Fraud: Wikeley v. Kea Investments

 

The noose is tightening around Ken Wikeley, having lost control of his family trust and being called to account for a USD 123 million fraud allegedly perpetrated in league with entrepreneur Eric Watson.

This fraud arose from Mr Wikeley’s involvement in obtaining default judgment against Kea Investments Ltd from a US court, with a Kentucky court upholding a supposed 2012 joint venture coal mining agreement; an agreement subsequently ruled a forgery by the New Zealand courts.

Kea is the investment vehicle established by Sir Owen Glenn to manage USD 350 million proceeds following sale of his transport logistics company.   

The first Kea Investments heard it supposedly owed USD 123 million was after attempts were made to seize Kea assets in the US in satisfaction of the Kentucky court judgment.

Kea’s legal agents in the British Virgin Islands had failed to forward notice of the pending Kentucky case. 

Sir Owen moved smartly, having the New Zealand High Court issue a world-wide order blocking enforcement of the Kentucky court order.

Global anti-enforcement orders are controversial.  To what extent should a court in one country interfere in the judicial processes of another?  To do so suggests the other country is a vassal state, subservient to the orders of another.

The Court of Appeal ruled it was a step too far in this case for the New Zealand High Court to injunct the orders of a Kentucky court.  It discharged the injunction.

But Mr Wikeley is no longer in a position to pick up the reins and carry on with enforcement of the disputed USD 123 million Kentucky court ruling.

After the High Court imposed its anti-enforcement order, interim liquidators were appointed at Kea Investment’s request to take control of Mr Wikeley’s family trust.  This trust is the lead litigant in the disputed Kentucky litigation.

The Court of Appeal signalled it would be sympathetic to any plans by Trust interim liquidators to put on hold further attempts to enforce the Kentucky judgment.

The court was told interim liquidators have obtained US Bankruptcy Court recognition as being in control of Mr Wikeley’s family trust.  The liquidators, not Mr Wikeley, now exercise all rights of his family trust as litigant in the US.

In New Zealand, the Court of Appeal confirmed the supposed 2012 joint venture agreement is a fabrication and further confirmed Mr Wikeleys’ family trust, now controlled by interim liquidators, is liable on earlier court orders to pay 75 per cent of Kea Investment’s legal costs incurred in legal action taken in England, the US, and Australia.

The court was told a Queensland court ordered confiscation of Mr Wikeley’s passport.

Part of his legal argument in New Zealand courts seeking to regain control of the Kentucky litigation was tossed out after his legal submissions were identified as being created by generative artificial intelligence.  References to non-existent cases were the giveaway.

Wikeley v. Kea Investments Ltd – Court of Appeal (21.11.24)

25.038

Estate: van den Boogart v. van den Boogart

 

Gerard van den Bogaart lived with his parents at their Auckland Opaheke home, near Papakura, for many years prior to their deaths five years ago.  Now in dispute with his siblings over rights to the two million dollar property, the High Court learnt of legal hiccoughs which saw his parents bequeathing their home and other assets to a family trust which no longer existed.

With the Trust as the only named beneficiary having been wound up and no longer in existence, their wills were of no effect; their parents’ estates are wound up as an intestacy, with assets to be divided according to statutory rules in the Administration Act.   

The High Court was told patriarch Wilhelmus set up a family trust in 1975.  The Trust had a stated distribution date of March 2000.  That date slipped past unnoticed.  In 2018, the essence of the original Trust was revived with a deed of family arrangement agreeing that trust assets would be distributed between family members on an agreed formula and the Trust wound up.  All beneficiaries signed.

The family home was never a Trust asset.

In an oversight, there was a failure to amend wills signed by Wilhelmus and spouse Anna stating that the family home and surrounding land would pass to the Trust on their deaths.

On their deaths, there was no longer in existence any family trust to take ownership of the family home.

This resulted in proposals for yet another deed of family arrangement.  A 2021 draft agreement proposed adjusting inheritance rights that would otherwise apply through the Administration Act; an agreement intended to give effect to their parents’ intentions.  All those affected signed, except Gerard.

He claims their father promised him the Opaheke property in return for years of work he spent maintaining the property.  He claims there have been secret deals between family members dealing in Trust assets to his disadvantage.

He departed the property, where he had been living rent free, only after a Tenancy Tribunal hearing ordered his eviction.  His siblings complain the property was left in a mess, requiring substantial work in preparation for sale.

Justice Anderson dismissed Gerard’s request for an injunction blocking a sale.

Gerard’s primary demand is for a forensic audit of Trust activities, Justice Anderson said.  That is a separate issue from sale of the Opaheke property, which is an estate asset, not a trust asset.

Should Gerard decide to carry on with a claim against his parents’ estates, compensation for any successful claim is the better remedy, he said.  Sale of the Opaheke property could go ahead.

The court was told Gerard would receive a one-seventh interest in his parents’ estates if divided according to Administration Act rules, a one-eighth share if he signed the 2021 proposed deed of family arrangement.

van den Bogaart v. van den Bogaart – High Court (21.11.24)

25.037

Tax Evasion: Shah & Naseeb v. Inland Revenue

 

Rehana Shah and Mohammed Naseeb were each sentenced to three year’s imprisonment for tax evasion, complicit in deliberately understating taxes due of some $800,000 over a six year period ending 2016.  Their claim to have no knowledge of tax requirements, having left this work to their tax agent, was dismissed.

They unsuccessfully appealed their conviction and sentence to the High Court, stating there were no grounds for criminal liability; it was simply a case of muddled accounting in their poorly run and chaotic business, they said.

Tax convictions followed failures to properly account for GST, PAYE deductions and income for their company: Supreme Constructions Civil & Drainage Works Co Ltd.  Their company stopped trading in 2015 and was wound up, insolvent.  They also understated taxable income in their personal tax returns.

Conviction for tax evasion requires proof of intent; the taxpayer knew tax was due, but deliberately evaded payment.   

Ms Shah and Mr Naseeb said they left all tax filings to their tax agent.  Any errors were not their responsibility, they said.  In addition, Ms Shah said she was no more than a ‘simple housewife who helped with some of the paperwork.’

Justice Jagose said there was clear evidence of the two concealing information from their tax agent in what amounted to deliberate efforts to evade tax.  Their tax agent was given limited information.  Relevant bank accounts were kept hidden.

Ms Shah’s claim to limited involvement in company business did not tally with evidence of her having an employment contract with Supreme Constructions and being involved in coding bank account statements delivered to their tax agent.

The two provided no assistance to Inland Revenue’s investigation.  Their sustained attempt to deceive and mislead Inland Revenue by delaying and obfuscating inquiries was further evidence of intent to evade tax, Justice Jagose ruled.

Shah v. Inland Revenue & Naseeb v. Inland Revenue – High Court (20.11.24)

25.036

Marriage: re Estate Mark Watson

 

One year into their relationship Mark Watson signed a will leaving all to his de facto partner Esther Vrieze.  Six years on, they married; each unaware that this marriage invalidated his earlier will, causing estate complications when Mark died nearly two decades later. 

The rule that marriage invalidates prior wills is well-known to lawyers; not widely known by the general public.

Mark Watson’s estate was left holding a Hastings residential property on his 2024 death with widow Esther and their children left with no immediate right to continued occupation.

A change in legal status from de facto partners to married, meant Esther could not enforce terms of her late spouse’s earlier, now invalid, will.

The Wills Act recognises this problem. Wills made ‘in contemplation of marriage’ remain valid after a subsequent marriage. 

The High Court was told Mr Watson’s will had no express wording stating it was made in contemplation of their marriage.

Justice McHerron ruled circumstance of their relationship implied Mr Watson’s will was signed in contemplation of a marriage, even though the marriage did not take place for six years.

Both Mr Watson and Ms Vrieze signed wills at the same time, on similar terms; each being a major beneficiary of the other’s estate.  Ms Vrieze told the court this was done with the understanding they would later marry, confirming the solidity of their relationship.

Mr Watson’s invalid will was declared valid.

re Estate Mark Watson – High Court (18.11.24)

25.034

Construction: CPB Contractors v. FZ Group

 

Infighting between contractors building a new prison at Waikeria in the Waikato saw Australian-owned lead contractor CPB demanding $3.5 million from Auckland fit-out contractor FZ Group with FZ claiming a letter it signed at CPB’s request mentioning the $3.5 million was simply a stratagem to get compensation from Corrections for project cost-overuns.

Waikeria prison’s extension has been blighted by delays and cost over-runs, particularly because of covid-19 lockdowns and subsequent shortages of building materials.

CPB Contractors Pty Ltd is lead contractor.  Hamish Storey’s FZ Group Ltd was involved as sub-contracter; his company specialises in commercial carpentry and fitouts.      

The High Court was told the two companies’ working relationship deteriorated through 2022.  CPB said more staff were needed on the job and some of the work done was defective.  FZ Group said it was held up by CPB’s failure to get the site ready for work.

This led to what was stated to be a ‘walk away’ agreement with FZ Group abandoning its contract.

Terms of this agreement came under scrutiny after FZ Group put in a Construction Contracts Act claim for what it said was work completed for CPB but not yet paid; a claim for just over $443,000.  Three weeks later, CPB demanded FZ Group pay it $3.5 million.

Associate judge Skelton ordered CPB pay FZ Group’s $443,000 Construction Contracts claim; applying the Act’s ‘pay now, argue later’ principles.  CPB was given two weeks to pay, or face winding up.

In turn, Judge Skelton blocked CPB’s attempts to wind up FZ Group for non-payment of $3.5 million, ruling a full court hearing is needed to determine circumstances surrounding FZ Group’s signature to the ‘walk away’ letter promising to pay $3.5 million.

CPB says the July 2022 letter blocks FZ Group from claiming any further contract payments and holds FZ Group liable for additional costs incurred bringing in another contractor to finish its work.

FZ Group says the letter was intended to support CPB’s claim against Corrections for project cost overruns and that it absolves FZ Group from any further liability.

CPB Contractors Pty Ltd v. FZ Group NZ Ltd – High Court (18.11.24)

25.035

Missappropriation: Industrial and Commercial Enterprises v. Howes

 

Dereck Howes, director of Auckland-based Industrial and Commercial in the business of refurbishing and leasing out shipping containers, was ordered to pay just on $600,000 after liquidation of his company.  He pocketed all cash coming into the business and on-sold containers not owned by his company. 

After Industrial and Commercial Enterprises Ltd went into liquidation in September 2023, liquidators could find no company records.

The High Court was told the company had no bank account; all cash was paid into Mr Howes personal bank account, used to pay a mix of company and personal expenses.

The GST number used on company invoices was Mr Howes personal tax number.

Evidence was given that Industrial and Commercial on-sold, without permission, leased containers sitting in its yard.  This money also went into Mr Howes personal account.

The Companies Office file shows no record of Mr Howes formally accepting any role as an appointed director.

Liquidators did not sue Mr Howes for Companies Act breaches as a director.  They sued him for ‘money had and received’ and ‘knowing receipt.’  He did not defend the liquidators’ claim.  He was ordered to refund $599,800 to the company.

Justice O’Gorman ruled liquidators had proved Mr Howes wrongly misappropriated funds while in control of the company.

Industrial and Commercial Enterprises Ltd v. Howes – High Court (14.11.24)

25.033

Trust: re Ron and Joan Gillatt Charitable Trust

 

One person’s treasure may be another’s junk.  The High Court was asked to amend terms of a charitable trust tasked with an obligation to store and maintain what turned out to be primarily household junk.

In 2001, Ron and Joan Gillatt established a charitable trust naming as beneficiaries local charities plus a model railway club and a cat protection organisation, all based in Christchurch.

Ten years later, the trust deed was amended to have the Trust take possession on their deaths all ‘books, magazines, papers, paintings, video tapes, philatelic items and DVDs’ that they owned.  These items were to be preserved, with the paintings gifted to a publicly owned gallery.

The High Court was told estate solicitors were shocked to find on the 2024 death of widowed Mr Gillatt that most of these items were no more than junk of no enduring importance.

His stamp collection was valued at some $3000; the 73 pieces of artwork at no more than $20,000.  Art experts advised none of the artwork was suitable for inclusion in any New Zealand public collection.

A requirement to use trust funds to store and maintain items of personal property ran the risk of disqualifying the trust’s charitable status, and with it, tax benefits that follow.

To save the Trust’s charitable status, the High Court approved amendments to the trust deed allowing trustees to dispose of all the unwanted personal property, with any proceeds of sale to be added to the trust fund where it may be used to benefit the Trust’s named charities.

The current size of this trust fund was not disclosed.

re Ron and Joan Gillatt Charitable Trust – High Court (13.11.24)

25.032

Costs: CNP Holdings v. Central Park Property

 

Painting himself as a disinterested bystander seeking compensation for investors in Maat Consulting’s disastrous Nido department store syndication, Craig Priscott was primarily driven by attempts to hoover up Maat’s assets, the High Court ruled, ordering Priscott pay Maat $187,000 of its costs spent fending off his legal action.  

Priscott sued Maat Consulting Ltd, its directors Neil Tuffin and Mark Hughson, plus members of their families trying to hammer them into selling up.

Any pretence that he went into battle for the benefit of Nido investors was negated by evidence that he sued only after failed negotiations to buy out Maat assets, Associate Judge Brittain said.

Maat Consulting establishes investment syndicates for purchase of commercial properties.

Considerable negative publicity followed a failed 2021 syndication in Henderson, West Auckland.  Retail investors lost some four million dollars after a planned big-box retail store branded as Nido failed following a mix of construction delays, funding problems and covid-19 restrictions.

Mr Priscott complains that financial information provided by Maat to the last tranche of Nido investors prior to their investment did not disclose that the project was already in default.

This breached the Financial Markets Conduct Act, he alleged.

The High Court was told he threatened Maat and its owners with legal action over not only the alleged Nido non-disclosure but also allegations they had overcharged management fees in respect of other property syndicates.

This threat was held over their heads as detailed proposals were put forward through 2022 for all Maat syndicates to be rolled up into one entity under the ultimate control of Mr Priscott.  He was offering $1.7 million compensation to Maat.

A September 2022 email presented an ultimatum: agree, or I sue as threatened.

Subsequent legal action by Mr Priscott’s company, CNP Holdings Ltd, was thrown out.  Neither Mr Priscott nor CNP had any direct interest in the outcome.

Associate Judge Brittain ruled litigation was launched for an improper purpose; the intention of forcing Maat Consulting to sell up.

Both Mr Priscott and CNP Holdings were held jointly liable to pay $187,000 of the $594,000 litigation costs incurred by Maat.

While Mr Priscott personally was not party to the litigation, he was liable to pay costs as the ‘real party’ who drove the proceeding, Judge Brittain said.

CNP Holdings Ltd v. Central Park Property Investment Ltd – High Court (5.9.24 & 12.11.24)

25.031

Property: Willems v. Willems

 

What started as a mutually beneficial family arrangement with parents Robert and Joscelyn Willems helping son Daniel and his then partner Georgia get a foot on the property ladder turned into a nightmare, with Daniel later strong-arming his parents into gifting him a greater share of their jointly owned Nelson purchase and then forcing a sale.

In 2019, Daniel’s parents agreed to financially support his plans to buy a home.

Discussions jelled into a proposal where they would jointly buy a house where all could live.

The arrangement saw Daniel’s parents putting up some $158,000 cash as the downpayment on a home at Turner Place in Wakefield.  Daniel provided no cash.

At the last minute, his parents had to contribute a further $55,000 to clear personal debts incurred primarily by Daniel’s then partner Georgia; the bank would not advance any mortgage finance unless these personal debts were first cleared.

The deal saw Daniel and Georgia registered as owners of Turner Place as to a one-quarter share; Daniel’s parents a three-quarter share.  All four were liable on the mortgage.

Turner Place has two separate living areas, enabling the two generations to live close together, but separately.  Property outgoings were shared equally between each generation.

The High Court was told this mutually beneficial family arrangement fell apart within a year, after Georgia left, going to Australia.

Georgia’s departure frustrated subsequent attempts to refinance the bank loan at a lower interest rate and to draw down a further $40,000 when Daniel’s parents sought to buy a new car.  She was no longer around as part-owner to sign the required variation of mortgage.

She willingly signed over her ownership interest on being released from the mortgage, with family agreeing Daniel’s ownership share would increase to one third, his parents’ share reducing to two thirds.

Evidence was given that Daniel’s share instead was increased to one half; this after he refused to sign off on any new financing arrangement which included a $40,000 advance to his parents unless his share was increased. 

Within a year, Daniel and his new partner had left Turner Place and he was demanding the property be sold.

He sued for a Property Law Act forced sale.  His parents’ failure to file a statement of defence meant they were barred from defending the case.

Justice Boldt ordered a sale, stating a forced sale was inevitable, given the circumstances.

With the wisdom of Solomon, he set out a formula for progressing a sale given the fact each side no longer talked to the other.

Daniel has two weeks to obtain a registered valuation of Turner Place, with his parents given the chance to buy out his half interest at that valuation less the outstanding mortgage debt.

If they do not accept this valuation, they have a further two weeks to obtain their own valuation with Daniel given the opportunity to sell his half share to them at an average of the two valuations.

If this fails, Turner Place is to be listed for sale.

In the final wash-up, Daniel’s parents are to be given credit for both their original $158,000 cash contribution and the extra $55,000 put in from the start to clear Daniel’s and Georgia’s personal debts, Justice Boldt ruled.

He dismissed Daniel’s claim that the $40,000 borrowed by his parents to buy a car should be excluded as their personal debt when calculating net equity in the property.  It is part of the mortgage debt secured over the home, Justice Boldt said.

Willems v. Willems – High Court (12.11.24)

25.029

Seascape: Shundi Customs v. China Construction

 

Intended to be New Zealand’s tallest residential apartment building, towering 190 metres above Auckland’s CBD, Seascape is mothballed while Chinese developer Shundi goes toe-to-toe with Chinese company China Construction, disputing liability for construction delays.   

Shundi Customs Ltd challenges an arbitration ruling requiring it pay some $33 million.  China Construction’s legal action to put Shundi into liquidation for non-payment was suspended when the High Court ruled China Construction had first to comply with its contractual obligations to finalise a performance guarantee from its Shanghai-based parent. 

The court was told their 2017 Seascape construction contract was signed before design was finalised and before any building consent was obtained.  While intended to become a fixed price contract, construction to date has continued on a cost plus margin basis.

Work stopped after the August 2024 arbitration ruling.

Shundi claims the arbitrator mis-interpreted the contract.

China Construction says the arbitrator got it right.

It claims Shundi is not only reneging on compensation due for current delays, but bizarrely is attempting to get financial compensation now for potential construction claims by China Construction which might, or might not, be disallowed in the future.    

The general rule in construction law is: ‘pay now, argue later.’  Applying this rule would see China Construction successful in winding up Shundi for non-payment.

Courts have qualified this rule where the debtor refusing to pay does have potentially valid grounds for non-payment and if later successful at the ‘argue later’ stage runs the risk of not recovering money paid over earlier because the recipient is now insolvent.

Shundi claims any payment it makes now is at risk.

It is possible China Construction’s parent company might cut it loose, simply abandoning China Construction to its fate, Shundi said.  This would prejudice any rights by Shundi to later recover $33 million if now paid across.

The High Court was told Shundi has made progress payments for construction to date totalling some $300 million.

Shundi says China Construction New Zealand Ltd did not promptly get a performance guarantee signed off by its parent company, as required by their 2017 contract.

A guarantee belatedly provided is inadequate, Shundi says.  To be enforceable under Chinese law, it must first be registered with the State Administration of Foreign Exchange in China, it says.

Justice Blanchard ruled China Construction could not enforce payment of the arbitrator’s $33 million ruling until the guarantee’s required State registration was complete.

Shundi Customs Ltd v. China Construction New Zealand Ltd – High Court (11.11.24)

25.030

Maori: Khov v. Hovell

 

Having their rented Tauranga property held in the name of a company they controlled meant the house was a company asset liable to be sold when their company went into liquidation the High Court ruled, over objections by shareholders Tama Hovell and Kristy Hill that this was incompatible with Maori tikanga.

They claim the property is free from seizure because it provides a ‘space for Maori hapu whanau tangata whenua from across the region.’ 

In late 2022, their company Takimano Ltd was forced into liquidation by Carters Building Supplies for an unpaid trade debt.

The liquidators’ report states they have failed to co-operate in the liquidation.

A 2023 application to the Maori Land Court seeking to stop liquidation was dismissed.  The court said it had no jurisdiction over liquidations.

They then challenged liquidators’ attempts to sell an investment property on Waitao Road, Tauranga, registered in their company’s name.  The ‘Westminster system and English law’ does not override Maori custom they argued.

Liquidators got a court ruling confirming the High Court has jurisdiction.  Associate Judge Brittain advised Mr Hovell and Ms Hill had to live with the consequences of their actions; by taking title in the name of their company, the investment property was a company asset.

Next step for the liquidators is to get an order for possession, prior to sale.

Khov v. Hovell – High Court (7.11.24)

25.028

Co-Ownership: Khan v. Khan

 

It was a case doomed from the start.  Firdaussi Khan’s attempts to remove his brother from their Rotorua property failed; one co-owner cannot evict another co-owner, each has the right to occupy all or any part of their property.

The High Court was told of dissension within the Khan family over rights to occupy the Ngongotaha Road property.  Following death of their father, his five children inherited the family home taking title with each having a one fifth share.

Evidence was given of an agreement allowing one sibling, Aubrey, to occupy the home with his family provided he paid all outgoings and kept up the maintenance.  After Aubrey died in 2022, his de facto spouse Norma remained in occupation with another of Aubrey’s siblings, Quentin, living in a garage on site.

Firdaussi complains the property now looks like a tip; with holes in walls, water damage unrepaired and rubbish lying around.  Rate arrears currently amount to $40,000, he claims.  He wanted everyone out so the property could be restored.

Neither Quentin nor Norma appeared in court to challenge any eviction order.

Justice Moore ruled Quentin cannot be ordered to leave.  As a co-owner, he is entitled to occupy the property.

Justice Moore declined a request that Norma be evicted.  It is possible she too may now be a co-owner; with the possibility she may have inherited, in whole or in part, the share held by her late spouse Aubrey.

He left open the possibility of Quentin and Norma being forced to pay an occupation rent to the other part-owners; the three siblings not living there.  If no agreement is reached to pay rent, a separate court application is needed.

Khan v. Khan – High Court (5.11.24)

25.027

Mortgagee Sale: Small (2005) Ltd v. Mahon

 

That financier Tim Edney should negotiate with property developer Peter Chevin, four times bankrupt and with a criminal conviction, as potential buyer in the forced sale of an unfinished Auckland development is not that unusual, Justice Wilkinson-Smith drily noted.  Property development attracts high stake gamblers; it is a high-risk high return game.

Neville Mahon failed in his claim that Mr Edney did not properly market sale of a failed Mangere Bridge townhouse development, selling at an undervalue.

Mr Mahon was ordered to pay $6.5 million owed on his 2014 guarantee of Mr Edney’s vendor finance for the Coronation Road project.  

The High Court was taken through a detailed examination of circumstances surrounding a 2018 forced sale of the unfinished development.

At heart of the litigation, Mr Mahon alleged Mr Edney rigged the sale; selling at $11.75 million to a company Mr Edney controlled: GB Ltd.  In turn, Mr Edney alleged Mr Mahon attempted to manipulate the sale process with a preposterous late bid from an obscure Australian purchaser allegedly in league with Mr Mahon. 

The two once worked hand in glove: Mr Mahon taking on property developments; Mr Edney providing finance.  No longer.  Many of their joint projects have subsequently collapsed into fiercely fought litigation.

The Coronation Road project got underway with Mr Edney’s company, Small (2005) Ltd, selling land in 2014 spread across five titles to a company controlled by Mr Mahon’s spouse: Coronation Gardens Ltd.  The High Court was told Mr Mahon’s spouse was named as being in control of Coronation Gardens because of doubts that banks would lend to any business venture then controlled by Mr Mahon.

Small (2005) left in second mortgage vendor finance.  The deal required Mr Mahon guarantee repayment.

When BNZ called up its first mortgage finance, Small (2005) paid off the bank, taking an assignment of its security.

A 2017 marketing campaign by Small (2005) to enforce its rights as mortgagee saw eight offers made.  This campaign was disrupted with an unsuccessful court application by Coronation Gardens attempting to stop the phrase ‘mortgagee sale’ being used in advertising.

The only unconditional offer was at nine million dollars.  Valuers agreed the land was worth some $14 million in 2017.  The offer was not accepted.

The highest bid was at $21.7 million, submitted by email just after tenders closed.  This offer came from Sydney.  It was conditional on the property able to be used for a ‘place of worship;’ a change of use that would require resource consent.

The High Court was told Mr Edney was suspicious about the bona fides of this offer.  The supposed offeror had never investigated the site, had downloaded tender documents just one day before tenders closed and had incorrectly completed the offer document by transposing the vendor and purchaser.  Enquiries identified that the offer emanated from a business with the same Sydney street address as that doing work for Mr Mahon.

This offer too was rejected.

There were suspicions that this $21.7 million bid was an attempt by Mr Mahon to artificially raise the properties’ value in order to get sufficient new loan finance, then to reclaim control of the project.

Mr Edney’s later sale negotiations with Mr Chevin came to nothing.  Mr Chevin wanted the entire purchase price left in by Small (2005) as vendor finance.  Mr Edney wanted at least a one million dollar cash contribution from Mr Chevin.

In 2018, a further marketing campaign was launched.  Market prices had fallen.  One valuer priced the land then at $11.62 million, as a ‘forced sale’ valuation.

Marketing resulted in no offers above nine million dollars.

Mr Edney then arranged a sale to another of his companies, GB Ltd, at a price of $11.75 million.

This sale crystallised Mr Mahon’s liability on his guarantee.

The High Court was told GB Ltd onsold the land two years later for $22.7 million.

Justice Wilkinson-Smith ruled Mr Edney’s Small (2005) had taken reasonable care to obtain the best price.  The price paid by GB Ltd was more than any other prospective purchaser offered unconditionally at time of sale.

Mr Mahon was ordered to pay $6.5 million; the balance of the unpaid guaranteed debt plus accrued interest.

Small (2005) Ltd v. Mahon – High Court (5.11.24)

25.026

Family Trust: Winsloe v. Winsloe

 

Brian Winsloe died in 2024 leaving a will stating his assets are to be divided equally between his three children: Blaine, Nicole and Mark.   One substantial asset is the former family home in Invercargill, but it is not an estate asset; it is owned by a family trust set up twenty years ago.  Blaine and Nicole want the house sold.  Mark is living in the house, refusing to budge.

It is now a trust law argument, not an estate law argument.

Both sides are deadlocked.  Blaine and Mark are the only two surviving family trust trustees.  Mark is no mood to agree with any trust proposal seeing him losing occupation of the Moulson Street property.

Mark says he shifted in one month prior to their father’s death, at his request.  His siblings say he didn’t shift in until after their father died.

Blaine, together with sister Nicole, went to court claiming Nicole had now been appointed as a further trustee and asked that Mark be removed as trustee.  They want the property sold.

Mark as trustee is hopelessly conflicted, acting in his own interests and not in the best interests of all trust beneficiaries, they claim.

Associate Judge Paulsen declined to remove Mark using the High Court fast-track summary judgment procedure.  Blaine and Nicole are also pursuing their own interests in seeking to have Mark removed both as trustee and from occupation of the trust asset, he pointed out.

Mark has a valid objection to trustee demands coming from his siblings when it is disputed whether Nicole had even been validly appointed as a further trustee, Judge Paulsen said.

To avoid the cost of a later full court hearing, Judge Paulsen offered to chair a judicial settlement conference, giving both sides an opportunity to settle their differences.

Winsloe v. Winsloe – High Court (4.11.24)

25.025

Estate: Francis v. Mortlock

 

Two decades after Wayne Francis’ death, his widow and a daughter from his first marriage settled a drawn out dispute over assets valued at nearly $200 million.  This is the final resolution of money disputes that surfaced shortly after Wayne’s 1999 death with allegations then that widow Deborah had gone on a ‘spending spree.’

His most enduring legacy is Christchurch-based Wayne Francis Charitable Trust, supporting young people.  Daughter Helena chairs this Trust.

The High Court was asked for consent to an agreed global financial settlement encompassing Mr Francis’ will, his family trusts, and the charitable trust he established one week before death from cancer.

This settlement sees widow Deborah receiving: an immediate cash payment of $300,000; assets of $15 million settled on a new family trust for benefit of herself and her children; plus forgiveness of all debts she owes Francis entities.

In turn, she agreed to surrender all rights as a beneficiary of his family trusts.

She also agreed to give up all litigation against her late husband’s estate and his business entities.  She had previously filed court proceedings both challenging the extent of assets left her in his will and questioning trustees’ interpretation of trusts he had established.  Particularly galling, had been trustees’ actions in reducing an annuity she was previously receiving.

Justice Dunningham gave Trusts Act approval to the agreed settlement which had been negotiated at a 2024 mediation.

Francis v. Mortlock - High Court (1.11.24)

25.024

Liquidation: re Ovato Ltd

 

It took some lateral thinking by insolvency specialists at BDO chartered accountants, but a pooling arrangement for assets and liabilities of companies in the Ovato printing group saw savings on liquidation costs which will flow through to an improved return for creditors.

Rees Logan and Andrew McKay were appointed liquidators of the four New Zealand subsidiaries of Ovato group in late 2022 after its Australian parent declared insolvency three months earlier; all victims of the online revolution leading to an interminable downturn in traditional print media.

Each of Ovato’s four New Zealand companies were originally set up for a different role: heatset printing; sheetfed printing; distribution of brochures, magazines and newspapers; and a corporate head office managing New Zealand group operations.

The four companies shared the same directors.  Cashflows were managed through two bank accounts controlled by head office.

Logan and McKay told the High Court that while there were relatively clear paper trails identifying payments in and out, at least $250,000 of chargeable time would be needed to isolate and allocate both costs and revenue between companies if each company were to be wound up separately as a discrete legal unit.

Employees had worked across multiple companies without wage costs being specifically allocated.  Paper and other printing supplies had been purchased by one company, then used by another.  Many customers were unsure of which company they contracted with, simply making payments to corporate head office labelled as payment to Ovato.

In the High Court, Justice Robinson made a Companies Act pooling order having all four companies liquidated as if they were one.  Resulting savings in liquidation costs will be shared between preferential and unsecured creditors, he said.

As a consequence, all assets and all liabilities will be thrown into the one bucket and dealt with as if the four companies were one company being liquidated.

Before going to court, Logan and McKay had discussions with both Customs and Inland Revenue regarding their claims as preferential creditors; collectively they are owed some $1.57 million.  Each agreed to limit their claim as a preferential creditor; proving in the pool as an unsecured creditor for the balance of their preferential claim.

The High Court pooling order confirmed this agreement.

re Ovato NZ Ltd – High Court (1.11.24)

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