Directors Duties: Auckland Trotting Club v. Canam Group

 

Holding in its favour what appears to be a worthless $85.6 million arbitration ruling against insolvent contractor Canam Construction Ltd, Auckland Trotting Club’s disastrous foray into property development now sees it suing Canam directors Loukas Petrou, Nicholas Page and Andrew Clark.

In 2015, Auckland Trotting awarded Canam Construction a $78.3 million contract for building residential apartments at its Alexandra Park track in Green Lane.  Canam was fired from the job three years later.  Another company completed the work.

A liquidators’ report filed after Canam put itself into liquidation describes as primary causes of the company’s collapse problems over Auckland Trotting’s supply of steel from China and a stop work notice imposed by Auckland Council.

Auckland Trotting’s dispute with Canam went to arbitration. Canam was ruled liable to pay $85.6 million; primarily costs of delayed completion and the extra amount Auckland Trotting had to pay for completion by another contractor.

With Canam Construction not worth suing, Auckland Trotting has fired writs far and wide claiming damages from: Canam’s directors; Canam’s holding company; and other Canam subsidiaries where it is alleged Canam stashed money.

In a preliminary High Court hearing, Associate judge Gardiner dismissed some, but not all, of the claims made against director Loukas Petrou.  If Auckland Trotting can prove that Mr Petrou failed to properly perform his Companies Act duties as director of Canam Construction, then Auckland Trotting as an unpaid creditor can recover from him directly, Judge Gardiner ruled.  Auckland Trotting alleges Canam directors were reckless.

Auckland Trotting also alleges Mr Petrou and fellow director Nicholas Page breached the Fair Trading Act, making misleading representations about Canam Construction’s financial viability.  The High Court was told of tender documents in 2015 stating Canam as having a strong balance sheet, healthy cashflows and no debt.  In contrast, a specialist report prepared partway through construction when Canam sought to renegotiate the contract described the company as facing an unsurvivable $14.8 million loss on the project, while the Canam Group claimed to be solvent.

It was Canam Construction’s failure to get a parent company guarantee within five days of being awarded the contract and its subsequent refusal make good on its promise to get a guarantee that justified subsequent cancellation by Auckland Trotting.

Auckland Trotting Club Inc v. Canam Group Ltd – High Court (13.07.23)

23.116

Tax: Aokautere Land v. Inland Revenue

 

Having fought to the bitter end litigation by Vey Group minority shareholders with a High Court order eventually forcing sale of an investment property in Wellington, company director Leslie Fugle then saw Inland Revenue snatch his $1.18 million payout in part-payment of $2.7 million tax debt owed by a Manawatu land development company he owned.

Mr Fugle is sole director and shareholder of Manawatu company: Aokautere Land Holdings Ltd.  In February 2021, Inland Revenue assessed Aokautere to $2.71 million tax on sales of land over the previous five years.  Aokautere had filed no tax returns for the period.  It did not challenge the default assessment.  It did not pay the tax.

Nearly two years later, Mr Fugle’s Aokautere Land was expecting to receive a payout on the court-ordered sale of Vey Group’s Webb Street property in Wellington.  Mr Fugle gained a controlling interest in Vey Group after initial investors fell out.  He engineered a secured loan from Aokautere to Vey Group, after gaining control.  A sum of $1.185 million was owed Aokautere following sale of Webb Street.  Inland Revenue pounced, claiming this money in part-payment of Aokautere’s earlier default tax assessment.

Aokautere is belatedly challenging Inland Revenue’s earlier default tax assessment and with it the right to seize cash expected from the Webb Street sale.

Mr Fugle claims Inland Revenue is not playing by the rules.  He says Inland Revenue did not comply with its own 2020 policy statement: The Disputes Resolution Process and Fair Trial Rights.

Under this policy, Inland Revenue waives timelimits for challenges to tax assessments where a related criminal tax prosecution is likely.  At time of the default assessment, both Mr Fugle personally and a company related to Aokautere Land were under investigation with allegations of GST fraud.  The High Court was told this fraud investigation has since been dropped.

There was no evidence of Inland Revenue ever considering a criminal prosecution against Aokautere.

Meanwhile, Aokautere asked the High Court to order disclosure of internal Inland Revenue documents justifying steps taken to snatch the $1.18 million from sale of Webb Street.

Justice Gwyn stated this demand was no more than a ‘fishing expedition,’ with Aokautere trying to build a judicial review case to overturn Inland Revenue’s seizure of the expected $1.18 million payout.  Disclosure was refused.

Aokautere Land Holdings Ltd v. Inland Revenue – High Court (13.07.23)

23.115

Trademark: Zuru v. Lego

 

A local skirmish in what is a world-wide assault by the Mowbray family business Zuru to dis-establish Lego’s trademark foundered in the New Zealand courts.  In the US, Zuru is arguing that the word Lego has lost trademark protection, going the same way by common usage as trademarks Cellotape and Velcro.

Marketing can be too successful, with a trademarked name becoming common usage as a name used to describe comparable products. 

One of Mowbrays’ manufacturing strategies for toys has been to take an existing product, produce a close clone and then market its product as being compatible with and able to be used in conjunction with the existing market leader.  Mass production in China keeps costs down; promised compatibility boosts market share, bootstrapping Zuru’s product to the market leader’s commercial reputation.

Lego came down hard on Zuru’s infiltration of its market.  Lego has been in existence for nearly ninety years.  The Danish company has long since lost copyright protection for its product.  Trademark of the name Lego is used to protect its market value.

The High Court was told Zuru sounded out US retailing giant Walmart in 2017 about stocking a Lego-compatible plastic building brick.  Walmart was enthusiastic, but rejected sample packaging describing the Zuru product as being compatible with Lego bricks.  Walmart approved packaging stating the product was ‘compatible with major brands.’

Following success with the Walmart launch, Zuru stocked its product in New Zealand the following year through The Warehouse.  New Zealand packaging described the bricks as ‘Lego bricks compatible’ with a notation over Lego to acknowledge it was a trademarked name.  Lego immediately fired off a ‘cease and desist’ letter, threatening legal action.  The Warehouse dropped the product until this issue was sorted out.  Zuru sent Lego samples of proposed packaging, seeking prior approval for any of several offered options using the word ‘Lego.’  It did not receive a favourable response. 

Zuru and Lego then fronted up to ten days of evidence and legal argument in the High Court at Auckland over use of Lego-compatibility wording on packaging.

Justice Lang ruled any use of the word ‘Lego’ on Zuru packaging was a breach of Lego’s trademark.  Zuru’s claim that ‘Lego’ had become a generic descriptive term describing interlocking toy blocks was dismissed.  Zuru’s claim that using ‘Lego’ on packaging was an honest attempt to provide consumer information about the use and quality of its product was also dismissed.

Use of Lego’s trademark was an aggressive attempt by Zuru to obtain leverage for its product, Justice Lang said.

Zuru New Zealand Ltd v. Lego Juris A/S – High Court (12.07.23)

23.114

Rates: Bushmere Trust v. Gisborne District

 

SunGold kiwifuit attract a premium price at retail; a premium reflected in market prices on sale of orchards.  This premium impacts on rating valuations where councils assess rates on ‘capital value,’ even though Zespri licences to grow SunGold are held personally in the name of the grower, the Court of Appeal ruled in a test case.

Bushmere Trust grows SunGold on just over half its 5.86 hectare property near Gisborne.  In 2020, valuers nationwide implemented new guidelines on valuation of SunGold orchards.  Bushmere was one of the first affected.  Its rating valuation jumped by some forty per cent to $4.1 million.

SunGold is grown under licence from Zespri.  Zespri is a monopsony, being the sole buyer of SunGold production.  Marketing and sales are co-ordinated by Zepri.  It controls the number of licences and specifies the areas to be planted.  Licences are personal to the grower, with Zespri approval needed for sale or transfer of any licence.

Given this background, Bushmere argued the right to produce SunGold lies with the grower personally and cannot be assessed as part of the land for rating purposes.  Bushmere land should be valued at $2.8 million, not $4.1 million, it said.

Rating legislation allows local authorities to use one of three possible methodologies to assess rates: capital value, land value and annual value.  Gisborne District uses capital value.

‘Capital value’ broadly equates with market value, the Court of Appeal ruled.  If Bushmere were to be sold, its 2020 market value would be $4.1 million, it said.  The right to grow SunGold on the property was directly relevant to Bushmere’s market value.

The court was told Zespri has never refused consent to the sale or transfer of an existing SunGold licence.

The Court of Appeal indicated value of SunGold licences is to be deducted where a local authority instead uses ‘land value’ for rating assessments.  Value of vines is deducted because they can be removed at any time, not forming part of the land.

‘Land value’ is often described colloquially as assessing rates on unimproved value.  By contrast, ‘capital value’ has property valued at its highest and best use.  This captures as part of a property’s value not only the right to plant SunGold on a rural property, but also new zoning rules in an urban environment permitting more intensive development.

Bushmere Tust v. Gisborne District Council – Court of Appeal (11.07.21)

23.113

Real Estate Agent: Goldline Properties v. Marsh

 

It is a warning to real estate agents looking to profit from purchasers’ difficulties on long term agreements to buy.  Strict disclosure rules governing real estate agents having a personal interest beyond their commission saw contracts for sale of land in south Auckland cancelled; Counties Realty director Ian Croft stepped in as joint buyer after a contract was signed but before later settlement.

The Court of Appeal was told Counties Realty acted as agent for property developer Goldline Properties Ltd in its 2020 sale of four vacant lots to Maree Dawn Marsh, with an agreed delayed settlement.  Finding herself short of finance to complete plans of shifting relocatable houses on to the properties, Ms Marsh joined forces with Mr Croft.  Over a twelve month period prior to settlement, three separate contract variations were negotiated with Goldline Properties, including a partial reduction in price.       

Goldline later cancelled the contracts.  Mr Croft’s subsequent involvement as joint purchaser taking a thirty per cent interest in the project was in breach of the Real Estate Agents Act, it said.  Cancellation was disputed.   

Consumer protection rules in the Act require real estate agents get fully informed consent from vendors whenever they have a personal interest in a sale beyond their commission.  These rules focus on the outcome of transactions, the court ruled.

The Court of Appeal said Mr Croft’s Real Estate Act obligations continued after the original contract was signed.  When terms were renegotiated prior to settlement, there was a conflict; Goldline was still Mr Croft’s client at a time when he had become joint purchaser and was negotiating variations for his own benefit.

Goldline could cancel, the court ruled.

With cancellation, it was agreed that the Marsh/Croft joint venture was entitled to compensation for work it had done; fencing and landscaping plus relocation of houses on two of the four lots.  Goldline disputes their claim for $500,000 compensation.

Goldline Properties Ltd v. Marsh – Court of Appeal (7.07.23)

23.112

Duress: Tang v. Sunbow Ltd

 

Sentenced to 18 years jail for the 2020 murder of business associate Elizabeth Zhong, Fang Sun used stand-over tactics to force signature on a document claiming $2.07 million.  In the High Court, this contract was ruled not enforceable on grounds of duress.

A curtain was lifted partially on the business dispute leading to Ms Zhong’s death when the High Court was asked to rule on validity of a 2019 contract signed in the year before she was murdered in her east Auckland Sunnyhills home.

Her business relationships were complicated.  The fact she held New Zealand citizenship was a major asset.  There were claims Ms Zhong held assets in trust for offshore investors.

Evidence was given of Sun transferring substantial sums from China to New Zealand; money placed with Ms Zhong for property investment.  She came to be involved with a company called Sunbow Ltd which owned land and a vineyard on Waiheke Island.  She guaranteed Sunbow debts and was paying interest on a mortgage over Waiheke securing borrowings from a company called DBR Ltd.  With Sunbow and related companies under pressure, Sun provided financial assistance.  It was not clear whether this was a loan or an equity investment in the business.  This financial support was in addition to some $1.3 million provided two years previously, described in court by Sun as pre-payment for purchase of Waiheke and its vineyard.  The $1.3 million purchase was not finalised.  Getting Overseas Investment Office consent proved a stumbling block.

The High Court was told Sun then demanded repayment of funds provided to Sunbow.  At the same time, DBR was threatening a forced sale to recover its loan.  A deal was negotiated between Zhong and Sun: Waiheke was to be sold to interests associated with Sun for $4.5 million, with a deduction of $2.07 million stated as funds previously provided.  Circumstances in which this agreement was signed led to the later High Court hearing about the agreement’s validity.

In affidavit evidence provided by Ms Zhong in court proceedings underway before her death, she stated she was pressured into signing with threats she would otherwise be killed.  Ms Zhong told of being continually harassed with phone calls and of being threatened more than once.

She did sign, but it was not in her commercial interest to sign.  As guarantor of Waiheke debts, it was more advantageous for her to find a third party buyer, getting the full price in cash and clearing business’ debts, rather than getting a lesser sum of $4.5 million minus $2.07 million on a sale to Sun.

Waiheke was sold to a third party for $4.3 million.  Ms Zhong was murdered eleven months later.

Sunbow liquidators asked for a High Court ruling on whether the $2.07 million agreement evidenced a debt Sunbow had to pay.  Justice Tahana ruled it was not a Sunbow debt; it was signed under duress with Ms Zhong signing on behalf of Sunbow with her life threatened.

Insolvency Service records show she was bankrupted by an unpaid creditor in the weeks after her death.

Tang v. Sunbow Ltd - High Court (5.07.23)

23.111

Director Disqualification: Olliver v. Registrar of Companies

 

Auckland property developer Greg Olliver’s disqualification from company management was reduced by one year, leaving him free to act as a company director from October 2024.

Mr Olliver has been a frequent visitor to the High Court; primarily litigation surrounding ownership and control of properties at Waimarie Street in Auckland seaside suburb St Heliers.  Ownership eventually passed to Oceania retirement group.

Management of initial site works for a then proposed subdivision by Mr Olliver resulted in a Companies Office ruling banning him from managing any company until October 2025; a four year ban.  His first court challenge to this ban was dismissed eight months later.

Undeterred, Mr Olliver again challenged the ban.  Legal argument centred on reasons for liquidation of BBG Holdings Ltd; a company controlled by Mr Olliver intended as the legal vehicle for his ultimately unsuccessful efforts to redevelop Waimarie Street.

Companies Office complaint was that Mr Olliver was a risk to creditors.  He had traded BBG whilst insolvent, it said; in particular, by starting earthworks on land it did not yet own, without a firm price for the work to be done, and allowing the work to continue knowing BBG did not have the funds to pay.

There was evidence of this work extending to neighbouring land for the benefit of Mr Olliver personally.

Mr Olliver said Companies Office had inflated and overstated the extent of his supposed mismanagement.  Companies Office failed to take into account references provided as to his business acumen, he said.  It was also taking a punitive stance, he argued.  In its report, Companies Office said: ‘anything less than a substantial period of prohibition would be a slap in the face for all law-abiding directors.’

Reducing the period of disqualification to three years, Justice Tahana said that while Mr Olliver was a risk to creditors and had acted to protect his own interests to the detriment of creditors, the extent of mismanagement was not as serious as the Companies Office found.   

BBG liquidator’s final report states unsecured creditors totalling $919,900 received 27 cents in the dollar.

Olliver v. Registrar of Companies – High Court (5.07.23)

23.110

Racing: Seed Housing v. Harness Racing NZ

 

Just one day before Harness Racing New Zealand took control of trotting club assets, Dunedin property developer Gary Todd bought a slice of land owned by Forbury Park Trotting Club in St Kilda, Dunedin.  The High Court dismissed Harness Racing’s argument that the deal has been cancelled, but there is still a live legal issue as to whether Harness Racing can refuse approval for the sale.

The Racing Industry Act had a fiery birth, with local interests up and down the country hotly protesting compulsory acquisition and control of local racing venues.  It was enacted on 30 June 2020.  One day earlier, Forbury Park Trotting Club completed negotiations for a $1.33 million sale of 6.4 hectares of its land to a property company controlled by Mr Todd: Seed Housing Ltd.

Learning of the sale, Harness Racing NZ lodged a Racing Industry section 21 notice on the title, warning sales were prohibited without prior Harness Racing approval.  Seed Housing immediately lodged a caveat to protect its claimed rights as purchaser.   

In the High Court, Harness Racing claimed the sale to Seed Housing was illegal.  The Racing Industry Act had retrospective effect, it said.  Associate judge Paulsen ruled Seed Housing had a valid contract, but it was arguable that Racing Industry Act requirements meant Harness Racing had to approve the sale.

Harness Racing refused consent to the $1.33 million sale.  The court was told pragmatic efforts by Mr Todd to renegotiate the deal and purchase Forbury Park’s entire site came to nothing.

Judge Paulsen ruled Seed Housing’s caveat is to remain, but it has to take legal steps promptly to challenge Harness Racing’s refusal to approve the existing sale.  Under the Racing Industry Act, Harness Racing is required to promote long-term viability of racing in New Zealand.  There has been no racing at Forbury Park since 2021.

Seed Housing Ltd v. Harness Racing New Zealand Inc – High Court (4.07.23)

23.109

Transpower: Nova Energy Ltd v. Electricity Authority

 

Shafted by Transpower’s restructured transmission charges since upheld by the Court of Appeal, Nova Energy’s remedy is to stop supplying power to the national grid from its co-generation plants unless given substantial transmission cost discounts for power used on-site by co-located business operations.

Transpower’s new charges were implemented in April 2023; designed in particular to re-allocate costs of the Cook Strait high voltage link previously charged to South Island generators.  Most of the Cook Strait traffic is one way; power supplied from South Island hydro-electric generators delivered to North Island consumers.

It costs Transpower about $800 million annually to maintain a national grid.

Allocation of ‘residual costs’ has proved contentious.  This covers costs of past transmission investments plus Transpower head office costs.  Residual costs currently amount to some 56 per cent of annual costs.

New rules see future Transpower investment charged to those who benefit, a rule change already causing angst on the West Coast where there are relatively few customers facing upgrade costs at the end of a very long and fragile transmission supply line.

Nova Energy challenged changes to transmission charges which penalised its co-generation plants.  For policy reasons, Transpower based residual cost charges on power usage.  Co-generators produce electricity they consume.  Power generated and consumed onsite never enters Transpower’s network.

To run a hydro-electric plant, a trivial amount of power is drawn from its generators before sending the balance down Transpower’s lines.  With Nova’s Taranaki co-generation plants, a little under half is used by nearby dairy factory and gas treatment plants, with the balance going to the national grid.  Power not sent to the grid is included in calculations for Nova’s ‘residual cost’ transmission charges.

Nova said this charging regime discriminated against co-generation plants and was irrational.  Nova is potentially liable to residual charges of $1.5 million for its Taranaki operations, a nearly 800 per cent increase on previous years.  This has knock-on consequences for those businesses using co-generated power, it said.

The Electricity Industry Act requires transmission charges to be set in a manner that promotes competition.  Nova said the ‘residual charges’ methodology chosen was based on an ability to pay; an equitable concept, lacking any principles of economic efficiency.

Transpower said any rule adopted would see winners and losers.  The rule chosen levies a charge on those least price-sensitive and did the least to distort investment decisions, it said.

While there is a case for treating co-generators differently in respect of residual costs, the Court of Appeal said, decisions setting the new transmission charge regime were not irrational.

Nova has the option to ‘island;’ disconnecting its Taranaki plant from the grid and consequently no longer liable for annual residual charges.  Transpower has reserved the right to offer discounts.

The Court of Appeal was told Transpower has unilaterally applied a cap to Nova’s residual charges, currently giving Nova a $163,000 annual saving.

Nova Energy Ltd v. Electricity Authority – Court of Appeal (3.07.23)

23.108

Accident Compensation: Simpson v. ACC

 

Having no declared income and having not filed any tax returns for the previous four years, Albert Simpson failed in a claim for earnings related accident compensation based on his tourism business.

In February 2020, Accident Compensation accepted his claim for personal injury by accident.  He was off work with infection to a wound after cardiac surgery.  He was subsequently refused earnings related compensation.

The High Court was told he is owner operator of Discovery River Cruises Ltd.  Its website advertises luxury houseboat cruises on the Waikato River.  It has not been a profitable business.  In the previous four years annual losses had exceeded between $50,000 and over $100,000.  Mr Simpson was not paid a salary.  His only income was a pension.

To determine earnings-related compensation for shareholder-employees, the Accident Compensation Act looks at earnings received immediately before an accident.  Mr Simpson had no earnings.  He said another part of the legislation was relevant to shareholder-employees; allowing Accident Compensation to pay weekly compensation based on what would be ‘reasonable remuneration’ for services.  Mr Simpson valued his work for Discovery River Cruises at $80,000 per annum.

Justice Campbell ruled the ‘reasonable remuneration’ formula applied only when income declared for tax did not properly represent services actually provided.  In this case, Mr Simpson never declared any income.  In the absence of a tax filing, the ‘reasonable remuneration’ rule could not apply.

Simpson v. Accident Compensation Corporation – High Court (30.06.23)

23.107

Fraud Prosecution: Morrison & Blackwood v. FMA

 

With criminal prosecutions unsuccessful following New Zealand’s longest running fraud trial, Richard Blackwood and Lance Morrison sued for Bill of Rights damages.  Damages awarded of $10,000 for Morrison and $15,000 for Blackwood will not cover legal fees for their day in court.  Each had previously incurred over $200,000 in legal costs defending FMA prosecutions involving allegations Viaduct Capital and Mutual Finance had rorted government guarantees on offer after the 2008 global financial crisis at a $3.38 million cost to taxpayers.    

Charged alongside Blackwood and Morrison were Paul Bublitz, Bruce McKay, Nick Wevers and Peter Chevin.  These prosecutions were not Financial Markets Authority’s finest hour.  Nine months into the trial, proceedings came to screeching halt; aborted by the trial judge when FMA ‘fessed up to holding nearly 15,000 documents which it had inadvertently failed to disclose as part of pre-trial Criminal Disclosure Act procedures.  The defendants were hopelessly prejudiced, the trial judge ruled.  They did not have the chance to properly prepare their defence and were at a disadvantage in cross-examining witnesses when prosecutors were sitting on undisclosed information.

It was a further year before a second trial started.  This was four years after charges were first filed.

Charges against Mr Morrison were withdrawn at the second trial, on grounds of his presumed lesser culpability, his age and poor health.  His legal fees to that date were some $213,000.  He was awarded $85,000 contribution towards these costs.

Mr Blackwood was convicted after the second trial, sentenced to nine months home detention.  This conviction was subsequently overturned by the Court of Appeal.  His legal fees across two trials came to $284,500.  A $100,000 contribution was awarded towards his costs.

Both then sued, claiming damages: for the failure to make proper initial disclosure under the Criminal Disclosure Act; and for a claim under the Bill or Rights Act that they did not get a fair trial.

They gave evidence of the reputational damage suffered to their personal and professional standing once charges were laid.  Mr Morrison told of being forced at one stage to live in a tent, surrounded by his personal belongings and boxes of documents while having to prepare for court with no power and no reliable internet.  Mr Blackwood told of residing at one stage during the first trial in a friend’s caravan, using a bathroom in a converted garage.

Justice McQueen ruled against their claim for general damages under the Criminal Disclosure Act.  But they were entitled to damages under the Bill of Rights Act, she ruled.  Exceptional circumstances in the aborted first trial was for both of them a breach of the right to a fair trial; the long delay before the second trial was for Mr Blackwood a breach of his right to trial without undue delay.

FMA said its delay in disclosing documents was inadvertent.  A right to damages does not require proof documents were deliberately withheld, Justice McQueen ruled.

Morrison & Blackwood v. Financial Markets Authority – High Court (30.06.23)

23.106

Defamation: Syed v. Malik

 

With their business relationship in tatters, Amir Malik took revenge online in what he called a ‘public awareness’ campaign about the behaviour of former associate Zainulabidin Syed.  He was ordered to pay $225,000 damages for defamation.

The two met in 2005, later becoming jointly involved in property investment.  Mr Syed came with nearly thirty years experience in Australia as a property developer.  By 2009, Mr Malik and family were living rent free at a property in Auckland owned by Mr Syed with Mr Malik working as a project manager on Syed projects.  Six years later, their business relationship fell apart.

The High Court was told Mr Syed had become aware of Mr Malik profiting through use of a separate company, contracted to work on projects.  Their relationship deteriorated further when Mr Malik then claimed to be in partnership, demanding an equity interest in one of the Syed developments.

Mr Malik was evicted from his rent-free accommodation.  He launched what the High Court described as a smear campaign against Mr Syed.

Evidence was given of group emails, Facebook posts and Urdu-voiced video clips which variously described Mr Syed as being involved in fraud, perjury, money-laundering and tax evasion.  Mr Syed was accused of having misused funds provided for construction of a mosque.  Mr Syed said this led to him being spurned by members of the Muslim community in Australia and contributed towards failure of his building company, Halal Homes.

Mr Malik justified his campaign as a public service, warning others who might have dealings with Mr Syed.  He provided no evidence to support his allegations.        

In August 2018, Justice Churchman ruled twenty separate published items were defamatory.  Mr Syed was told to reformulate his claim for $10.9 million damages, primarily losses claimed from the failure of Halal Homes.

Following a subsequent damages hearing, Justice Isac ordered payment of $225,000 damages as compensation for Mr Syed.  Mr Malik’s defamatory comments were described as an attack on every aspect of Mr Syed’s life: his family, faith and business. Mr Malik’s wife Trinity Wilson was held jointly liable on $150,000 of this $225,000.  She had assisted in promulgating the defamatory comments, Justice Isac ruled.

Mr Syed received adverse media publicity in 2018 with allegations he was exploiting government funding as an emergency housing provider.

Syed v. Malik – High Court (30.06.23)

23.105

Relationship Property: Maule v. Cooper

 

Court orders were needed to enforce a relationship property agreement between Len Cooper and Tracey Maule following their 2018 divorce.  Len sought unsuccessfully to reopen their property agreement as unfair because of a subsequent $280,000 court judgment holding him liable for reckless trading.  

In 2020, the Supreme Court ruled Auckland builder Len Cooper was liable to pay damages for reckless trading with action taken following liquidation of his company Debut Homes Ltd.  In 2018, he had agreed a relationship property agreement with to a 50/50 split of personal and business assets having his half share then valued at $692,000.

Their relationship agreement has not been fully implemented while Len argues it should be set aside on grounds of serious injustice.  The Supreme Court damages ruling should also be taken into account, he claims.  Justice Peters ruled Len’s personal liability for $280,000 court-ordered damages was insufficient grounds to re-open the prior relationship agreement.  Presuming the damages claim is a relationship debt, she said, court proceedings were underway at time of agreement negotiations and Len accepted liability for any outcome in the Debut Homes litigation.

Justice Peters ordered both to perform their prior relationship property agreement.  This included an agreed cash adjustment by Len following the $1.64 million sale of their former family home on Mahoney Drive in Auckland suburb Albany.  He was also ordered to take legal steps to remove Tracey’s liability: on a mortgage over a Bush Road property, on her personal guarantees on supply contracts for Len’s business Jumbo Bins, and on a Jumbo Bins’ credit card used to pay business expenses.

In turn, Tracey was ordered to facilitate transfers of ownership for both Bush Road and Jumbo Bins from family trusts into Len’s name.

Maule v. Cooper – High Court (29.06.23)

23.103

Estate: Burgess v. Burgess

 

A risible bequest to a son amounting to 0.2 per cent of a farmer’s $2.4 million estate led to a Family Protection Act claim by Lindsay Burgess against his late father’s estate.  His estate payout was increased from $5000 to $400,000.

Te Aroha farmer David Burgess died in 2019.  Other than a $5000 bequest to each of his children, all his estate was transferred to a family trust.  His son Lindsay is not a beneficiary of this trust.  The primary beneficiaries are Lindsay’s brother Kevin together with Lindsay’s stepmother Noi and her child Guy.

Negotiations with trustees came to nothing.  Lindsay was asking for $500,000; the trustees were willing to pay about $300,000, with payment made by transferring to him a Wairongomai Road estate property.

Lindsay sued under the Family Protection Act.  This Act allows reallocation of distributions under a will or intestacy following failure to provide ‘proper maintenance and support;’ wording given a liberal interpretation by judges over time, awarding compensation where there has been breach of a moral duty to acknowledge a family relationship.

The High Court was told Lindsay during his working life returned to the family farm repeatedly for extended periods of time to help out at times of family emergencies, primarily when his mother was terminally ill and later when his father became unable to work the farm.  Immediately after his father’s death, he continued to oversee farm operations.  Part of the time, Lindsay earned income sharemilking on the property but his work extended beyond that contractually required from a sharemilker.  He was paid a minimal wage for extra work done; payment sometimes being payment in kind with gifts of motor vehicles.

Lindsay said this work prevented him from getting ahead, building up assets with better pay from alternative employment.  Evidence was given that currently his only income is a social welfare benefit, the result of a ‘bungled’ hip operation.

Justice Harvey ruled Lindsay was entitled to a greater contribution from his late father’s estate, awarding $400,000 and specifying this is to be paid in cash, not kind.

Estate trustees argued no further payment was appropriate, given that Lindsay’s father specifically stated in his will that Lindsay was to receive less because ‘adequate provision’ had been made for Lindsay during his lifetime and because he had received a ‘substantial’ provision from his mother’s estate.

There was evidence that Lindsay’s inheritance from his mother had been reduced after a family dispute over terms of her will which was settled with an out-of-court family agreement.  The court was told part of Lindsay’s inheritance from his mother was paid to his then wife when their marriage ended.

Burgess v. Burgess – High Court (29.06.23)

23.104

Money Laundering: FMA v. Tiger Brokers

 

With ultimate ownership residing in the Cayman Islands and customer data stored on servers in China, Tiger Brokers (NZ) Ltd was fined $900,000 for failing to comply with money-laundering legislation.

Tiger provides sharebroking services through its online trading platform Tiger Trade.  A formal warning from Financial Markets Authority in March 2020 for non-compliance with Anti Money Laundering and Countering Financing of Terrorism Act requirements was followed by a sample audit of customer accounts.

The High Court was told 33 customer accounts were audited as a check on customer due diligence.  This was a very small sample, given that High Court evidence showed Tiger then had some 126,000 customers.  There was insufficient information about client identity on 21 of the 33 accounts audited.  In all but one of those 21 accounts, the unusual nature of transactions merited enhanced customer identification.  In one case, the customer file was tagged with a requirement to seek approval from senior management before processing any transaction; there was a failure to do so.  Tiger said the sample selected was not representative.

Tiger Brokers was further found to have failed to report, or was late in reporting, suspicious transactions on nineteen transactions in customer accounts audited.  Suspicious activity reports are collated by the police financial intelligence unit.

Tiger Brokers further failed to keep proper accounting records.  Customer information was stored off-shore and not in English.

Justice Gault approved a negotiated settlement between Financial Management Authority and Tiger Brokers requiring Tiger pay a $900,000 civil penalty.

Despite its failures to comply with the Act, there was no evidence that Tiger Brokers had in fact assisted substantive money laundering or financing of terrorism, Justice Gault said.

Financial Markets Authority v. Tiger Brokers (NZ) Ltd – High Court (28.06.23)

23.102

Property Share: Ogilvie v. Li

 

Paul Ogilvie and Vickie Li lived together for over fourteen years in an Auckland property owned by her parents, raising two children.  On separation, his claim to a share of the house failed; it was not relationship property and there was never any enforceable promise he would share in its value.

The two met in 2003.  One year later, Ms Li was living in a property on Coronation Road in Auckland suburb Hillcrest purchased by her parents for $323,000.  Her parents live in Hong Kong.  Their daughter paid rent and managed the property on their behalf, taking in several flatmates who also paid rent.  Ms Li ensured mortgage payments were kept up to date, organised routine maintenance and occasionally remitted funds back to her parents.

The High Court was told Mr Ogilvie moved into Coronation Road some two years after he started dating Ms Li.  Her parents required that Mr Ogilvie also pay rent.  He was an apprentice builder; she a physiotherapy student.  Ms Li managed finances for both their household and the Coronation Road property.

Evidence was given of increasing tension as their relationship deteriorated.  In good times Ms Li would say they were lucky to have their own house in Auckland; in bad times she would emphasise it was her parents’ house and if Mr Ogilvie left he would get nothing.  He took to covertly recording their arguments.

They separated in 2019.  Ms Li remained in Coronation Road.  Mr Ogilvie had fulltime care of their children, with Ms Li paying child support.  He was left with no assets of substance.

Mr Ogilvie claimed his former wife had promised he would share in the value of the property.  This was enforceable, he said, because she had full authority to act on her parents’ behalf.  They had signed powers of attorney so that Ms Li could deal with Coronation Road in their absence.

Justice Walker ruled Mr Ogilvie was aware of the limited authority Ms Li had been given; she contacted her parents to discuss any major issues that came up.  Any comments by Ms Li that the two might one day be gifted ownership gave no rights to ownership, Justice Walker ruled.

Mr Ogilvie further claimed repairs and renovations he carried out on the property created rights to share in its value.  This work was largely what might be expected of someone paying less than market rental while living in a property owned by family, Justice Walker said.  It was insufficient to justify a claim to an interest in the property itself.

Ogilvie v. Li – High Court (28.06.23)

23.101