Asset Forfeiture: Commissioner of Police v. Franklin

 

Misuse of Drugs Act charges against Wayne Brendon Franklin were dismissed but he agreed to hand over $404,700 as proceeds of crime.  In addition, agreement terms left open the possibility of a tax investigation into suspected tax evasion.  

After a May 2020 police raid at a Kumara property on the West Coast, Mr Franklin was charged with drug offences.  Methamphetamine together with $12,050 was seized at the property.  After a court ruling that evidence was obtained unlawfully, police offered no evidence at the subsequent trial.  Charges were dismissed.

Some eighteen months later, the High Court approved a negotiated settlement under the Criminal Proceeds (Recovery) Act.  This followed a court ruling that evidence inadmissible in the criminal case could be used in proceeds of crime recoveries.  Mr Franklin agreed to forfeit the $12,050 cash seized and further agreed to pay $392,700 as profits from criminal activity.

Mr Franklin owns property on Portage Road in Auckland suburb New Lynn.  There is a proceeds of crime restraining order on the property, blocking any sale.  Mr Franklin was given three months to finance the $392,700 profit forfeiture order by borrowing against Portage Road, failing that the property is to be sold.

Terms of the agreed settlement specifically stated it is not binding on Inland Revenue.

Commissioner of Police v. Franklin – High Court (27.06.23)

23.100

Defamation: AlKazaz v. Deloitte

 

Previously let go by Deloitte as part of restructuring in 2013, Ahmed AlKazaz sued for defamation a decade later alleging he had been defamed by Deloitte when turned down for further employment in 2018.  His claim was outside the two year time limit for defamation claims and did not specify how he had been defamed, the High Court ruled.   

Mr AlKazaz previously worked for Deloitte subsidiary DeloitteAsparona Ltd in what was described as a training role.  Five years after departure, a recruitment agency sent his CV to Deloitte in response to an advertised vacancy for a technical consultant role.  When Deloitte responded that it ‘declined to proceed,’ the recruitment agency sought feedback.  Deloitte responded with a comment that information on Mr AlKazaz’s CV was inaccurate and added a link to a media article in which Mr AlKazaz had sued another employer for unjustified dismissal.

The High Court was told that Mr AlKazaz’s application for work as a technical consultant had been viewed with amusement by Deloitte staff who had worked with him previously, taking the view he did not have the skills claimed.

The Defamation Act generally requires claims to be filed within two years.  Those claiming to be defamed are expected to take steps promptly to protect their reputation.  Mr AlKazaz’s claim was filed too late, Associate judge Gardiner ruled.  The fact Mr AlKazaz has English as a second language, was doing his own legal work and was unaware until recently that New Zealand law allowed actions for defamation were not an excuse, she ruled.

Mr AlKazaz’s claim also failed because he did not specify what comments were defamatory and how they were considered defamatory.       

In earlier separate legal proceedings, Mr AlKazaz sued in the Employment Court claiming Deloitte breached terms agreed on his 2013 departure.  The Employment Court acknowledged that disparaging and derogatory comments were made about Mr AlKazaz when he subsequently applied for a new job.  These comments did breach the 2013 agreement.  No remedy was available because the comments were not made by staff of the DeloitteAsparona subsidiary, his former employer.

AlKazaz v. Deloitte Ltd – High Court (26.06.23)

23.099

Family Trust: Awhi Trust v. Henry

 

Trying to lever sister Liane out of a Northland house owned by a family trust, the High Court put eviction on hold awaiting evidence whether fellow sister Lena Henry and other trustees knew Liane had contributed financially on the understanding that the house was to remain a place for her to live.  

A confused tale of extended family dealings was put before the High Court in an application to evict Liane Henry from a property at Cooke Street in Whangarei.  In 2015, Liane signed up to buy Cooke Street for $220,000.  The purchase was funded by her mother.  Whilst Liane signed the agreement to purchase, title came to be registered in the name of her mother and husband.  There was confused evidence before the High Court as to what happened subsequently. Liane thought she was the owner and weekly payments made to her mother were interest on a loan of the purchase price; her mother said weekly payments were rent.  There was no tenancy agreement.  Despite her mother saying payments were rent, there was evidence of persistent requests by her for repayment of the ‘loan’ so she and her husband could buy a property for themselves.  To add to the confusion, Liane denied ever being asked to repay a loan.

Unbeknown to Liane, there was movement behind the scenes in 2020.  Title to Cooke Street was transferred to a family trust controlled by Liane’s sister Lena.  The transfer price was recorded as $440,000.  A bank loan secured over Cooke Street was used by the family trust to buy a Maungatapere property with their mother and her husband given rights to live there.  Six months later, Liane became aware that Cooke Street was now owned by a family trust.  In the interim, she had kept up the regular weekly payments to her mother.

The family trust took legal action to evict Liane from Cooke Street, using the High Court fast track summary judgment procedure saying Liane had no defence to its claim for possession.

Associate judge Gardiner said it is undisputed that Cooke Street was originally purchased for Liane to live in.  Liane arranged for substantial renovations and contributed to the cost.  A full court hearing is needed to determine whether trustees of the family trust as current registered owners of Cooke Street were aware of Liane’s rights of occupation at time of the 2020 ownership change, Judge Gardiner ruled.  Proof of their knowledge could lead to a damages claim against the trustees.

Awhi Trust v. Henry – High Court (26.06.23)

23.098

Hagaman: Miramar Consolidated v. USC Investments

 

A dispute over transfer of shares in unlisted property company USC Investments Ltd is the very tip of an iceberg; the frigid relationship between Lani Hagaman widow of the late Earl Hagaman and Keith Hagaman, Earl’s son from an earlier relationship.  Lani was penalised with increased court costs over delays in finalising Keith’s restructuring of his USC shareholding.

The High Court was told there is a hostile relationship between widow Lani and stepson Keith over resolution of Earl Hagaman’s estate.  Earl died in 2017, aged 91.

USC Investments Ltd is a property investment company set up by Keith and his father in 2004, with Keith coming to have a fifty per cent shareholding through a company called Miramar Consolidated Ltd.  Keith lives in California.  Miramar is ultimately controlled though a Cook island discretionary trust.

On Earl’s death, Lani came to control the other fifty per cent of USC Investments.  She proved to be obstructive when in 2020 Keith sought to rationalise his USC shareholding.

As required by USC’s constitution, Keith gave notice to Lani as fellow shareholder that he was looking to sell, offering his fifty per cent stake at $850,000.  She quibbled over the validity of the notice.  A new notice was issued.  USC’s constitution allowed three months for her to buy or to find a buyer of her choice at that price.  Otherwise Keith was free to sell elsewhere.  After waiting three months, she said she didn’t want to buy.  Keith nominated himself as buyer of his Miramar shareholding, at a price of $2.5 million.  USC’s registration of the share transfer was put on hold, with an explanation demanded of the price.  It was insinuated that Keith may be party to some deal in breach of money-laundering legislation.  Keith explained the $2.5 million share price was a ‘wash-up’ figure making allowance for debts owed him by Miramar.  Still registration of the share transfer was delayed; supposedly because of what was an innocuous Bank of New Zealand request to USC about the status of Keith’s Cook Island discretionary trust.

Out of frustration, Keith took steps to have USC wound up on Companies Act grounds that Lani as director was acting oppressively towards Miramar as shareholder.  She indicated this High Court action would be defended, before capitulating and allowing Miramar’s fifty per cent shareholding to be transferred to Keith personally.

Associate judge Paulsen ordered Lani and USC Investments pay an increased contribution towards Miramar’s legal costs on its application to windup USC.

Miramar Consolidated Ltd v. USC Investments Ltd – High Court (20.6.23)

23.097

 

Post judgment note: In August 2023, Keith’s fifty per cent shareholding in USC Investments was transferred to Lani Hagaman and he resigned as USC director.

Employee Advocate: Halse v. Rangiura Trust

 

Touting his expertise as New Zealand’s leading anti-workplace bullying expert/advocate, employee advocate Allan Halse was described in the Employment Court as himself using intimidation and coercion when acting on behalf of clients.  His High Court claims of deceit and fraud against Waikato rest home operator Rangiura Trust Board and its legal advisers was struck out as having no merit and being an abuse of process.

Mr Halse worked as a lay advocate, appearing regularly on behalf of employees in Employment Relations Act mediations with employers.  His allegations of deceit and fraud followed a March 2018 mediation which resulted in compensation for a Rangiura employee.  The mediation settlement signed by Rangiura and its employee included a ‘non-disparagement’ clause; both sides agreed not to make disparaging or negative comments about the other.  Mr Halse also signed.

Seven weeks later, Mr Halse was seeking to act for another Rangiura employee in another employment dispute.  Rangiura was not keen to engage with Mr Halse.  It wanted an independent investigator.  The High Court was told Mr Halse made numerous disparaging comments about the independent investigator, refused to allow his client to participate in this investigation and threatened to publicly malign Rangiura if it did not capitulate to his demands.  He followed up with unflattering and abusive social media posts.

Mr Halse refused to take down the posts in the face of advice from Rangiura and its legal advisers that these posts breached the March 2018 mediation with its ‘non-disparagement’ clause that he had signed.  Instead, he sued; alleging, amongst other things, that their actions were part of a conspiracy concealing an alleged internal fraud at Rangiura and were part of a scheme to close down his business.

Justice Moore struck out his claims.  They were too vague to enable a court hearing to take place, he ruled.  The claims were also an abuse of process, seeking to re-litigate claims previously bought unsuccessfully in the Employment Court, he further ruled.       

Mr Halse is sole director and shareholder of CultureSafe NZ Ltd.  The company is in liquidation following a failure to pay some $67,000 in penalties imposed by the Employment Court.  Liquidators’ first report notes some of CultureSafe’s office equipment appears to have been sold to Mr Halse and staff at an undervalue prior to liquidation.  This included a mobile phone sold at $50 and a laptop at $100.

Halse v. Rangiura Trust Board – High Court (19.06.23)

23.096

Family Trust: Ryan v. Lobb

 

Legal strategies intended to prevent his former wife forcing sale of the family home failed with the High Court ordering Stuart Lobb vacate their Auckland Remuera property prior to sale.

A bitter relationship property dispute between Stuart Robb and Verena Ryan has resulted in multiple court hearings over the last three years.  He remains with their daughter in a family trust-owned Orakei Road property; she lives in rented accommodation with their son.  Mr Robb has resisted all attempts by his former wife to force a sale of Orakei Road to recover her half share.  Auckland chartered accountant Digby Noyce as court-appointed receiver was given High Court authority in 2020 to proceed with a sale.  He has been hampered by Mr Robb’s legal manoeuvers.    

At time of their separation in 2016, a $1.4 million Westpac mortgage was secured over Orakei Road.  In 2020, Westpac was repaid with funds Mr Robb sourced from his father.  Rather than have the Westpac mortgage discharged from title to Orakei Road, Mr Lobb and his allies instead took ownership of the Westpac mortgage and with it all the rights held by Westpac.  The High Court was told Mr Robb and close family then supposedly used these rights to take control of Orakei Road as mortgagee in possession.  This would have the effect of frustrating any sale.  As receiver, Mr Noyce got the High Court to intervene.

Mr Noyce was then left with problem of giving clear title to Orakei Road on a sale when registered against the title was a Westpac mortgage no longer controlled by Westpac but in the hands of Mr Lobb and his allies opposed to any sale.

In the High Court, Justice Edwards ruled that there is no longer any money owing under the Westpac mortgage and that the funds borrowed to repay Westpac are not secured by that mortgage.  The Westpac mortgage is to be removed from the title, she ruled.

Mr Lobb said that on a sale he will be unable to find suitable alternative accommodation given his constrained financial circumstances.  Mr Lobb has had years to adjust to the idea of leaving the family home and prepare for that eventuality, Justice Edwards said.  Ms Ryan has been waiting a similar period for a sale to get sufficient funds to both pay her legal bills and find better accommodation, she pointed out.

Ryan v. Lobb – High Court (19.06.23)

23.095

Building: Stott v. Uplifting Homes

 

A house relocated from Auckland to Bay of Plenty intended as a Katikati family’s dream home was in the end written off and demolished with the High Court ordering repayment of $94,900 relocation costs.

Gavin Stott and Megan Savageau were living in a garage and sleepout on their rural Katikati property when in 2019 they signed up to buy a one hundred year old Auckland bungalow for relocation from Remuera in Auckland.  At a price of $158,000, Hamilton-based Uplifting Homes Ltd agreed to truck the building south and establish it on permanent piles complying with local council building requirements.

There were complications.  The bungalow as sold was in fact a second storey structure on top of a first floor masonry building.  When severed, the ‘floor’ of the bungalow amounted to the ceiling of the original first floor.  The building was cut in two for transportation. At Katikati, local council required extra strengthening to comply with the high-wind zone requirements for local builds.

The High Court was told the house sat on temporary piles for nearly nine months before located on to new foundations.  The house suffered water damage.  Delays were caused in part by covid-19 pandemic lockdowns.  The Stott family expressed concerns about quality of workmanship by Uplifting’s contractors reinstating the building on its new piles.  Negotiations hardened.  The Stotts refused to pay the balance of the contract price.

Eventually, Mr Stott and Ms Savageau decided to leave Katikati, shifting to Nelson.  Their Katikati property sold for $1.25 million with the relocated house demolished as a condition of the sale.  They cancelled their contract with Uplifting Homes, suing for $800,000 claimed as ‘wasted expenditure.’  Justice Jagose said some of this claim was unrealistic; claiming for costs of a finished fitout which were not part of the relocation contract.   But Uplifiting Homes was liable for breaches of both the Building Act and the Consumer Guarantees Act, he ruled.  The relocation and reinstatement was not carried out in a competent manner, in compliance with the building consent or within a reasonable time.  Damages of $94,900 were assessed as fifty per cent of the contract price plus costs of preparing the Katikati site for connection of services.  A claim for costs of demolition was dismissed.

Stott v. Uplifting Homes Ltd – High Court (19.06.23)

23.094

Lease: Centro Pilgrim v. Mathew Barr Motor Group

 

Anger over what Christchurch commercial landlord Centro Pilgrim saw as attempts by tenant Nissan dealership Mathew Barr Motor Group to sabotage sale of its Sydenham units led to litigation over disputed lease payments.  Tit for tat litigation saw Centro liable for unpaid rent rebates.

The High Court was told Motor Group leased units at Pilgrim Place in Sydenham from Centro Pilgrim Ltd.  It was agreed annual lease payments would initially be $240,000, with subsequent inflation adjustments.  The deal was structured with Motor Group’s monthly rentals stated as totalling $316,950 per year, leavened by Centro making a return payment each month leaving Motor Group with a net annual payment of $240,000.  This rebate was labelled a ‘capital repayment,’ initially treated as tax free for Motor Group.

Later told these rebates were taxable in hands of Motor Group, the rebate formula was changed to ensure Motor Group’s effective annual lease cost stayed at $240,000 as agreed.  This change had the effect of increasing the amount rebated to Motor Group each month, at Centro’s cost.

The new payment/rebate formula operated for some years without interruption before differences over Centro’s proposed sale of Pilgrim Place came to a head.  Motor Group said the lease gave it first right of refusal on any sale.  It sent a copy of the rebate agreement to Centro’s real estate agents.  Potential buyers would discount the price offered on learning that the lease headline rent rate supposedly paid by Motor Group as sitting tenant was not the effective rent rate.

Annoyed that Motor Group was disrupting sale plans, Centro immediately claimed some $128,000 from Motor Group, claiming there had never been any valid agreement to alter the rent rebate formula and that Motor Group had been overpaid.  Centro stopped paying further monthly rebate invoices.

Associate judge Paulsen ruled there had been a valid variation.  Centro, in part, alleged the disputed variation was a stitch up negotiated by a former Centro director to Motor Group’s advantage.  Centro was liable for the actions of its former director, Judge Paulsen said.

Centro was ordered to resume payment of the varied rebate and to make good all arrears.  Failing that, Motor Group can put Centro into liquidation, Judge Paulsen said.  At time of the court hearing, Centro rent rebate payments to Motor Group were in arrears by some $56,000.

Centro Pilgrim Ltd v. Mathew Barr Motor Group Ltd – High Court (19.06.23)

23.093

Liquidation: Delorme SE24 Ltd v. Spot X Ltd

 

Auckland property developer Cheng Tih Lee, otherwise known as Brandon Lee, saw the High Court whip away control of his company Spot X Ltd following allegations he was actively hiding from insolvency practitioners seeking to track down $300,000.  At the same time Mr Lee was allegedly trying to spirit assets away from their grasp.

Mr Lee is in the sights of liquidators seeking to track down assets of a company called Delorme SE24 Ltd.  Delorme is insolvent.  They identified $300,000 cash from Delorme had found its way to another company called Spot X Ltd.  Mr Lee controls both companies.

Delorme liquidators had trouble contacting Mr Lee.  He no longer lived at the address noted on Companies Office records.  He was subsequently served by text and email with formal notice to attend the liquidators’ office and to answer questions about Delorme’s assets.  He didn’t show up.

Liquidators then took steps to force Spot X Ltd into liquidation in order to recover what was presumed to be a $300,000 intercompany loan.  Through intermediaries, Mr Lee let the liquidators know that Spot X’s listed registered address was no longer being monitored, offering no alternative as to where legal documents could be drawn to his attention.    

To their consternation, Delorme liquidators then discovered Mr Lee was rearranging shareholdings in his various related companies which would have the effect of shifting assets away from Spot X.  They asked the High Court immediately put Spot X into interim liquidation; a formal liquidation application would take some time.

Associate judge Sussock appointed Insolvency Service as interim liquidators with power to take control of Spot X assets.  Company assets are in jeopardy, she ruled.

Delorme SE24 Ltd v. Spot X Ltd – High Court (15.06.23)

23.091

Dotcom: R. v. Ortmann & van der Kolk

 

Having struck a plea bargain with US authorities, Kim Dotcom’s lieutenants Mathias Ortmann and Bram van der Kolk were jailed in New Zealand on a raft of charges for conspiracy to commit copyright fraud.  Evidence at sentencing highlighted how Dotcom’s Megaupload set out to defraud not only film and video copyright holders but also Megaupload’s own customers.

Megaupload was launched in 2005, ostensibly to provide locked cloud storage facilities.  By late 2010 it had fifty million daily users accessing pirated movies and videos.  At that time, it commanded four per cent of global internet traffic.  Over a decade, it was estimated to have garnered revenues of US$175 million from both user subscriptions and advertising inserted in and around pirated product.  Kim Dotcom is alleged to have snaffled most of this income for himself; a total of some US$100 million.  Ortmann, as chief technical officer, admitted to getting approximately US$19 million; talented coder and lead programmer van der Kolk, US$3 million.

After nearly a decade of legal manoeuvring to avoid extradition to the United States on charges of copyright fraud, Ortmann and van der Kolk struck a deal with US authorities.  They would not stand trial in the US.  They would plead guilty in the New Zealand courts, serve whatever sentence a New Zealand court imposed, surrender any remaining cash received from Megaupload and assist US authorities in their prosecution of Kim Dotcom.

Evidence was given of Megaupload’s attempts to mask the extent of copyright infringement; what Ortmann described as an ‘innocent front end’ with ‘private back-end access.’  Each movie or video uploaded to the site was identified with its discrete URL.  Copyright holders issuing takedown notices did so by reference to the specific URL.  Megaupload dutifully complied with a takedown request for that URL, leaving in place multiple copies of the same product sitting behind a different URL.  For copyright holders, it became a fruitless game of whack-a-mole.

Megaupload customers were rewarded for uploading frequently viewed product with payment in either cash or subscription privileges.  This encouraged further copyright infringement and increased the number of paying users.  At least three million dollars were paid out in cash rewards.  A policy decision was made to reduce the cost of paying cash rewards by denying payment on grounds that product uploaded was in breach of copyright, with Megaupload cynically still hosting and distributing this same material.

The High Court was told ninety per cent of Megaupload’s registered users had never uploaded a file; they paid for access to view and download content.

Pleading guilty to participating in an organised criminal group, deception and dishonesty: Ortmann was sentenced to two years and seven months imprisonment; van der Kolk two years and six month’s imprisonment.  After Megaupload was shut down, the two established their own cloud storage service: Mega, offering end-to-end encryption for customers.

R.v Ortmann & van der Kolk – High Court (15.06.23)

23.092

Lease: Gama Foundation v. Fletcher Steel

 

With its Christchurch site lease expiring in August 2016, Fletcher Steel and landlord Gama Foundation were poles apart on Fletcher’s contractual obligations for end-of-lease repairs and reinstatement.  Fletcher chose to simply vacate the site it had occupied for four decades, leading to a legal dispute over liability for end-of-lease costs. 

Gama Corporation is a non-profit philanthropic charity set up by Grant and Marilyn Nelson.  The Court of Appeal was told representatives of Gama and Fletcher Steel met in the year before Fletcher’s planned site departure, achieving limited agreement on required repairs.  Little of even this work was done before Fletcher departed.  Repair work would have disrupted Fletcher’s daily on-site operations.

Gama subsequently carried out the work, at a cost of $1.75 million.  Fletcher reimbursed $900,000 of this cost, accepting it was a lease liability.  It refused to pay the balance, saying Gama was trying to have Fletcher pay for reinstatement beyond lease requirements.   

The two went to arbitration, as required by their lease.  The arbitrator required Fletcher to pay a further $320,000 saying this covered work Fletcher should also have carried out.  Fletcher paid the extra.

Gama Foundation sued, claiming the arbitrator got it wrong.  Gama said it was entitled to the full $1.75 million.  By failing to reinstate, Fletcher was in breach of the lease and the full $1.75 million was recoverable as costs incurred in mitigating the breach of contract, it said.

The Court of Appeal said the arbitrator got it right.  As tenant, Fletcher was liable to pay only for the reasonable cost of repair and reinstatement work which it should have carried out.

Gama Foundation v. Fletcher Steel Ltd – Court of Appeal (15.06.23)

23.090

PwC: PriceWaterhouseCoopers v. Zag Ltd

 

Facing significant reputational risk for cost overruns on a delayed $56 million HR software makeover for New Zealand Police, PwC is fighting to keep under wraps its 2018 damages settlement.  A project sub-contractor now being sued by PwC wants to see details.

In 2014, National government commissioned improvements to Police staff information systems.  Oracle PeopleSoft was then in use.  PriceWaterhouseCoopers was appointed head contractor on a project expected to generate $56.2 million revenue over ten years.  Documents released under the Official Information Act show there were government concerns six months out from the go-live date that implementation targets would not be met.  The project was delivered late and over budget.

Following a closed-door mediation, PwC agreed in 2018 to pay damages.  The amount paid is confidential.  As head contractor, PwC accepted liability for the failure to perform.

PwC alleges sub-contractor Zag Ltd bears some of the blame.  Previously known as Soltius Ltd, this company has had a revolving door of New Zealand resident shareholders over the years.  Its ultimate owner is international consulting company, Accenture.

In the High Court, Zag Ltd demanded to see details of the 2018 out of court mediation and settlement with Police.  The general Evidence Act rule is that mediation proceedings cannot be used in any subsequent court case.  This is to ensure full and frank disclosure in mediation discussions.

Justice McQueen ruled Zag Ltd could see documents used as part of the mediation, but Zag itself had to keep this information confidential.  PwC says the payout to Police was intended as compensation for financial losses.  Zag Ltd is entitled to see the detail to determine whether settlement terms were reasonable, Justice McQueen said.  It was known during mediation that PwC would be looking to recover some of its settlement costs from sub-contractors.  Police agreed at the mediation to assist PwC in any action taken against project sub-contractors.

The extent of Zag Ltd’s liability, if any, has yet to be decided.

PriceWaterhouseCoopers v. Zag Ltd – High Court (13.06.23)

23.087

Estate: Barnard v. Estate Margaret Barnard

 

On her death in 2019, Palmerston North resident Margaret Barnard left an estate valued at $4.4 million with son Graeme aggrieved that he did not receive an equal share with his two brothers.  An unequal distribution was explicable, the Court of Appeal ruled.  Graeme had been treated financially more favourably than his brothers during their mother’s lifetime and she was concerned about potential claims from Graeme’s estranged wife.

Graeme sued under the Family Protection Act claiming his mother had failed in her ‘moral duty to provide proper maintenance and support.’  The court was told that on one calculation of the estate distribution Graeme was to receive about 22 per cent by value, brothers Timothy and Roger nearly forty per cent each.

When Graeme and his wife separated in 2006, Margaret helped finance their relationship property settlement, taking part share in Graeme’s home as part of the deal.  This share of the home was gifted to Graeme by will on Margaret’s death.  Graeme’s marriage was not formally dissolved until after Margaret’s death.

Graeme was bequeathed, as were his brothers, a one third share on sale of their mother’s Palmerston North home.

He was given tightly constrained rights to a one third share of Margaret’s share portfolio: his brothers were gifted outright a one-third share each; Graeme was given a life interest in the income only on the remaining one-third share.  And on Graeme’s death, this one third share goes not to Graeme’s children but to his two brothers and their children.  The court was told Graeme’s annual after-tax income on this one-third share would be about $26,000.

Graeme’s two brothers claim that their mother limited Graeme’s share bequest to only a life interest because of concerns over his business acumen and the fact Graeme and his estranged wife were still married.

Graeme contested the will, claiming its terms failed to properly recognise the care and support he provided to his mother.  The Court of Appeal said Graeme’s greater support for their mother in her later years arose because he lived closest to her.  There was no breach of a moral duty by Margaret to her son, the court ruled.  The will provided Graeme with substantial property, capital and income, it said.  Graeme’s financial position could not be described as precarious before or after his mother’s death, the court said.

Barnard v. Estate of Margaret Barnard – Court of Appeal (13.06.23)

23.089

Family Trust: Nobilo v. S. Nobilo Family Trust

 

Members of the west Auckland Nobilo wine dynasty are back in court.  Having agreed to bail out brother Steve with a short term loan in 2016, Mark Nobilo was forced to sue Steve’s family trust to recover $670,500 principal and interest unpaid.

Bringing their wine-making tradition with them from Croatia, the Nobilo families’ vineyards at Huapai are now prime residential real estate.  Winding down the family trust established by patriarch Nikola has seen sons Nick, Steve and Mark at daggers drawn.

Sale of the former family homestead on Station Road opened a can of worms.  Both Nick and Steve had used the homestead, a family trust asset, as security for their borrowing to pursue separate personal business interests.  At a family meeting in 2015 following their mother’s death, the three sons thrashed out an agreement to wind up their father’s family trust.  The trust specified each would share equally on final distribution.  They mutually agreed to a different formula, recognising that Mark had not enjoyed the economic benefit of using trust assets for personal borrowing.  The new 30:30:40 formula saw Mark getting a larger share.

That was not the only issue.  Nick and Steve needed to agree on allocation of loan costs for the $2.3 million borrowings secured over the homestead.  The two also needed to refinance these loans when the homestead was sold.

The High Court was told Steve was having trouble refinancing.  Mark assisted with a short term eight-week loan funded with his share from sale of the homestead plus another $100,000 from personal savings.  These funds were loaned to Steve’s family trust; repayment due in April 2016.  Steve’s family trust defaulted.  Steve died in 2019.  Mark sued in 2022.

Steve’s family trust denied it had borrowed the money.  It had been a loan to Steve personally it claimed and was a debt of Steve’s estate.  The Trust further claimed interest was due only on the $100,000 component of the money advanced.

Associate judge Gardiner ruled the written record of emails, minutes of family meetings and cash distributions made on sale of the homestead were clear; Steve’s family trust was the borrower and interest was due on all the money advanced.  The S Nobilo Family Trust was ordered to pay $670,500.

Separately, Steve’s family trust claimed the 30:30:40 division formula no longer applies.  It alleges there was never any proper agreement regarding allocation of loan costs on the $2.3 million between Steve and brother Nick.  Judge Gardiner said this dispute is of no relevance to the debt due Mark.

Nobilo v. S Nobilo Family Trust – High Court (13.06.23)

23.088

Property Share Agreement: Mallon v. Griffiths

 

A property sharing agreement between relatives morphed into a legal argument whether it was a landlord/tenant relationship or shared ownership: Carolyn Mallon and her husband claim part-ownership of her son’s Bay of Plenty property; son Lewis Griffiths says she and husband Anthony were only tenants who had sought building extensions to allow them a more comfortable retirement.  It was not the first time the Mallons claimed ownership rights to a family member’s home.

In 2017, Mr Griffiths finalised purchase of a home on Tawhero Street at Mamaku, near Rotorua.  He borrowed $20,000 from his mother and stepfather to complete the purchase.  Two years later, the Mallons shifted in with what later became a disputed living arrangement.

The High Court was told all three jointly agreed on plans for an extension to Tawhero Street.  Further bank funding was arranged with an extension to Mr Griffiths’ existing mortgage.  As a condition of this further loan, the Mallons funded repayment of a $24,500 personal debt of Mr Griffiths and signed a tenancy agreement for their continued occupation of Tawhero Street.  The Mallons paid half the cost of architect’s plans and resource consents before building work commenced.

A February 2022 property share agreement between all three required the Mallons pay $285 per week; in return Tawhero Street could not be sold without their consent, they could not be evicted without their consent and should Ms Mallon die before her husband then he similarly could not be evicted without his consent.

Within months, possibility of eviction arose.  Mr Griffiths had separated from his partner.  Sale of Tawhero Street loomed as part of a relationship property settlement.  The court was told there was an altercation in late 2022 when Mr Griffiths attempted to change the locks at Tawhero Street and to remove the Mallons’ vehicle and their belongings.

The Mallons registered a caveat against title to Tawhero Street, claiming shared ownership by reason of their contributions to the purchase and subsequent extensions.  They claim $131,400 cash plus a one half share of any capital gain on sale.  Mr Griffiths says their contributions were a combination of unsecured loans, to be repaid, and rent paid as tenants.

Associate judge Taylor ruled the caveat remain.  It is arguable a constructive trust existed, he said.  Proof of any ownership interest requires a full court hearing.

Mr Griffiths told the court a common pattern has become apparent; in 2017 the Mallons registered a caveat over his sister’s property in respect of a converted garage on that property where they had then been living.  The Mallons say they paid to convert this garage into a two bedroomed cottage for their retirement.

Mallon v. Griffiths – High Court (12.06.23)

23.086

Family Trust: Cooper v. Cooper

 

Rights to share in family trust assets were front and centre in a dispute over housing used communally by a Pasifika family in Pukekohe, south Auckland.  This after attempts to remove as beneficiary a daughter-in-law who had contributed financially to the families’ home.

The 2004 purchase of a Cooper family home on Lough Bourne Drive in Pukekohe was set up with two family trusts as owners.  Finance for the purchase came from Westpac.  George and Tekura Cooper had ten children.  One son, Mosiah, was quadriplegic with injuries suffered in a diving accident as a teenager.

Two separate dwellings connected by a garage at Bourne Drive enabled George and Tekura to live in one house and Mosiah with wife Eleanor to live at the other.  Of the four, Eleanor was the breadwinner.

Whilst at law Bourne Drive was owned by family trusts, extended Cooper family treated George and Tekura as the owners.  Eleanor provided cash to meet household expenses for both families and kept up Westpac mortgage payments.  Eleanor was a borrower on the Westpac mortgage.

From mid-2010, Eleanor left fulltime employment to take care of Mosiah.  ACC care-giver payments went into father-in-law George’s bank account.  He paid an allowance to Mosiah and Eleanor.

Family dynamics changed with Mosiah’s death in 2019 and George’s death in 2022.  Extended family took steps to have Eleanor removed as a beneficiary of the two family trusts.

Mortgage payments to Westpac, previously made through George’s bank account, fell into arrears.  Eleanor took to paying Westpac direct.

The High Court was told there was dissension within extended family as to Eleanor’s right to trust assets.  Some family members were of the view that her contributions were no more than payments for rent and board.  There was evidence of prior acknowledgement by father-in-law George that Eleanor should have a thirty per cent share of trust assets.  Eleanor wanted payment now.  Family said she had to wait until death of her mother-in-in law Tekura.

Concerned trust assets might be run down in the period prior to Tekura’s death, Eleanor registered a caveat against title to Bourne Drive.  She claims a property right in Bourne Drive, given the financial contributions she provided for its purchase and upkeep.

Associate judge Sussock ruled the caveat remain, protecting Eleanor’s position pending a full court hearing on any entitlement she may have to family trust assets.

Cooper v. Cooper – High Court (7.06.23)

23.085

Estate: re Estate Basil Jones

 

Tensions between two children and their stepmother coupled with confusion over ownership of estate assets caused the High Court to appoint independent executors to take control of Nelson car dealer Basil Jones’ estate.  Little progress in estate administration had been made in the two years since Basil’s death in 2021 with ongoing hostility between Basil’s daughter Cindy and her stepmother Laurel.

In a will signed nine days before his death, Basil appointed as joint executors his children Cindy and Jason together with his wife Laurel.  He and Laurel had begun a de facto relationship some 32 years previously, before subsequently marrying.  Cindy and Jason are children of an earlier marriage.

All three were named as beneficiaries.  There were complications. 

Laurel was given a life interest only in the family home in Seaton Street, Nelson.  The High Court was told the executors cannot agree on a programme for repairs and maintenance or alternatively for sale of Seaton Street and replacement with a more modest home for Laurel.     

A commercial property in Collingwood Street was gifted in shares to Basil’s children Cindy and Jason and Basil’s grandchild Danielle.  This was not a stand-alone asset available to be gifted; it was an asset of his car dealership: Sun City Motors Ltd.  The Sun City Motors business itself was gifted in an equal three-way split to Cindy, Jason and Laurel.    

The court was told that after her father’s death, Cindy unilaterally took control of Sun City Motors; transferring company shares into her name, appointing herself as sole director.  She subsequently acknowledged that she holds Sun City in trust for her father’s estate.  Urgent steps were necessary on her father’s death to ensure the business kept trading, she said.  Laurel complains she is not being kept properly informed about Sun City’s profitability.

The court was told that Laurel has disclaimed all rights as a beneficiary in Basil’s estate.  She is bringing both a relationship property claim and a Family Protection Act claim against his assets.

Laurel acknowledged there was a conflict of interest.  She agreed to stand down as executor.  Cindy and Jason should do so also, she said.  Cindy and Jason claimed they could properly deal with the estate after Laurel’s departure.

Justice Isac ruled it was best to remove all three as executors.  They had failed to agree on how their competing claims might be resolved.  Their various conflicts of interest coupled with current hostilities meant agreement to resolve their differences was unlikely.  In any event, Jason was not actively involved in estate administration.  He is living in Thailand.

re Estate Basil Raymond Jones – High Court (7.06.23)

23.084