Memelink: Haines v. Official Assignee

 

Censured by the Law Society for professional misconduct in what was alleged to be sham billing designed to increase voting power at a client’s creditors meeting, solicitor Quentin Haines was subsequently in court for a ruling on how much was in fact owed by now bankrupt client, Harry Memelink.

When in 2017 Mr Haines struck out on his own as a young solicitor, he took on Mr Memelink as a client.  It proved to become a very fraught relationship.

The High Court was told Mr Memelink faced bankruptcy in mid-2018.  An Insolvency Act proposal was put to creditors, to avoid bankruptcy.  Mr Haines voted, claiming he was owed one million dollars in unpaid fees.  The proposal failed.  Mr Memelink was bankrupted in August 2018.  Insolvency Service is handling his bankruptcy.

In light of the Law Society ruling that the one million dollar invoice was a sham, Insolvency Service refused to accept Mr Haines’ claim to be a creditor in Mr Memelink’s bankruptcy.  Mr Haines sought a High Court ruling to set a dollar figure on his claim.

Mr Memelink appeared in court, challenging Mr Haines entitlement to any payment at all.  He alleged Mr Haines had failed to do his job properly and had not fully carried out client instructions.  The court was told Mr Haines had acted for Mr Memelink on 38 separate legal matters.  Mr Memelink further alleged their fee arrangement was to have Mr Haines collect payment only from any costs award made in his favour following successful court actions.

The Insolvency Act allows the High Court to make an assessment of the value of work done for a bankrupt prior to bankruptcy where their contract lacks an agreed rate of remuneration.  Associate judge Johnston ruled the value of unpaid work done by Mr Haines amounted to $525,000.  Insolvency Service was directed to accept this amount as an unsecured claim by Mr Haines in the Memelink bankruptcy.

Haines v. Official Assignee – High Court (24.05.23)

23.075

Freezing Order: River Oaks Mews v. Meurant

 

Alleging that Ross Meurant had emptied their company bank account without authority, trustees of a family trust had a High Court freezing order placed on an Auckland property owned by Mr Meurant and his wife.

Alexey Potter and Egor Petrenko alleged in the High Court that Mr Meurant and entities associated with him had been charging excessive management fees to their company River Oaks Mews Ltd.  They claimed he had breached duties as a director when taking some $1.6 million from company bank accounts.  The amount owed as management fees is disputed.  Following a River Oak audit, Mr Meurant was told to provide evidence supporting fees claimed, or complaints of theft would be laid with police.  It is alleged at least $736,000 was taken in excess of fees legitimately charged.

River Oaks asked the High Court to impose a freezing order over a Meurant property in the Auckland suburb of St Johns after learning it was on the market.  It was alleged Mr Meurant was cashing up with the risk proceeds would be salted away out of River Oak’s reach.

Justice Jagose imposed a time-limited freezing order.  Any sale was blocked for one week, with the freezing order to then be reviewed.  Mr Meurant had no warning that River Oaks had applied for a freezing order.

Companies Office records show Mr Meurant resigned as director on the day scheduled for court review of the freezing order.

River Oaks Mews Ltd v. Meurant – High Court (23.05.23)

23.074

Land: Sofinowski v. Makan

 

Falling Auckland house prices saw a buyer ordered to pay $553,300 damages covering loss on resale after he defaulted on a $1.38 million agreement to purchase a west Auckland home.

The High Court was told Piyush Makan agreed in September 2021 to buy a Simpson Road property in Ranui from Marc and Katherine Sofinowski.  Contract price was initially $1.4 million; reduced by agreement one week later to $1.385 million.  Settlement of his purchase was not required for eleven months.

One month prior to settlement, Mr Makan said he had been unable to raise finance.  He again requested a reduction in price.  The Sofinowskis refused, cancelling the contract when he failed to settle on due date.  Simpson Road was put back on the market.  Four offers were received, with a price differential of $80,000 between highest and lowest offer.  They resold at $871,800.

Mr Makan was ordered to pay $553,300 for breach of contract.  This included the difference between the original price and the price at subsequent sale, plus real estate expenses and interest on late settlement.

Sofinowski v. Makan – High Court (18.05.23)

23.073

Defamation: Spring v. Browne

 

Under investigation for accessing the NZTA vehicle register without authority and having his home searched by police, Marc Spring then unsuccessfully sued former bosses Cory Browne and Glenn Tulloch for defamation.

This followed Mr Spring’s search of the NZTA register in February 2020 to identify registration of a Range Rover seen driven by a Mr Mathew Blomfield.  The two were in the middle of a personal dispute.  Mr Spring discovered the vehicle was registered to Mr Blomfield’s wife.  He earned the ire of Mr Blomfield after reporting this fact to the liquidator of a company Mr Blomfield was involved with.    

The High Court was told Mr Blomfield then laid a complaint with police, suspecting Mr Spring had improperly accessed the NZTA register as part of their personal dispute.  Police learnt that Mr Spring had been previously employed by Corporate Cars Ltd, now known as Clearance Cars Ltd.  At Corporate Cars, he had logon authority to the NZTA register for work purposes.  After March 2019, he worked with Corporate Cars as a contractor.  A company administrator facilitated his continued use of Corporate Cars access to the register.

Evidence was given that the then directors of Corporate Cars, Cory Browne and Glenn Tulloch, were not fully aware of Mr Spring’s ongoing access. 

When asked by both Mr Blomfield and police if Corporate Cars had authorised the Blomfield search, each said no.  Mr Spring sued, claiming $800,000 for injurious falsehood.  He had access to the NZTA register with permission of Corporate Cars and it was defamatory for Mr Browne and Mr Tulloch to suggest otherwise, he said.      

Injurious falsehood is an economic tort.  It requires proof false statements were made recklessly or maliciously to a third person causing monetary loss.

Justice Tahana ruled neither Mr Browne nor Mr Tulloch were liable.  They did not make any false statement. When asked if Corporate Cars had authorised the improper Blomfield search, they answered no.  This was true.

Corporate Cars only became aware of Mr Spring’s misuse of the register after NZTA cut off access.  This followed a complaint by Mr Blomfield to NZTA that Corporate Cars workplace access was being used for unauthorised purposes.

Spring v. Browne – High Court (17.05.23)

23.072

Business Sale: Directus South East Asia v. Beattie

To settle their ongoing family dispute, Charles Beattie agreed to take ownership of father Anthony’s fruit and vegetable concentrates business Directus valued at $935,000.  In return, Charles gave up all claims as beneficiary of family trusts and the estates of his father Anthony and Anthony’s deceased wife.  It did not prove to be an amicable settlement.  A subsequent dispute over the level of Directus’ debts saw the two in court.

The High Court ruled that the agreed deal required son Charles to clear a USD 227,300 Directus business debt, putting a severe dent into his cashflow at a time when Charles said he was short of cash.

The High Court was told father and son signed a sale agreement in 2020 described as full and final settlement of their business and personal disputes.  Son Charles was gifted ownership of the Directus business and its south-east Asian customer base.  In return, he promised not to claim any rights as a beneficiary of his father’s family trusts or as a potential beneficiary of his father’s estate on death.

The Directus deal involved transfer of all business assets and liabilities to a Hong Kong company controlled by son Charles.  His father retained his shareholding in Directus South East Asia Ltd, which was left as an asset-less shell.  Charles was later to dispute his liability to pay a Directus debt of some USD227,300 owed to US company Directus USA Inc.  His father Anthony owned Directus USA.

Associate judge Taylor ruled son Charles was personally liable to pay this debt.  The 2020 sale specifically included sale of Directus’ business debts as well as assets.  The contract gave Charles twenty working days to challenge the value of any debts Directus owed; it was too late to dispute the amount of a debt 18 months later, Judge Taylor said.  Transfer of all business assets and liabilities was part of a wrap-up deal intended to end a family dispute in what was a full and final settlement.

Charles could not belatedly reopen the deal claiming he did not expect to pay cash over and above giving up his disputed family claims.

The court was told Directus South East Asia, still owned by father Anthony, had paid Directus USA the amount claimed.  As a matter of law, liability on a debt cannot be assigned without creditor agreement.  Primary liability for the debt still lay with Directus South East Asia, owned by father Anthony.  It was Directus South East Asia under father Anthony’s control which sued son Charles to recover the amount paid.  In the 2020 sale agreement, Charles agreed to indemnify Directus South East Asia for any debts left unpaid.

Directus South East Asia Ltd v. CNG International Ltd & Beattie – High Court (16.05.23)

23.071

Relationship Property: K. v. K.

 

Failing to properly engage with his wife’s relationship property claim resulted in the High Court removing a Taranaki dairy and takeaway proprietor as trustee of a family trust and ordering him to vacate their trust-owned family home.

In dispute were family trust assets including a five hectare rural lifestyle block containing a small pine plantation, a dairy and takeaway business, boats, motor vehicles and motor-cross bikes, valued in total at $987,000.  

The names of husband and wife were anonymised as Mr & Mrs K in published court proceedings.  They separated in 2017, after a relationship lasting sixteen years.  A family trust was established after they had been in a relationship for four years.  Both were named as trustees, together with an independent trustee from a local accounting firm.  Assets accumulated during their relationship went into this family trust. 

The High Court was told Mrs K was continually frustrated in attempts to resolve her relationship property claim after the 2017 separation and subsequent divorce.  She was no longer living in the family home.  Repeated offers by Mr K to buy out his spouse came to nothing after efforts to raise finance stalled.  His failure to implement procedures agreed in the Family Court led to High Court intervention.  The same pattern of behaviour was repeated.  Mr K blamed his failure to engage with the court process on ‘being busy’ and on ‘not doing email.’  He had provided an email address as his point of contact for court documents.

In November 2022, Mr K did turn up in court on the day set down for a decision on his wife’s relationship property claim.  He repeated proposals to buy out his spouse, proposals which he had failed to implement in the past.  Justice Gwyn decided it was time to press on, given what she described as Mr K’s failure or unwillingness to act on previous court rulings or his own proposals.

Mr K was removed as trustee of their family trust.  He was ordered to facilitate a valuation of trust assets and to co-operate in marketing the family lifestyle block.  If bank financing could not be retained over the dairy and takeaway business, it too was to be sold.  Mr K was to pay the Trust $47,500 rent on account of his occupation of the family home since separation.  On sale of Trust assets, the net proceeds were to be divided in half, with each half going to new family trusts controlled separately by Mr & Mrs K.

Six months later, Mrs K was back in court.  Her husband was obstructing attempts to sell the family home, refusing to allow real estate agents’ access.  Justice Gwyn ruled Mr K to be an unlawful occupier, giving him two weeks to leave.

K. v. K. – High Court (28.11.22 & 15.05.23)

23.069

Company: Walters v. Neale

 

Tani and Margaret Neale were told to cough up $177,000 proceeds from sale of Wanaka-based TMC Transport’s trucks with the High Court saying the company would be put into liquidation if they did not sort out their differences with fellow shareholder Luke Walters.

The court was told two trucks and a flat deck trailer previously owned by a company controlled by Mr Walters were sold in 2018 to a new company called TMC Transport 2018 Ltd.  TMC was owned 50 per cent by Mr Walters and 50 per cent by Tani and Margaret Neale.  Their business relationship fell apart in a little over a year.  The Neales fired Mr Walters as one of the two directors.  He left the company.  The High Court subsequently ruled this supposed dismissal of Mr Walters was invalid; correct company procedures for removal of a director had not been followed.

The trucks and trailer were sold after Mr Walters departed.  The Neales kept the $207,000 net sale proceeds; saying initially this was in repayment of money they had lent the company, later saying they were holding the money in ‘safe-keeping’.  There was no evidence that the money was being held on deposit, in trust.

Mr Walters sued, complaining the Neales had taken for themselves all proceeds from sale of company’s assets leaving him with nothing.  Some $30,000 of this money was used by the Walters to pay TMC Transport’s GST obligations.

Associate judge Lester ruled the Neales’ unilateral removal of Mr Walters as director amounted to prejudicial behaviour in breach of the Companies Act.   If the two sides cannot agree on how the sale proceeds should be divided, a liquidator will be appointed, he said.

The Neales were given seven weeks to sort out their differences with Mr Walters.  Failing that, a court appointed liquidator takes control.  If automatic liquidation kicks in, the Neales must repay $177,000 to the company within ten days.

Walters v. Neale – High Court (15.05.23)

23.068

'Spencer on Byron:' Body Corporate 2017624 v. Grimshaw

 

Leaky home specialists, law firm Grimshaw & Co, was ordered to pay $3.2 million damages after failing to properly advise on distribution of a twenty million dollar 2013 settlement for remediation of Spencer on Byron in Takapuna, Auckland.

Cost increases incurred while apartment owners fought over division of the pie were a direct result of Grimshaw not properly identifying owners’ rights, the High Court ruled. 

Twenty storeys high, Spencer on Byron stands out on the North Shore skyline.  It was plagued by construction defects.  The Spencer body corporate hired Grimshaw as legal adviser.  Grimshaw negotiated a twenty million dollar out of court settlement with builder Multiplex and Auckland City Council.

As is common with expensive remediations, a legal claim was first filed forcing both Multiplex and the Council into mediation.  Named as plaintiffs were both the Spencer body corporate and named apartment owners.

Not all apartment owners signed up, though all were levied for payment of ongoing legal and consultancy fees.  Arguments over whether apartment owners who had not joined the legal action were entitled to share in the twenty million dollar settlement led to remediation delays.  On Grimshaw’s advice, the court was asked to rule on apartment holders’ entitlements.  This delay resulted in further legal costs and an increase in remediation costs.  Grimshaw was held liable for these increased costs: $3.2 million.

In anticipation of the 2013 settlement, Grimshaw had prepared three years prior a distribution agreement setting out a formula for division between apartment owners who had signed up (compensation for cost of apartment repairs) and the body corporate (for repair of common areas).  Apartment owners who did not sign up took the view that they would benefit at least from the body corporate repairing common areas that all made use of.

But Unit Titles Act rules changed between the time a draft distribution agreement was floated and the time it was actioned; apartment owners no longer shared ownership of common areas, ownership lay with the body corporate.  Apartment owners who had not joined the legal action missed out, the body corporate said.  All settlement money would go to those who signed up.

Justice Tahana ruled Grimshaw was negligent in not advising a redraft of the distribution agreement in light of the Unit Titles rule change.  Legal costs disputing application of the distribution agreement and subsequent remediation delays were a direct result of this failure, she said.

The court was told a mediation agreed between all apartment owners in 2015 resulted in eighty per cent of the twenty million dollar settlement directed to remediation of common areas, the balance to apartment holders who had signed up for the initial litigation.  Those who had not signed up did not receive a payout.

Body Corporate 2017624 v. Grimshaw & Co – High Court (28.4.23 & 15.05.23)

23.070

 

Post judgment note: The Court of Appeal subsequently ruled Grimshaw was not negligent; the earlier distribution agreement remained valid despite changes to the Unit Titles Act.  In addition, the court ruled Grimshaw's advice did not cause the claimed $3.2 million loss.

Insurance: Polladio Holdings v. New India Assurance

A $745,000 insurance claim was denied after a commercial property owner lied about the circumstances in which weather damage was first discovered.

Polladio Holdings Ltd owns the Grosvenor Hotel in Timaru.  Director Ping Lim claimed on a New India insurance policy for hail damage to the roof.  A hail storm passed over Timaru in November 2019.  It was not until September 2020 that a claim was made.

New India queried the delay.  Mr Ping said he was not aware of the damage until the roof was inspected one year later, prior to planned renovations.  It came out in evidence at the High Court that Mr Ping was aware of hail damage back in November 2019 when contractors made temporary repairs to the roof.

New India’s policy invalidates claims made dishonestly and further requires that ‘true statements’ are made when claiming.  Justice Wylie ruled Mr Ping’s false statement about when the damage was discovered, by itself, was sufficient ground for New India to refuse payment.

Changes to insurance law in 1977 prohibited insurance companies from denying cover on the sole ground of delay in making a claim.  The amount paid out can be adjusted if any delay increases costs for the insurer.  For Polladio Holdings, the justification for non-payment was not the delay in reporting damage, but the fact of lying about the delay.    

Separately, Justice Wylie ruled there were two further grounds for New India to refuse payment.  A policy exclusion for damage caused by ‘marring and scratching’ was sufficient to deny payment; cosmetic pitting and scratching to the roof caused by hail damage fell within this exclusion.  Where severity of the hail storm had punched holes in the roof, this was due to rust and corrosion in the roofing material, again an excluded condition.

Polladio Holdings Ltd v. New India Assurance Co Ltd – High Court (12.05.23)

23.067

Theft: Purucker v. Huebler

 

Common sense suggests conviction for theft quickly leads to an open and shut claim to recover funds stolen.  But the law and common sense are often strangers, as experienced by Takaka café owner Alexandra Purucker trying to recover $873,300 she said was stolen by erstwhile friend Iris Huebler.

Huebler was sentenced to four years imprisonment after pleading guilty to five counts of theft.  The High Court was told Ms Purucker travelled regularly to her native Germany over the period 2011-2018, leaving Huebler in charge of business affairs.  Huebler was subsequently charged with theft following a forensic accountant’s analysis identifying suspicious transactions totalling $873,364.

As part of plea bargain negotiations between Huebler and prosecutors prior to sentencing, the amount allegedly stolen was reduced to $700,000.  Jumbled in with these negotiations were allegations of theft by Huebler against another person.  Charges in respect of this further theft were withdrawn.

One year on, Ms Purucker took legal action against Huebler seeking to recover $873,300 as a civil debt.  Huebler challenged the debt claim, saying any money supposedly taken had been paid back.  This lead to a legal tussle in the High Court as to the status of her prior theft conviction when applied to a civil claim for recovery.

The general rule is that conviction is proof only of a conviction, not the factual circumstances surrounding an offence.  Criminal liability requires proof beyond a reasonable doubt; civil liability, proof on the balance of probabilities.  The differing rules has led to the Gilbert & Sullivan situation of two trials, one criminal the other civil, with conflicting outcomes.  High profile cases overseas have seen a person found not guilty of murder in criminal proceedings ordered to pay damages for unlawful killing in a subsequent civil case.

In New Zealand, the Evidence Act rule is that while conviction is proof that the person committed an offence, that fact can be challenged in subsequent civil cases.  In any subsequent civil case, a judge must first assess whether there are sufficient grounds to challenge the fact of the conviction.

Justice Isac ruled Huebler had no grounds to challenge her recorded conviction for theft of $700,000.  She provided no evidence at the time of her plea negotiation that there had been no theft.  In the time since conviction, she had not taken any steps to disprove evidence of theft provided by the forensic accountant.

Consequently, Huebler’s theft conviction is evidence that that she is liable to repay Ms Purucker, but only up to $700,000; the amount agreed in the plea negotiations.  That leaves a shortfall of $173,000 allegedly stolen.  It is open for Huebler to dispute in a civil debt recovery claim whether this further amount is owed, Justice Isac ruled.

Purucker v. Huebler – High Court (11.05.23)

23.065

Mortgage: Perpetual Trust v. Bolton

 

With Ken Bolton refusing to remove a mortgage blocking transfer to his sibling of their late father’s Tauranga property, the High Court ordered removal instead be signed off by the court registrar.  This followed Ken Bolton’s thirty years’ mishandling of their late father’s estate.

Ken took over estate administration in 1993, after the death of his sister, the prior executor.

The High Court was told that after their father’s death in 1975, his three children as beneficiaries mutually agreed that one of their number, Alan, would buy their father’s Sutherland Road property.  Ken said he would take care of the paperwork, to save legal costs.  Alan handed over $20,000 cash.  He paid the balance in gold bars then valued at around $80,000.  Ken was to sell this gold.  He didn’t.  He placed the gold bars with Gold Corp on the assumption this would generate a good return.  The value of these gold bars was lost when GoldCorp went into liquidation in the 1980s, insolvent.

Unbeknown to Alan, Ken never transferred to him title for Sutherland Road.  Ken instead transferred Sutherland Road to a company he controlled and signed a mortgage giving himself rights as secured creditor over the property.  Rating charges Alan paid to Ken were not handed on to Tauranga Council. The full picture later emerged when Alan learnt of a threatened Council sale for rate arrears.

The High Court removed Ken as executor of their late father’s estate, appointing Perpetual Trust in his place.  Perpetual found Ken unco-operative.  He did not respond to requests for removal of the Sutherland Road mortgage.

Justice Walker subsequently ruled there was no justification for the mortgage.  She ordered Ken remove the mortgage within fourteen days, failing that court staff could sign off on the mortgage discharge.  Justice Walker signalled Ken would be held liable for the estate’s legal costs having forced a court hearing to have the mortgage removed.

Perpetual Trust v. Bolton – High Court (11.05.23)

23.066

Wireless Spectrum: Cayman Spectrum v. Spark

 

Part of an ongoing spat with Spark, telco entrepreneur Malcolm Dick alleges Spark made false statements intended to defeat the course of justice during a 2015 Commerce Commission merger application and that Spark employees misled the Commission.  He failed in an attempt to have the High Court refer these complaints to the Law Society and the Commission. 

The dust up between Spark and Mr Dick is playing out as part of ongoing litigation between Cayman Spectrum (NZ) and Spark.  In that litigation, Cayman alleges Spark knowingly assisted Cayman director Boyd Craig in ripping off Cayman.  Mr Dick is the controlling figure behind Cayman.  He also has interests in another telco, Blue Reach.

Mr Dick alleges Spark lied to the Commerce Commission during a 2015 application when seeking to buy Woosh Wireless and Craig Wireless.

It is alleged Spark failed to tell the Commission in 2015 that Blue Reach intended to enter the retail market.  Mr Dick claims documents Spark were required to disclose as part of the current Cayman Spectrum/Spark litigation make it clear that Spark was aware back in 2015 that Blue Reach was likely to become a market participant at retail level.  The High Court was told that at the Commerce Commission hearing a Spark employee stated that Spark’s understanding was that Blue Reach intended to offer wholesale telco services only.

The wholesale market is a different ‘market’ to retail.  Market concentration is a central issue in Commerce Commission deliberations.

Mr Dick applied to have the Cayman/Spark litigation documents handed over to both the Commerce Commission and the Law Society for disciplinary action against Spark and several named employees.

Blue Reach and Spark have a bruising backstory.  In 2018, Blue Reach had a claim against Spark struck out.  This concerned a Blue Reach allegation that Spark had misled the Commission.  Justice Lang described the current 2023 case as another effort by Blue Reach to have Spark’s behaviour investigated. 

Rules governing documents ordered to be handed over prior to a court hearing cannot be used for any collateral or ulterior motive, except in exceptional circumstances.

Blue Reach was making use of documents it had no right to access, Justice Lang ruled.  Blue Reach is not party to the current Cayman Spectrum/Spark litigation.  Through Cayman, Blue Reach opportunistically learnt of the documents’ existence simply by reason of Mr Dick’s holdings in both Blue Reach and Cayman.

Staff at both the Law Society and the Commerce Commission will be aware of Mr Dick’s complaints and have power to initiate their own investigation if warranted, Justice Lang said.

Cayman Spectrum (NZ) Ltd v. Spark NZ Trading Ltd – High Court (10.05.23)

23.064

Real Estate: James v. Luxury Real Estate

Ordered to pay a $125,000 commission on sale of their Queenstown property, claims by Ross and Nona James that real estate agent Terry Spice had cancelled his agency agreement in a heated argument over negotiating strategy were dismissed in the High Court.

Litigation followed the March 2017 sale of the James’ Queenstown property for $3.15 million, sold to a Singapore buyer alerted to the listing by James’ next door neighbour.  The James refused to pay commission and marketing expenses billed by listing agency Luxury Real Estate Ltd.

The James expectations were a likely sale at $3.3 million.  Evidence was given of initial discussions directly between the James and eventual buyer Chivukula Bharadwaja with Mr Bharadwaja signalling he would offer $3.25 million.  The James were disappointed to receive a written offer to buy at a lesser price: a flat three million dollars.  They considered they were being ‘played.’

Over the following days, two more expressions of interest surfaced; both from Australia.  Luxury Real Estate agent Terry Spice initiated a multi-offer process, requiring all three to submit their best and final offer by deadline.  When the two Australian prospects later withdrew without making an offer, the James objected to Mr Spice then advising Mr Bharadwaja that he was the only one left in the running.

A blazing row ensued.  Uncomplimentary language was exchanged.  Mr Spice walked out.  The James said Mr Spice’s actions amounted to cancellation of the agency agreement; no commission was payable on the subsequent sale.

Justice Osborne ruled the heated argument did not amount to cancellation.  Subsequent emails between Mr Spice and the James were evidence of steps taken to progress a sale.

The James further argued that if there was no cancellation, commission was not payable because of Mr Spice’s breach of duties as an agent.  Mr Spice’s disclosure to Mr Bharadwaja that there were no competing offers was a wrongful disclosure of confidential information, they said.  Mr Spice said he is ethically required to tell a multi-offer bidder that all other bidders have withdrawn, otherwise he has misled a prospective purchaser and is open to liability under the Fair Trading Act.

Justice Osborne ruled that Mr Spice was in breach of his duties as an agent only to the extent that he had not fully explained to the James from the outset as to how a multi-offer process might work out.  The James suffered no loss from this breach, he ruled.  The sale price of $3.15 million was the price Mr Bharadwaja submitted as part of the multi-offer process.  There was no evidence of this being below market value.

James v. Luxury Real Estate Ltd – High Court (10.05.23)

23.063

Contract: Progressive Livestock Ltd v. Donaldson

Failing to clearly show that a livestock contract was signed on behalf of his company meant director Scott Donaldson was personally liable to pay a $473,400 company debt.

The High Court was told Mr Donaldson was farming in the West Coast and mid-Canterbury regions through the 2019/2020 season under the company name SLD Agriculture Ltd.  Livestock were sourced from nation-wide company Progressive Livestock Ltd under several lease agreements.  One year on, Mr Donaldson was disputing payments due.  Progressive sued.

An immediate legal complication was sloppy paper work evidencing the lease arrangements.  The original contracts named as lessee ‘Scott Donaldson trading as SDL Agriculture.’  The name of Mr Donaldson’s business ‘SLD Agriculture Ltd’ was incorrectly recorded on the written contracts as ‘SDL Agriculture.’

Justice Osborne ruled lease payments were not company debts; the contracts were with Mr Donaldson personally.  To avoid personal liability for a company debt, Companies Act rules require the company name be clearly and correctly stated on any contract.

The paper work signed by Mr Donaldson not only transposed his company initials SLD into SDL but also left off the critical designation ‘Ltd.’  The abbreviation ‘Ltd’ signals to potential creditors that the contracting party is a limited liability company; owners accept no personal liability for debts of the business.

Progressive Livestock Ltd v. Donaldson – High Court (10.05.23)

23.062

One Pure: Wang v. Kang

Jianping Wang, majority shareholder in bottled water exporter One Pure, finds business operations are being hampered by the financial woes of minority shareholder Yongnan Kang who has gone missing, whereabouts unknown.

Mr Kang initially ran into financial difficulties following default on a RMB fifteen million loan from Guangzhou Dongjiang Petroleum.  A charging order was imposed by Dongjiang on Mr Kang’s twenty-five per cent shareholding in One Pure International Group; a first step towards enforcing a court judgment issued by a Guanzhou court in China.  Dongjiang is currently owed some $3.25 million.

Adding to Mr Kang’s financial difficulties, fellow One Pure shareholder Mr Wang is looking to recover from him $23.7 million; in part, compensation for what an arbitrator ruled was a breach of contract in Mr Kang’s $33.6 million sale to Mr Wang of a seventy-five per cent One Pure stake in 2018.  Mr Wang had a second charging order placed over Mr Kang’s minority One Pure shareholding.

A charging order has the effect of ‘freezing’ an asset, prior to a forced sale.

Mr Wang subsequently told the High Court these two charging orders were hampering One Pure’s business operations.  He said the charging orders should be removed; the shares were no longer Mr Kang’s property as he no longer had any right to the shares.  Since Mr Kang was a ‘defaulting party,’ terms of their shareholders’ agreement meant Mr Kang’s shareholding was forfeit; the shares had passed to him, Mr Wang said.

Justice Peters ruled there was no automatic transfer.  If Mr Kang is a ‘defaulting party,’ then any share transfer requires his One Pure shareholding to first be valued.  This had not been done.

She further ruled that the Dongjiang charging order should remain for recovery of its China court judgment.  Dongjiang said it would remove its charging order only if paid the lesser of either the $3.25 million owed or the value of Mr Kang’s twenty-five per cent One Pure shareholding.

Wang v. Kang – High Court (9.05.23)

23.061

Bankruptcy: Scott v. BNZ

More than ten years after his bankruptcy started, self-employed artist Michael Craig Scott, also known as Makoure Scott, remains bankrupt with a discharge refused following his abject failure to engage with both Insolvency Service and the courts.  Details emerged of Scott wrongly pocketing whilst bankrupt a USD100,000 refund from Virgin Galactic, his deposit for a commercial space flight.

The High Court was told Scott was bankrupted by Bank of New Zealand in 2012 after sale of his Carey’s Bay property in Dunedin left a shortfall of some $483,000 owed the Bank.  He has apparently lived overseas since; in the United Kingdom and more recently Australia.  Creditor claims in his bankruptcy totalled $673,100; personal property and paintings left behind in Dunedin raised $3,114 at an Insolvency Service auction.

Because he failed to file with Insolvency Service a statement of financial position, the three year period for automatic discharge from bankruptcy never started running.

In 2022, whilst in Australia, Mr Scott applied to the High Court for a bankruptcy discharge, saying he was not going to return to New Zealand while still bankrupt.  He failed to attend the New Zealand court hearing by audio-visual link.  He claimed to have no assets.  Discharge was refused.

Associate judge Paulsen said that creditors received no distribution in the bankruptcy, that Scott had failed to provide information to Insolvency Service as required and that there was evidence of assets being hidden from Insolvency Service, in particular his status as beneficiary of a family trust and a USD100,000 Virgin Galactic refund.

Insolvency Service told the court Mr Scott did provide some financial information in March 2021 such that an automatic discharge from bankruptcy will operate from March 2024.

Scott v. Bank of New Zealand – High Court (5.05.23)

23.060

Whales: Hart v. Director-General Conservation

In England, stranded whales become the personal property of King Charles III, though in practice it is the quaintly named Receiver of Wrecks who takes possession.  In New Zealand, Maori have ownership of stranded whales, a customary right preserved by the Treaty of Waitangi.  That does not stop disputes between Maori iwi over territorial rights to particular strandings.  Rangitane and Ngati Kura/Ngai Tahu each claim they are entitled to bone from two whale strandings on the north-east coast of the South Island.

The High Court was told the two iwi are arguing over bone from dead sperm whales washed ashore; one in 2009 near the Awatere River mouth, the other in 2018 further down the coast at Marfells Beach.  Department of Conservation arranged for the carcasses to be buried.  The jaw bones were first removed and buried separately, awaiting a decision by the two iwi as to final ownership.  Both iwi have cultural ties to the area.  Evidence was given that whilst Rangitane and Ngati Kura/Ngai Tahu were both aware of the strandings, they never sat down together to decide ownership. 

While the Marine Mammals Protection Act requires a Conservation permit for any person to have possession of whale bones, Justice Cooke ruled that Conservation does not have the power to act as arbiter deciding which iwi has rights of ownership.  In 2021, the then Minister of Conservation, Kiri Allen, decided allocation of the whale jaw bones would be decided by government.  The bones were dug up and trucked to Kaikoura.  Ngai Tahu lobbying saw it gain possession.  Rangitane complains it was never asked for its views.

Hearing of the move, Rangitane sued.  Justice Cooke ruled Ngai Tahu’s continued possession of the jawbones was unlawful; the iwi did not have a Mammals Protection Act permit issued by Conservation. He further ruled that government’s decision to truck the jawbones to Kaikoura was in breach of the Treaty; it was for the two iwi to first resolve customary rights to the whale bone.

Hart v. Director-General of Conservation – High Court (2.05.23)

23.059

Bankruptcy: Westpac v. Chen

Now working in Dubai as a self-proclaimed forex trading specialist, Jiayuan (Georgia) Chen said she should be excused a $350,000 Westpac debt because writing off this amount would be ‘a tiny drop in Westpac’s kitty’ compared with its record profits.  She was bankrupted at Westpac’s request. 

The High Court was told this debt arose from a loan used to buy an investment property in Auckland suburb Millwater.  Named as co-guarantor was Mathew McKenzie.  According to Companies Office records, they then shared the same Auckland residential address.

The Millwater property was purchased by their company J & MWM Holdings Ltd in December 2017.  Mortgage repayments were irregular.  The loan was put on Westpac’s watchlist with an agreement payments would become interest only.  No payments at all were made after February 2020.  Evidence was given that Ms Chen had been diverting rental receipts to an account she held at another bank.

Under pressure from Westpac, Ms Chen put Millwater on the market.  A sale for $1.17 million in late 2020 left a shortfall owed Westpac of approximately $350,000.

The High Court was told negotiations with Mr McKenzie saw him making part-payment on his guarantee to Westpac.  Ms Chen claimed that her renegotiation discussions with Westpac got nowhere and that should be grounds to excuse further liability.  Westpac had demanded current arrears be made good before it would look at negotiating new terms.  She further claimed Westpac should look solely to Mr McKenzie for further payment.

Associate judge Lester said it was a simple case of Ms Chen refusing to accept the commercial reality of being called to account on her guarantee.

Ms Chen said she had no assets in New Zealand and that bankruptcy was pointless.  The bank account Ms Chen used to divert rental income will be the starting point for Insolvency Service to identify where the money went, Judge Lester said.

Westpac v. Chen – High Court (1.05.23)

23.058