages totalling $150,000.  Justice Wylie ruled neighbours conduct fell within the bounds of normal use.  The Austins’ opposition to neighbours legal use of the right-of-way and to the existence and occupation of the new residential units had become unreasonable, he said.

Pragma Designer Homes Ltd and Rentrezi 2 Ltd developed the neighbouring properties.  The two companies are associated; they share a common parent and a common director. Justice Wylie ruled their misuse of the right-of-way during construction amounted to both trespass and nuisance. There was evidence of construction vehicles parked on the right-of-way for extended periods, debris including concrete slurry left on the right-of-way and damage to the road surface itself.  A telephone line, a gas line and a water line, all providing utility services to the Austins’ property, were at various times accidentally cut.  The court was told issues were raised with both Pragma and Rentrezi at the time.  Both the trespass and nuisance during construction were prolonged and went beyond what the Austins could reasonably have been expected to tolerate, Justice Wylie said.  Pragma and Rentrezi were held jointly liable to pay damages of $20,000.

Austin v. Rentrezi 2 Ltd & Pragma Designer Homes Ltd - High Court (10.05.21)

21.077 

Shadow Director: NZ Labour Enterprise v. Sembhi

While not appointed as a director, Dap Sembhi was ordered to pay $312,250 damages as a ‘shadow’ director responsible for NZ Labour Enterprises Ltd losses when trading insolvent.

Established in 2013, Labour Enterprises operated out of Papakura, south Auckland, supplying labour on short term contracts.  Listed as director was Amandeep Sembhi, Dap’s spouse. Dap Sembhi was never appointed as a director.

In 2019, Inland Revenue forced Labour Enterprises into liquidation on unpaid tax debts totalling some $390,000; primarily unpaid GST and PAYE.  PwC were appointed liquidators.

The High Court was told Dap Sembhi dealt with the liquidators, telling them he was in charge of company operations.  His wife was just the ‘written director,’ he said. Mr Sembhi operated the company’s bank account, organised labour contracts and liaised with Inland Revenue, Immigration and Social Development.  

Justice Campbell ruled Mr Sembhi was liable as if he were a director of the company.  Any person acting in the position of director is liable as a director, even if not appointed as such.

Mr Sembhi as a shadow director and Mrs Sembhi as appointed director were held jointly liable for company losses totalling $312,250. This was the net deterioration in the company’s position between the date the company should have stopped trading (March 2015) when it had a net deficiency of some $84,000 and the date it did stop (May 2019).  They were in breach of directors’ duties by allowing their company to continue trading whilst insolvent.

In addition, Mrs Sembhi was held personally liable to repay $686,500 to the company; funds borrowed from the company, including cash withdrawals and money spent on personal and household expenses.

The Sembhis did not appear in court to challenge the liquidators’ claim.

NZ Labour Enterprises Ltd v. Sembhi – High Court (5.05.21)

21.076

Film Studio: Studio NZ v. Wallace

Plans by Studio New Zealand Ltd to build a film studio on industrial land at a south Auckland site in Takanini hangs on arguments with the Wallace family that it has an enforceable $53.5 million contract to buy the site.

Studio New Zealand Ltd, managed by Andrew Coldicutt, has $40 million funding from government for construction of the film complex as a ‘shovel ready’ project.  Wallace family interests deny there is any contract to sell their Porchester Road site. The land is owned jointly by two Wallace family trusts.  The property was used historically for stables and as a horse training track.

The High Court was told negotiations for Studio New Zealand to buy or lease the site started back in 2016.  The possibility of a joint venture with the Wallace family was mooted.  Proposals firmed up in 2020 with an interchange of emails: Wallace family offered to sell at $53.5 million; Studio countered seeking a three-year option to buy at that price.  Wallace family refused to allow an option, indicating the original offer to sell at $53.5 million was still on the table.  What is in dispute is a Studio New Zealand email response agreeing to buy at $53.5 million. There is more to the deal than just price, Wallace family says.  A simple email will not suffice; a detailed agreement for sale and purchase needs to be agreed.  Wallace family interests refused to sign a Studio New Zealand agreement for sale and purchase sent after its email agreeing to buy.

Associate judge Andrew upheld Studio New Zealand’s right to lodge a caveat against title to Porchester Road.  He said all legally essential terms for a contract had been agreed by email: the property and the price.  It is for a full court hearing to determine what other terms might apply to their contract.

Wallace family expressed concern that Studio New Zealand is a shell company with no assets of substance and no income.

Studio New Zealand Ltd v. Wallace – High Court (3.05.21)

21.075