Leaky Home: Weber v. Tremain Real Estate

Acting as a mere conduit, passing information from seller to intending buyer did not make a real estate agent liable for alleged misrepresentations about a leaky home.

In 2015, Tony and Robyn Weber purchased a home on Te Mata Peak Road, Havelock North.  Only when looking to sell three years later did they become aware it was apparently a leaky home.  Wood sampling undertaken from exterior cladding by interested buyers as part of pre-purchase due diligence identified decay and high moisture levels.  They decided not to buy; the Webers withdrew Te Mata from sale and looked to recover damages in respect of their own previous purchase. Claiming $1.7 million damages in respect of their previous $1.32 purchase in 2015, the Webers sued a long list of defendants including Tremain Real Estate.  Tremain acted for the 2015 vendors: Donald and Murray Gilbertson.     

The Webers allege Tremain Real Estate was party to misrepresentations about Te Mata’s weather tightness.  Tremain denies all liability, saying it merely passed on information including local council records provided by the Gilbertsons.  Tremain did not add to or endorse the accuracy of the information provided.

Associate judge Johnston struck out the Webers claim against Tremain Real Estate.  As a real estate agency, it relayed information acting purely as a conduit. Tremain was not liable for its accuracy, whether the information was misleading or not.

Webers other claims against Hastings District Council and the Gilbertsons are yet to be decided.

Weber v. Tremain Real Estate – High Court (15.06.22)

22.104

Ombudsman: Financial Services Complaints Ltd v. Chief Ombudsman

The Parliamentary Ombudsman’s Office lobbied parliament changing the rules in 2020 to prohibit any further private sector dispute resolution bodies from being called ‘ombudsman.’  Having Mary Holm as one of its five directors, private sector financial dispute resolution service Financial Services Complaints Ltd subsequently survived a seven year legal battle to use the title ombudsman.  

The law change was triggered by Financial Services 2015 application to use the label ‘ombudsman’ for its retail dispute resolution service.  A Banking Ombudsman Scheme and an Insurance and Savings Ombudsman Scheme were rival private sector services already in operation.

Copied from Sweden, the parliamentary ombudsman is a public official acting as a peoples’ representative, empowered to investigate use and misuse of government power.  It took offence at private sector organisations using a similar moniker as a brand to attract custom.  The parliamentary ombudsman had been receiving some 25 enquiries a month from confused retail investors; their complaints should have been sent for investigation to private sector providers such as the Banking or the Savings ombudsman.

As far back as 2011, Financial Services Complaints Ltd had contacted the then Chief Ombudsman pointing out the competitive advantage private sector businesses were gaining through use of the word ‘ombudsman.’ Either they should be prohibited from using the term, or all providers should be allowed to join in, it said.  This was at a time when consent of the Chief Ombudsman was need for private sector businesses to use the word in their name.

In 2015, Financial Services formally requested approval to rebrand as an ombudsman-titled service.  Seven years and multiple court cases later, the Court of Appeal ruled in its favour.  In successive court cases, judges criticised Chief Ombudsman refusals for use of the name: one case ruling the Ombudsman was being overly protective of the title; a second that the Ombudsman had not properly considered Financial Services application.  A 2021 Court of Appeal ruling forced an independent re-assessment of Financial Services’ application.  The 2020 law change prohibiting private sector use of the title specifically kept alive Financial Services then current application.

Financial Services appealed the requirement for an independent re-assessment.  This was independent in name only, it said.  The decision would still lie with someone appointed by the Chief Ombudsman; a person who would receive a background briefing from the Chief Ombudsman. Any adverse outcome would inevitably be challenged by Financial Services, the Court of Appeal said.  The court directed the Chief Ombudsman to allow Financial Services use of the ombudsman name for its dispute resolution scheme.

Financial Services Complaints Ltd v. Chief Ombudsman – Court of Appeal (15.06.22)

22.103

Director Disqualification: Olliver v. Registrar of Companies

Unsuccessfully challenging Companies Office’ four year ban from acting as a company director, Greg Olliver blamed his estranged spouse Sarah Sparks for BBG Holdings’ failure, an allegation she disputes.

BBG Holdings Ltd was controlled by Mr Olliver. It is in liquidation, insolvent. Unsecured creditors will be repaid in part, according to the most recent liquidation report.  The liquidator comments that dealing with disputed claims totalling $7.9 million from entities controlled by Mr Olliver led to increased liquidation costs; all allied to BBG’s entitlement to receive payment of  $836,000 for subdivision earthworks.

Mr Olliver said BBG’s financial difficulties had their genesis in his relationship with Ms Sparks whom he married in 2000.  An acrimonious split has seen claim and counter claim over ownership and control of properties in Auckland’s eastern suburbs. Mr Olliver alleges steps she took without his knowledge frustrated subdivision plans, causing secured creditor BNZ to step in.

In 2021, Companies Office exercised its administrative powers to ban him from acting as a company director.  It alleged Mr Olliver was reckless in his management of BBG, using the company as a vehicle for his own personal benefit with disregard for company creditors.  Mr Olliver took to the High Court asking further evidence be taken into account. Companies Office did not appreciate the full picture, he said.  Problems at BBG were a direct consequence of his former spouse’s litigious behaviour, he alleged.

Justice Wylie ruled against reconsideration of the four year ban.  The further evidence was of no or limited relevance, he said.  It runs to nearly 500 pages.  It is largely a self-serving narrative in which Mr Olliver seeks to clear himself of allegations of mismanagement, he said.

Mr Olliver had every opportunity to provide Companies Office with all relevant evidence before the ban was imposed, Justice Wylie ruled.

Olliver v. Registrar of Companies – High Court (10.06.22)

22.102

Lotto: Lipsham v. Helmbright

Two years after his $17 million Lotto windfall, Mark Lipsham hired Kim Helmbright as his ‘financial, property and spiritual’ adviser.  Three years further on, he was in court demanding she explain what happened to $2.8 million dollars he claims was supposed to be used to buy properties in his name. She says the money was payment for her services.

Court attention centred on a disputed Freelancing Agreement dated October 2019 which stated she would receive $2.8 million. Mr Lipsham alleges the date is forged. He did sign a document in December 2019, he says, but this was after the $2.8 million was handed over and the document was represented to him as recording payment for properties to be purchased in his name.  The High Court was told Ms Helmbright purchased in her own name a $1.65 property at Waipapa in January 2020 and a $660,000 property at Okaihau in March 2020.

Mr Lipsham claims these properties were purchased with his money and that Ms Helmbright holds the properties in trust for him. Ms Helmbright was separately paid about $70,000 for her services, he says.

After a preliminary High Court hearing, Ms Helmbright was ordered to hand over for inspection: all relevant tax records; her correspondence with lawyers over the property purchases including her anti-money laundering disclosures as to source of funds; and any documentary proof of work done to justify a $2.8 million fee.

Also ordered to hand over electronic records relating to the disputed Freelancing Agreement, Ms Helmbright says the document was compiled on a laptop which she disposed of in early 2020 without keeping a backup.  The court was told a template for the Freelancing Agreement exists on the documaticapublic website.  Templates can be downloaded on payment of a fee.  Ms Helmbright was ordered to disclose bank statements and credit card records to identify if and when she purchased the template.

Lipsham v. Helmbright – High Court (9.06.22)

22.100

Estate: Smith v. Endean

After living together for 45 years in their Auckland Cockle Bay home and raising five children, Jocelyn Smith failed in a claim to her late husband’s half share in the property because they were estranged at the time of his 2019 death and there was no expectation she would benefit.

Together with evidence provided by her children, Jocelyn painted a picture of a spouse who during her married life paid all household bills, did all the housework and all the gardening whilst fully involved first in a cleaning business and later in their meat transport company.  Cockle Bay was initially purchased in their joint names.  In the normal course of events, her husband’s half share would pass to her on survivorship following his death.  The High Court was told that their registered ownership was changed five years prior to Mr Smith’s death at his suggestion, from a joint tenancy to a tenancy in common. The legal effect was to remove the right of survivorship; whoever died first kept their half of the property as an asset in their estate.

George Smith was 90 when he died; Jocelyn 80. Evidence was given that five years prior to his death Mr Smith took legal steps to end their marriage and divide relationship property.  An agreement was drawn up.  Mr Smith signed; Mrs Smith didn’t.  The two lived apart for the last three months of his life.

Mr Smith’s executor wanted Cockle Bay sold to free up cash for the estate.  Mr Smith’s will left his estate in trust for his grandchildren.  Mrs Smith sued, alleging a constructive trust existed allowing her to continuing living at Cockle Bay for the remainder of her life.

Associate judge Gardiner ruled there was no constructive trust.  This required evidence that through her actions Mrs Smith expected to have a life interest in her husband’s share of Cockle Bay after his death.  All evidence pointed the other way.  The unsigned separation agreement, the change of joint ownership to tenants in common plus lawyers’ correspondence stretching back three years prior to his death were clear; it was intended to sell Cockle Bay and split the proceeds.

The court was told seven of her nine adult grandchildren wanted their grandmother to stay at Cockle Bay for as long as she wished.

Smith v. Endean – High Court (9.06.22)

22.101

Court Costs: Blair v. Street

A Wellington property dispute over court costs of a few thousand dollars was chased all the way to the High Court, leading an exasperated judge to question such a disproportionate use of legal resources.  While he does hold an undergraduate degree in drama, Justice Isac was unimpressed by legal theatrics surrounding the dispute.

It started in 2020 when Mr Blair agreed to buy a Wellington residential property being sold by a family trust, then withdrew. It progressed through colourful correspondence between lawyers with allegations of sophistry and pained expressions of distaste about unwanted lectures in basic principles of contract law. It ended with arguments over legal costs.  

Mr Blair’s purchase was conditional on a satisfactory building report.  After getting a building report, Mr Blair withdrew from the contract.  Trustees then found a new buyer, paying a better price.

Vendor trustees asked for a copy of Mr Blair’s building report, as permitted by terms of the now cancelled sale contract.  He immediately provided a three page ‘client summary’ received as part of the full report.  Trustees demanded the full report.  Mr Blair said he had been told the client summary would suffice, and in any event, his building inspector specified the full report was not to be released to third parties without consent.

The High Court was told the trustees repeatedly asked for a copy of the full report.  Legal threats followed.  Their dispute came to a head with trustees asking the District Court to order release of the full report.  Mr Bair immediately handed it over.  No court hearing was necessary.  The two sides then argued over who paid the trustees’ legal costs.  Trustees had threatened they would demand full legal costs, indemnity costs, if the District Court was involved.   

As a general rule, the winning litigant in a court case is awarded only a contribution towards legal costs calculated on a set scale.  Full recovery, or indemnity costs, are awarded as a sanction for blatant failures to comply with court directions. 

The District Court ordered Mr Blair pay trustees’ full legal costs of $13,581.  Mr Blair appealed.  The High Court was told that even before this District Court decision, the two sides had been negotiating about how much Mr Blair would contribute to the trustees’ continuing legal costs.  Negotiations fizzled out with two sides only $1500 dollars apart.

In the High Court, Justice Isac ruled the trustees were not entitled to indemnity costs, they get scale fees only.  Mr Blair gets a partial refund. Indemnity legal costs are reserved for any misconduct in failing to follow court directions, Justice Isac said.  Mr Blair did not act in contempt of any District Court directions; he handed over the full report as soon as legal action was filed.  Mr Blair was awarded scale costs for legal fees on his successful appeal.

Blair v. Street – High Court (8.06.22)

22.099

Leaky Building: Miles v. Gadd

Unaware it was leaky building, vendor of an apartment in central Wellington’s Sirocco development was not liable to compensate a disgruntled buyer for potential remediation costs. But a legal obligation on vendors to disclose future earthquake strengthening costs now joins requirements to disclose known leaky building remediation costs, following a Court of Appeal ruling.

The Miles purchased their Sirocco apartment from business consultant Bruce Gadd in 2013, paying $540,000.  He had owned the apartment for some nine years, but was absent overseas as a career civil servant for extended periods.  Eight months after their purchase, the Miles learnt along with other owners in the eleven-story building that scheduled minor maintenance had uncovered extensive moisture penetration.  Further investigations recommended a reclad for the entire building.  As at 2020, remediation costs were estimated at $22 million.  The Court of Appeal was told no decision has yet been made to remediate.

The Miles sued Mr Gadd, alleging proper disclosure was not made at the time of their June 2013 purchase.  In addition to statutory disclosures required when selling a unit title apartment, the standard agreement for sale and purchase required Mr Gadd as vendor to disclose ‘any other liability.’

This required disclosure of potential future special levies to deal with remediation costs to the entire complex arising from the likes of earthquake strengthening or water ingress, the Court of Appeal ruled. But Mr Gadd was unaware of any latent water ingress issues and consequently had no knowledge of any potential future special levies to remediate the problem, the Court of Appeal said.

Sirocco’s external Harditex cladding had the potential to leak.  The Miles were advised in their pre-purchase valuation report that buildings using similar cladding had leaked.  They chose not to get a building report.  There had been sundry minor issues affecting Sirocco whilst Mr Gadd owned his apartment: leaking taps and toilet in one apartment; a shower leak in another; a leak from the deck of a further apartment; the need to remediate stormwater outflow from one outlet.

Reports to Sirocco’s body corporate from cladding specialists at the time Mr Gadd was an owner stated jointing in the Harditex cladding was being kept under review but that no issues were apparent.  There was nothing to cause a vendor in Mr Gadd’s position to believe that ongoing work could not be managed under Sirocco’s regular maintenance fund such that a special levy would be required, the Court of Appeal said.

Seven years after buying for $540,000, the Miles sold their Sirocco apartment for $305,000.

Miles v. Gadd – Court of Appeal (7.06.22)

22.098

Minority Shareholder: Vijayakumar v. Vasanthan

Treating their joint venture property company Manukau Family Doctors Ltd as if it were his own resulted in a High Court order that Siva Vasanthan pay nearly $750,000 to minority investor Sothilingin Vijayakumar, buying out his fellow investor’s forty per cent share.

In 2005, the two jointly purchased commercial premises on Great South Road, at Manukau in Auckland, which was then fitted out for use as a medical clinic.  The 60/40 shareholding recognised their respective contributions to the purchase price. Dr Vasanthan is sole director.

The following year, Dr Vijayakumar moved to Australia, leaving his fellow investor to manage their property investment.  Fifteen years later, he was in court with a long list of complaints about Dr Vasanthan.  In particular, Dr Vijayakumar complained of failures to pay bank loan interest on time (resulting in threats of a mortgagee sale); a further bank loan being raised without his consent and apparently used to meet personal expenses of Dr Vasanthan; lease of the premises at below market rental to interests associated with Dr Vasanthan; charging to their company operating costs more properly paid by a tenant; using company cash to pay personal legal expenses; and excessive management fees charged by Dr Vasanthan.  Evidence was given that Manukau Family as landlord received no rental income at all for one four year period and that in other years income received was consumed by management fees charged by Dr Vasanthan.

Dr Vasanthan did not appear in court to answer these allegations.

Justice Fitzgerald ruled Dr Vasanthan was in breach of the Companies Act; managing the company in a manner oppressive to his fellow investor as minority shareholder.  He was ordered to buy out Dr Vijayakumar’s minority interest paying some $750,000: $445,000 as the value of his minority shareholding; $222,300 he loaned to the company and $79,200 as a proportion of direct losses suffered by leasing the building at below market rental.

Vijayakumar v. Vasanthan – High Court (1.06.22)

22.096

Subdivision: Shaw v. Dixon Homes Ltd

Having already constructed 115 houses on its Dixon Road subdivision in Hamilton, Dixon Homes Ltd is bogged down in legal dispute with neighbours over further subdivision.  Dixon says neighbours, the Shaw family, have welshed on an agreement to progress subdivision; the Shaws say Dixon has already benefited from a land swap without holding up its part of the deal.

Their dispute has origins in a 2013 agreement in which the Shaws agreed to transfer ten hectares of their land to Dixon Homes. In return, Dixon Homes agreed to extend planned infrastructure services and roading up to the new boundary.  The Shaws allege Dixon Homes has failed to bring reticulated gas to the boundary and has left the proposed road link 27 metres short, creating what they call a ‘spite strip’ deliberately leaving a legal gap in the proposed road.  Dixon Homes allege the Shaws are deliberately blocking further subdivision plans by refusing to sign Council applications and by dismissing their entire legal and technical teams to stymie progress.  Since these dismissals, the Shaw family have corresponded with Dixon Homes directly under the letterhead ‘De Jure Sovereign Territorial Authorities ki Nukuhau.’

Dixon Homes said the deal is off; the Shaws lodged a caveat over part of the subdivision seeking to have their agreement enforced.

Associate judge Andrew ruled the caveat remain.  The Shaws have an arguable case that Dixon Homes had no valid grounds to cancel the agreement, he said.  A full trial is needed to establish the disputed facts.

Shaw v. Dixon Homes Ltd – High Court (1.06.22)

22.097

Ticket Refunds: re STA Travel (NZ) Ltd

Youth travel specialist STA Travel (NZ) Ltd collapsed into liquidation in September 2020 after its Swiss holding company shut up shop in the face of covid-19 international travel restrictions. Ticket refunds received by STA Travel do not belong to the company but are held in trust for individual passengers, the High Court ruled.

STA Travel liquidators are holding about $428,800 refunded by airlines compensating passengers for cancelled flights. Liquidators expect more cash to dribble in over time.  Further expected refunds will be delayed where airlines like Virgin Australia are themselves insolvent.

Liquidators sought High Court directions on the status of refunds.  Justice Robinson ruled the refunds are held in trust by STA Travel.  Passengers’ travel contracts were with individual airlines. As a travel agency, STA acted as a conduit processing the paperwork.  Similarly, in receiving refunds STA was acting only as a conduit, Justice Robinson said.

Liquidators told the court they can identify which customers are entitled to a specific refund from the $428,800 currently held. There are 1560 STA Travel customers who have made claims for refunds totalling $5.55 million.  Before liquidation, STA Travel management used some refunds then received to pay company debts.  

The court was told about $19,100 of the refunds STA liquidators currently hold relate to customers who had already been compensated through a credit card ‘charge-back.’  It is the credit card company which is out of pocket.  Customers are not to be compensated twice over, Justice Robinson ruled. This money belongs to the appropriate credit card company.

STA Travel (NZ) Ltd was not a member of Travel Agent’s Association of New Zealand which provides financial compensation for customers where a member agency fails.

Re STA Travel (NZ) Ltd – High Court (30.05.22 & 14.06.22)

22.095

Construction: Titterton v. Dynasty Capital

Dynasty Capital could not use a ‘sunset clause’ to back out of its Kaiapoi fixed price house build when it deliberately stopped work attempting to force purchaser Andrea Titterton into paying an extra $45,000.  

Ms Titterton signed up in 2020 for a new house to be constructed in Rahme Crescent, Kaiapoi; one of adjoining house builds sold off the plans as fixed price land and building packages.  The High Court was told developer Dynasty Capital Ltd subsequently sought increased payments from three purchasers; one agreed to paying an extra $40,000; a second withdrew and the deposit was refunded; Ms Titterton questioned why she had to pay an extra $45,000.  Her request for details of cost increases justifying extra payment in a fixed price contract were ignored.  Work stopped on the build for Ms Titterton, whilst the other two jobs were completed on time.

In March 2022, Dynasty cancelled Ms Titterton’s contract.  It pointed to a ‘sunset clause’ in the building contract allowing cancellation if a code compliance certificate was not obtained by end of February 2022.

In the High Court, Associate judge Lester ruled Dynasty had no grounds for cancellation.  The build contract required Dynasty to complete the build with reasonable diligence.  There was evidence Dynasty told contractors on Ms Titterton’s build to stop work while variation costs were reviewed.  Dynasty said it stopped work because Ms Titterton asked in a telephone conversation that work stop while cost variations were sorted out.  Judge Lester ruled the effect of the conversation was that Ms Titterton was neither agreeing to the variation nor cancelling her contract. She simply wished to take legal advice. Her lawyer subsequently wrote to Dynasty Capital seeking to enforce the contract.

Companies Office records name Na Zhang of Halswell as sole director of Dynasty Capital and Auckland-based Stephen MacEachen as sole shareholder.

Titterton v. Dynasty Capital Ltd – High Court (27.05.22)

22.094

Fraud: R. v. Huirua

Ten per cent of the $32 million received by Taranaki iwi Ngaa Rauru Kiitahi in 2003 as its Treaty settlement was lost in a fraud perpetrated by iwi member Te Whitinga Mark Huirua resulting in a jail term of two years eleven months.

Huirua was appointed to the iwi’s investment arm because of his professed experience in banking and investment.  The High Court was told he inveigled fellow investment board members into allowing him to make ‘direct investments.’  This involved transferring iwi funds totalling $3.1 million into two separate companies having Huirua as sole director and shareholder. Of this money: $2.1 million was lost trading; $500,000 taken for personal expenditure.  Over a seventeen month period up to October 2019, Huirua created fictitious entities and manufactured fake correspondence and email traffic to conceal these losses.  The fraud was revealed when auditors could find no evidence of claimed investments.

Huirua was convicted of forgery and carrying on business fraudulently.  It is not a crime to make poor investment decisions, Justice Gendall said.  But it is a crime to dishonestly conceal losses.

Members of Raura Kiitahi told the court of their anger and shame following Huirua’s dishonesty.  Their financial loss was compounded by the fact these iwi funds were compensation for historic Treaty of Waitangi breaches.

Huirua was described as having a high sense of entitlement exhibiting impulsiveness and poor problem-solving skills.  He blamed investment losses on bad luck.

R. v. Huirua – High Court (27.05.22)

22.093

Insolvent Estate: MY Templar Ltd v. Parsons

In 2020, Jihong Lu died in Taiwan. In Auckland he had a reputation for throwing money around like confetti; staging a dismally unsuccessful musical at Sky City casino and extravagantly refurbishing the 22.7 metre MV Templaravailable for charter.  His New Zealand estate is insolvent.  Who owns MV Templar was disputed.

In his will signed just prior to death, Mr Lu described MV Templar as being worth three million dollars.  Lu family members claim the vessel was never owned by Mr Lu.  He purchased it with family money and was never the owner, they said.

The High Court was told Lu family holds considerable assets through a group of companies known generally as the Templar Group. Jihong Lu had management control of Templar Group with general licence to use Templar money as he saw fit to advance family financial interests.  Transactions were poorly documented.  Money was drawn down from various Templar companies as and when needed.

Administrator of Jihong Lu’s estate alleged MV Templar was a personal asset of Mr Lu which had been subsequently sold to a company in the Templar Group but never paid for.  $2.97 million remained unpaid, he said.

In the High Court, Associate judge Andrew ruled the legal and commercial documentation set out a clear trail: Mr Lu purchased MV Templar in his own name in two tranches between 2016 and 2017; spent his own money on fitting out the vessel for luxury charters; then in 2018 transferred the vessel to a newly formed Templar subsidiary called MY Templar Ltd but was never paid.  Result: MY Templar Ltd owed Mr Lu’s estate $2.97 million.

The High Court was told the vessel was sold by agreement prior to trial for $800,000, with sale proceeds held in trust pending the outcome.  MY Templar Ltd is now in liquidation, insolvent.  Evidence was given that Templar Group has separately filed a claim against Jihong Lu’s estate for $5.6 million, money allegedly lent to Mr Lu.

MY Templar Ltd v. Parsons – High Court (26.05.22)

22.092 

Bride Price: Almarzooqi v. Salih

A 500,000 dirhams deferred bride price agreed as part of an Islamic wedding in UAE was enforced in the New Zealand courts as a contractual promise.

In December 2013, Rafif Salih married Rahla Almarzooqi in the United Arab Emirates.  He was then working in New Zealand as a dentist; she was living in Australia on a UAE government scholarship.  As is common with Islamic marriages, a bride price or nikah was agreed with Mr Salih making an immediate payment of 30,000 dirhams (about $13,000) and agreeing to payment of a further 500,000 dirhams (about $215,000) on his death or the event of an irreconcilable divorce.   

The High Court was told they then lived in New Zealand, separating after six months.  In 2016, Ms Almarzooqi obtained a divorce from the Personal Status Court of Dubai.  Mr Salih refused to pay the agreed 500,000 dirhams.  New Zealand courts had no grounds to enforce the UAE nikah, he said.

Islamic marriage customs are not unique to UAE and Sharia law, Justice Simon France said.  Had they instead married in New Zealand, agreement to nikah can operate within a New Zealand legal context. Whether UAE law or New Zealand law applied, it was a case of determining terms of the marriage contract and establishing whether the contract had been broken, Justice France said.   

Their marriage contract was governed by UAE law, Justice France ruled.  Terms of the contract required Mr Salih pay 500,000 dirhams on their divorce.

Almarzooqi v. Salih – High Court (25.05.22)

22.091

Customs Fraud: Zhu v. Customs

Over four million dollars in cash was uncovered including $3.2 million stuffed into rubbish sacks at a storage unit during an Auckland Customs raid breaking open a smuggling ring importing cigarettes from China concealed inside furniture shipments.  Tax revenue evaded was $18.7 million.

It was a family affair: husband Wei Yi Hu was sentenced to five years three months imprisonment for customs fraud and wife Hua Yi Zhu three years; her China-based brother, who organised shipments, remained safely outside the jurisdiction of New Zealand courts.    

Zhu unsuccessfully appealed her sentence of three year’s imprisonment.  She was a minor player in the scheme, she said.  Further, there were cultural issues in play, she said.  In Chinese culture, wives show deference to their spouses and do their bidding.

The sentence was not manifestly excessive, Justice Davison ruled.  Zhu played an active, central and significant role over an extended period of time between 2015 and 2018, he said.  While her husband was described as the mastermind behind operations, there was evidence Zhu dealt directly with cigarette suppliers in China, liaised with her brother over shipment details and initiated payments to China.

Zhu v. Customs – High Court (20.05.22)

22.090

Loan: Merchant Finance v. Xu & Litt

Claiming $548,000 was still owed after a mortgagee sale, Merchant Finance was instead forced to pay Cheryl Xu and Karl Litt $145,800 following its failure to provide proper credit contract disclosure.  

Ms Xu and Mr Litt launched into the Auckland restaurant business in late 2017, repurposing a small convenience store in front of their 1930s villa on Remuera Road into a café.  A $1.98 million Merchant Finance Ltd loan was used to both refinance existing short-term borrowing and also to expand with new restaurants in St Heliers and Onehunga.

The High Court was told Merchant Finance sold the Remuera Road property for $1.79 million in a June 2019 mortgagee sale.  Mr Litt was bankrupted in September 2020. Further legal fallout followed with Merchant Finance suing for money allegedly still due after the forced sale. Sloppy loan documentation resulted in Justice Fitzgerald ruling no interest was payable on the loan; Merchant Finance breached Credit Contracts and Consumer Finance Act requirements to make proper disclosure of contract terms.

Evidence was given of Merchant Finance’s failure in loan documentation to state its physical address and the date interest starting running. Total interest payable over term of the loan was miscalculated.  Disclosure of the default interest rate was obscured.  The default interest rate was described as 20 per cent, but off to one side of the loan document a typed notation stated ‘plus ordinary interest rate.’ What appeared to be a default interest rate of twenty per cent was in fact about forty per cent.

The Credit Contracts penalty for failing to make proper disclosure meant Merchant Finance could not recover any interest and had to refund all interest paid.

The base loan advanced by Merchant Finance was $1.65 million, which was less than the $1.79 million received following its mortgagee sale.  Its actual loan advance of $1.98 million included some $208,000 being twelve months interest treated as paid in advance and capitalised into the loan.

Merchant Finance Ltd v. Xu & Litt – High Court (21.12.21 & 19.05.22)

22.089

Asset Forfeiture: Commissioner of Police v. Standen

High-powered cars supposedly subject to proceeds of crime restraining orders are proving elusive as police attempt to track down what are allegedly gang-related seizures.

In April 2022, Daren Mark Standen met with Christchurch police to negotiate a Criminal Proceeds (Recovery) Act settlement following conviction for methamphetamine offences.  He agreed to forfeit some $226,000 cash seized by police in late 2020 as being proceeds of crime.  There were stumbling blocks over ownership of specific motor vehicles alleged to be tainted as purchased with proceeds of crime.  First: a 2008 Porsche Cayenne, owned by Standen.  This was taken from him he said, by gang members he was unwilling or unable to name.  A court order was issued for seizure of the Porsche.  The High Court was told it had quickly passed through hands of three different people, with the person currently in possession claiming to have paid $20,000 to buy it.  Second: a 2003 Audi Quattro, registered in Standen’s name.  This vehicle was also stolen from Standen in a gang-related robbery, police said. The High Court ordered forfeiture and sale of the Audi.

Within gang culture, disputed debts are commonly settled by force with the seizure of assets such as cars; a process colloquially described as ‘taxing.’  As a general rule, ownership of stolen cars remains with the original owner.  Any person subsequently in possession cannot claim ownership, even when they did not know it was stolen and paid market price.

Commissioner of Police v. Standen – High Court (26.01.22 & 17.05.22)

22.088

Fair Trading: Corporate Cabs v. Kumar

Corporate Cabs throwing  the book at a former driver as a warning shot for other drivers was of limited success when the High Court ruled there was no Fair Trading Act breach by drivers setting up a rival business under a different name.  

Prem Kumar’s driver contract with Corporate Cabs Ltd was terminated in late 2017, after some eighteen months working for the company.  Drivers working with Corporate Cabs are categorised as owner/operators.  They are required to purchase their vehicle from a Corporate Cabs nominated supplier and comply with Corporate’s rules for fit-out and signage.

The High Court was told Mr Kumar’s contract was terminated for breaching Corporate Cab rules.  He then adapted signage on his car describing his new business as ‘Business Cab’ but used Corporate Cabs’ font and dark-blue background for his new logo. Corporate Cabs sued alleging breach of his owner/operator contract, breach of the Fair Trading Act and breach of the Trade Marks Act.  Mr Kumar did not appear in court.  There were suggestions he had moved to India.

Corporate Cabs said an example had to be made of Mr Kumar; drivers might otherwise assume they could breach Corporate Cabs rules with impunity.  Evidence was given that Mr Kumar changed the branding of his new business after Corporate Cabs objected; adding a silver fern to the name Business Cab and changing the background colour to black.

Justice Harvey ruled Mr Kumar was not in breach of the Fair Trading Act.  There was no evidence of customers being confused between the two businesses. Corporate Cabs is primarily a taxi-booking service.  Mr Kumar’s new business operated from kerbside hires.  The amended branding was not misleading or deceptive, Justice Harvey ruled.

An injunction was granted prohibiting Mr Kumar in the future from using any branding on his taxi which is similar to Corporate Cabs branding.

Corporate Cabs Ltd v. Kumar – High Court (17.05.22)

22.087

Asset Forfeiture: Commissioner of Police v. Lin & Du

Smuggling cigarettes from China through their Auckland company Enternal Trading Ltd resulted in proceeds of crime orders totalling $900,000 imposed on director Bo Lin and sales manager Jialiang Du. Customs duty evaded by smuggling was estimated at $1.2 million.

In July 2019, Customs intercepted a container at Auckland Port with some 480,000 Chinese cigarettes hidden inside boxes of food imported by Enternal Trading.  A further 603,000 cigarettes were found at a storage unit linked to Mr Du.  A WeChat message on Mr Lin’s phone sent after the Customs interception asked his China suppliers why cigarettes were loaded into his container. Customs found all prior WeChat messages had been deleted.  It also found a handwritten note at Mr Lin’s home detailing these stratagems as ploys to deflect Customs enquiries.

Proceeds of crime restraining orders were placed over property owned by Mr Lin in Auckland suburb New Windsor and Mr Du at Whenuapai. Both were convicted of Customs fraud; Lin sentenced to nine months home detention, Du two months.

The High Court approved a negotiated settlement with profit forfeiture orders of $900,000 imposed under the Criminal Proceeds (Recovery) Act; $600,000 payable by Mr Lin, $300,000 by Mr Du.  Orders were made for sale of the restrained properties.  The court was told these profit forfeitures took into account the fact Enternal Trading had separately paid sums due to both Customs and Inland Revenue.

Commissioner of Police v. Lin & Du – High Court (16.05.22)

22.086

Estate: Ridley v. Mulholland

Described as holding other beneficiaries to ransom, Gregory Mulholland was removed as administrator of his late mother’s estate and ordered to vacate her Auckland home where he had been living rent free.  

Jocelyn Mulholland died in 2020 leaving her net estate to her three children.  She owned a property at Rathmar Drive, Manurewa.  Son Gregory lived with her for the six years prior to her death.  He then stayed on at Rathmar Drive, rent free refusing to leave.  The High Court was told a Heartland Bank reverse mortgage had been taken out over Rathmar Drive years earlier, with interest currently at 5.95 per cent compounding monthly being added to the balance owing.  Terms of the reverse mortgage require repayment on Mrs Mulholland’s death.

Gregory and sister Catherine were appointed estate administrators.  Gregory refused to budge from the property, saying he wanted to buy it.  Delays were caused by Catherine’s failure to itemise chattels taken from the property, he claims.

Gregory’s claims about chattels were of no moment, Justice Gordon ruled.  There was evidence that Gregory helped box up their mother’s personal effects and knew which items had gone into storage and which had been distributed between the children.

Gregory was ordered to leave Rathmar Drive within two months.  He had no legal right to stay in occupation.  He was removed as administrator of the estate.  Failing to progress sale of Rathmar Drive was a breach of his obligations as administrator, Justice Gordon ruled. Evidence was given that Rathmar has a current online valuation of $935,000, with Heartland Bank owed some $74,000.

Ridley v. Mulholland – High Court (12.05.22)

22.085

Due Diligence: Melco Properties v. Hall

Black Diamond Technologies allege vendor of a property in Lower Hutt deliberately went bush to prevent completion of due diligence causing its $1.5 million purchase to fall over, all because the vendor had a better offer.  Vendors cannot use their own default as grounds to escape a contract, the Supreme Court ruled.  

In December 2019, Black Diamond agreed to buy a neighbouring property in Parliament Street from Anthony John Hall.  Black Diamond had until 9 January 2020 to complete due diligence.  The intervening Christmas/New Year break caused complications.  At Mr Hall’s direction, his lawyer did not respond to requests for a due diligence extension.  The contract came to an end when Black Diamond did not either complete its due diligence before the deadline or waive the requirement for due diligence, the High Court ruled.  Black Diamond appealed.

Evidence was given during the High Court trial of Mr Hall cancelling at the last minute Black Diamond’s access for a proposed engineering inspection scheduled for 8 January.  He would be tramping in the Tararua Ranges he said, out of phone contact.  Telephone records established that Mr Hall was in contact with a second buyer prior to this cancellation.  This buyer offered a better price.

Black Diamond registered a caveat over title to Parliament Street, blocking any sale to the second buyer.  This caveat remains.  Black Diamond is entitled to return to the High Court and argue the original $1.5 million contract still stands, the Supreme Court said.  As a general rule, vendors cannot through their own behaviour prevent purchasers from carrying out their part of the contract, the court ruled.

Mr Hall complains that if the original $1.5 million contract is enforced, Black Diamond would have had two years without payment before getting Parliament Street at a price below its current market value.

The court was told the second buyer was offering to pay an extra $100,000.

Melco Property Holdings (NZ) Ltd v. Hall – Supreme Court (12.05.22)

22.084 

Asset Forfeiture: Commissioner of Police v. Knights

An Auckland light industrial unit converted without resource consent into residential accommodation for immigrant workers and WINZ beneficiaries has been targeted for confiscation on grounds receiving rental income amounted to a ‘significant criminal activity.’  

The High Court was told a warehouse on Maich Road in a Manurewa light industrial zone was used to house both foreign workers and WINZ beneficiaries from 2015 after being converted into 23 separate bedrooms with kitchen and bathroom facilities attached.  Residents were charged $200 per week for accommodation.  No building consents were obtained for the alterations. A land use resource consent lodged with Auckland City in 2017 to change zoning to residential was withdrawn after Council inspectors indicated consent would be refused.

Police took action, alleging collection of rentals amounted to a significant criminal activity.  Three of the participants: Jenni Diana Farmer, William Robert Farmer and Mark Vincent Hubble negotiated a Criminal Proceeds (Recovery) Act settlement. Paul Andrew Knights challenged allegations he was involved in any criminal activity.  While a company he owns received about $343,000 in rentals for an eighteen month period starting late 2017, he was unaware of zoning and Building Act issues, he said.

Justice Lang ruled that Mr Knights was wilfully blind to the issues; he had received multiple emails from Mr Farmer outlining Council objections.  A restraining order was placed over Mr Knight’s interest in the converted warehouse, pending prosecutions for alleged breaches of the Resource Management Act and the Building Act.  Mr Knights says criminal proceeds legislation is being used improperly.  It was never intended to be used as grounds to seize assets for breaches of public welfare regulations, he says.

Commissioner of Police v. Knights – High Court (9.05.22)

22.083

Construction: Cancian v. Tauranga City

As project manager for multiple Tauranga housebuilds, Danny John Cancian was liable to ensure work complied with building consents.  He was fined $36,000 for breaches of the Building Act.

Cancian and his company Bella Vista Homes Ltd gained notoriety when Tauranga Council closed down as dangerous, building sites in a subdivision known as The Lakes.  Poor construction forced demolition of some homes; remediation for others.  Cancian was charged with breaches of the Building Act in respect of eight properties.  After a trial and several appeals, convictions and fines stood in respect of two properties.

Justice Lang confirmed conviction and a $20,000 fine in relation to an Aneta Way build.  Poorly finished cladding breached the Act.  Cancian could not lay the blame on an apprentice working on site.  As the licenced building practitioner responsible, it was Cancian’s job to supervise his apprentice, Justice Lang said.

Building Act charges in relation to one Lakes Boulevard build centred on foundation footings for a rear wall.  Footings poured were inadequate for a consented wall one metre high and were in fact used to support a wall that was nearly three metres high.  Cancian was held liable as project manager, even though another licenced building practitioner personally supervised pouring of the inadequate footings.  A $20,000 fine was reduced by $4000 after Cancian’s further Lakes Boulevard conviction for filing with Tauranga Council an incorrect record of the completed work was overturned on appeal; filing a record of work is not ‘building work’ as defined by the Act, Justice Lang ruled.

Cancian was ordered to pay Tauranga City ninety per cent by value of the fines imposed. 

Cancian v. Tauranga City Council – High Court (28.3.22 & 29.04.22)

22.081 

Bankruptcy: re Clarke

Bankrupted more than eight years ago and sentenced to two years three months imprisonment during that time for Insolvency Act offences, former Auckland chartered accountant Stuart Francis Clarke was released from bankruptcy on condition that he not act as a trustee or director until August 2024.

Clarke was bankrupted in March 2014 on a Westpac guarantee for money used to purchase a Hamilton commercial building.  In the normal course of events, he would expect to be discharged from bankruptcy three years later.  But the three year clock does not start ticking until a bankrupt files with Insolvency Service a personal budget together with details of all assets and liabilities. The High Court was told Clarke provided incomplete information and refused to answer Insolvency Service questions. The clock never started.  He was imprisoned after pleading guilty in 2018 to multiple Insolvency Act offences including managing a business whilst bankrupt, concealing assets and contributing to the extent of his insolvency with extravagant spending around the time of his bankruptcy.  Evidence was given that he spent some $84,000 on personal expenses over a 21 week period.

Insolvency Service did not challenge his court application for discharge.  The High Court was told Clarke is now aged 65, his only income a state benefit.  He has no assets, but holds assets in his name as an independent trustee of client family trusts.

Associate judge Sussock ruled that it is not in public interest to leave a person perpetually in bankruptcy.  There is a point where they have to get on with their life. She discharged Clarke from bankruptcy with immediate effect, subject to the condition he not act as a director or trustee before August 2024.

re Clarke – High Court (29.04.22)

22.082

Sofitel Auckland: Een v.Body Corporate 384911

Investors allege Pandey-controlled CP Group running the Sofitel Auckland Viaduct Harbour Hotel put on the squeeze; blocking disgruntled absentee apartment owners from earning revenue hosting Airbnb guests, forcing some to sell at reduced prices to CP Group.    

Viaduct Harbour has 175 residential units; the majority under control of the Pandey family.  About eighty apartments are managed privately with owners mostly living offshore, predominately in Singapore and Malaysia.  These private owners refuse to lease their apartments into CP Group’s Sofitel hotel operations.  Each are having to pay annual body corporate levies of some $24,000 a year.  They dispute the size of annual levies and are challenging CP Group’s use of common areas for hotel operations.

The High Court was told CP Group used its majority voting in September 2020 to amend body corporate rules, stopping private apartment owners from using other providers to let out their apartments. This left them with no revenue while still liable for corporate levies, disgruntled owners said.  Five gave up, selling to a Pandey-controlled company for prices ranging between $150,000 and $170,000.  CP Group has since conceded the new rules are invalid and cannot be enforced.

Litigation over disputed use of common areas carries on. CP Group stalled, demanding private owners stump up security for its legal costs.  They live overseas and may not pay if they lose, it said.  Associate judge Taylor ruled against security for costs. Offshore owners own assets in New Zealand; their apartments at Viaduct Harbour.  CP Group’s attempt to block private owners from earning letting revenue counted against its demand of security for costs, Judge Taylor said.

Een v. Body Corporate 383911 – High Court (29.04.22)

22.080

Royalties: Talley's Group v. MacLab

Talley’s claim MacLab is not properly paying royalties for supply of mussels resulted in a counterclaim by MacLab for $3.4 million alleging overcharging for stock supplied.

A 2014 supply agreement saw Talley’s Group Ltd and MacLab (NZ) Ltd joined at the hip in a long-term arrangement.  MacLab processes raw mussels, producing powder for health products having claimed anti-inflammatory properties.  The deal sees Talley’s receiving five per cent of MacLab’s gross revenue as royalties.  Talley’s disputes the amount paid in royalties and the manner in which it is paid.  It was envisaged payment would be made in kind, through issue of shares in a company holding MacLab assets, Talley’s claims.  It has been refused access to MacLab’s internal records to allow verification of royalty payments, it says.

When sued by Talley’s, MacLab kicked back, alleging Talley’s overcharged for mussels supplied.  MacLab has to prove what was the market price.  The New Zealand market is dominated by Talley’s, MacLab and Sanford. MacLab dragged Sanford into its litigation seeking a court order for release of Sanford pricing information.

Sanford agreed to release pricing schedules and invoices covering mussel sales to its customers for the six year period ending December 2018.  It refused to release aggregated data.  That could identify pricing strategies developed over time and could be extrapolated to determine current pricing strategies, it said.  In the High Court, Associate judge Sussock agreed, refusing to order disclosure of aggregated information.  Judge Sussock also ruled Sanford was not obliged to disclose any information it held regarding pricing by other suppliers.  If MacLab wants this information, it should be approaching these other suppliers, Sanford said.

MacLab has to pay Sanford’s costs in assembling pricing information being released.

Talley’s Group Ltd v. MacLab (NZ) Ltd – High Court (20.03.20, 29.10.21 & 28.04.22)

22.078

Property: van der Byl v. van der Byl

Family confusion over financial assistance to support their mother came to a head when Robin van der Byl needed a High Court order to force sale of her Palmerston North home in order to buy a home for himself.  Justice Simon France dismissed family suggestions that Robin had muddied the waters in gaining part share of their mother’s home.

The High Court was told of van der Byl family discussions in 2006 about support for their parents.  Son Robin suggested construction of a granny flat alongside the family home with their parents shifting into the granny flat and Robin with his then wife shifting into the main house.  Neither his parents nor his siblings were in a position to provide financial support for the build.  Robin put up $100,000.  He told the court his parents offered to transfer a one-third share of the property to him ‘to protect’ his contribution.  The High Court was told this amount roughly equated to one-third of the then market value of the property.  Each had separate lawyers finalise the transaction.  His father died whilst granny flat construction was underway.  Three years later, in 2009, Robin moved out of the main house.  Other members of the wider family subsequently shifted in; some paying rent, some not.

Some twelve years later, Robin was living in Australia in straightened circumstances.  His only income was a national pension.  His accommodation was a bedroom rented from a relative.  Attempts to realise his share of the Palmerston North family home was met with more than dismay; some relatives were outraged that his 88 year old mother should be required to sell up and buy elsewhere in order to pay out his share. Robin should wait until his mother died, they said.  Questions were raised about how Robin came to be part-owner.

Justice Simon France ruled there was nothing sinister in Robin becoming part-owner.  The transaction was clearly documented.  He was entitled to cash-out his part share.  While his mother had lived at the property for nearly thirty years and any question of a move was stressful, Robin faced financial hardship in looking to buy a home for himself, Justice France said.  Robin’s mother was offered the opportunity to buy out her son’s share of the Palmerston North property at a court-ordered valuation, failing that it is to be sold.

An online valuation values the property at $850,000. Evidence was given that Robin had accidentally wound up as half owner of the Palmerston North property after his father’s death because of a lawyer’s mistake in naming Robin as a joint owner rather than owner as tenant-in-common with a one-third share.  In the High Court, Robin asked to be cashed-out at a one third share, being the intent of the 2006 financial arrangement.

van der Byl v. van der Byl – High Court (28.04.22)

22.077

Insolvency: Scutter v. Tawa LP

Fiddling the books to avoid payment of $391,000 GST came at a cost; liquidator of Wellington-based Matrix Homes clawed back $2.1 million as a voidable payment after Matrix went into liquidation insolvent.  What were claimed to be pre-payments on a building contract were Matrix shareholder loans, the High Court ruled.

Matrix Homes Ltd was in the business of assembling homes from factory-built modular units, a departure from the usual practice of on-site builds.  After its 2018 liquidation, Matrix liquidator John Scutter challenged transactions that saw Tawa LP, controlled by Matrix’s Sean Murrie and Joseph Hannah, wind up with ownership of a Matrix property development in Tawa without payment. Matrix had agreed to build eleven duplex style modular apartments at William Earp Place for a fixed price of $2.75 million.

The High Court was told Matrix was insolvent from the get-go.  Banks refused to fund the project.  Working capital was drip fed by Mr Murrie and Mr Hannah.  Deposits paid by purchasers were recorded as pre-payments, with GST payable. Evidence was given that Mr Murrie’s and Mr Hannah’s working capital contributions for Matrix were supposedly Tawa LP pre-payments but were recorded in Matrix accounting system as shareholder loans to Matrix.  Mr Murrie told the High Court that Matrix accounting staff had made a mistake. Justice Gwyn ruled there had been no mistake; Mr Murrie had instructed staff to record the transactions as Matrix shareholder loans to avoid liability for GST.

Shortly before Matrix was propelled into receivership by Sean Murrie himself, a flurry of accounting entries saw the shareholder loans transformed into payments by Tawa LP of the purchase price for Earp Place apartments.  Tawa LP took ownership.  Matrix liquidator challenged this arrangement; Tawa LP had gained a Matrix asset but had not paid for it, he said. Tawa LP was ordered to pay Matrix $2.16 million; the face value of credit invoices drawn up to re-categorise the Matrix shareholder loans as Tawa LP pre-payments.

Scutter v. Tawa Limited Partnership – High Court (28.04.22)

22.079