Farm Sale: Stalker v. Duncan

Nine years after the Stalkers paid $1.35 million buying a sheep and beef farm in north Otago from Phil Duncan, they were awarded $515,000 damages because the farm’s effective grazing was misrepresented; the 450 hectare property covering areas of undulating land together with steeper hill country described on sale as having 285 hectares of effective farming land in fact had only 212 hectares.

Hampden Farm is near Moeraki Bay.  It had been in the Duncan family for three generations when then owner Phil Duncan offered the property for sale, keeping the homestead block for himself.  The property is a mix of flat and hilly land, with areas of native bush and gorse.  Having sold their Tuatapere farm, the Stalkers purchased Hampden in 2011.

The High Court was told the Stalkers became aware of discrepancies in the farm’s effective hectarage only in early 2018 when looking to sell to son Callum and his wife Hanna.  A farm valuer used aerial photography from a Land Information database to accurately measure Hampden’s effective farmland.  Given the substantial difference between effective hectarage as advertised and what in fact existed when they purchased, the Stalkers looked to recover damages from Mr Duncan.  He denied liability.  He said his calculation of 285 hectares was based on fertiliser records; assuming an average annual fertiliser spread per hectare, he used the volume spread to work backwards, reaching an assumed effective hectarage.

Justice Osborne ruled the Stalkers were entitled to rely on the advertised 285 hectare figure, and did rely on it to their cost. It took seven years to recognise the discrepancy because the Stalkers did not personally farm the property in the interim as a stand-alone operation; it was leased out for a time and later combined by the Stalkers with a nearby property in a joint operation.  Mr Duncan also overstated the number stock he carried on Hampden; Justice Osborne ruled.

Damages for the discrepancy at $515,250 were assessed on current values for the farm; not on values at the time the farm was purchased years previously.  As at June 2020, the farm had a market value of $2.27 million.

Stalker v. Duncan – High Court (30.06.20)

20.113

Restraint of Trade: Christensen & Purdom v. Gordon

Tim Gordon pushed the boundaries after agreeing to a restraint of trade when selling Trans-Space Industries for $1.92 million and then promptly negotiating for the purchase of AutexPSL which similarly manufactures aluminium products.  Trans-Space’s new owners allege he is breaching agreed terms prohibiting both use of confidential Trans-Space information and setting up a rival business.    

In December 2019, Mr Gordon sold Auckland aluminium fabricator Trans-Space to a consortium of family trusts: the Christensen Family Trust Number Two and the Purdom Family Trust.  In a restraint of trade agreed as part of the deal, he promised not to be involved in a rival business for the next three years and further agreed not to poach customers.

The High Court was told Mr Gordon advised Trans-Space ten weeks later that he was negotiating for the purchase of AutexPSL, part of Autex International.  Evidence was also given that during the covid-19 lockdown his spouse used remote access to Trans-Space’s computer system to provide Mr Gordon with two invitations to tender sent to Trans-Space: one from Genesis Energy, the other from Sir Howard Morrison performing Arts Centre in Rotorua.  Mr Gordon’s administrator rights to Trans-Space’s computer system were not revoked after his sale.  The court was told he twice accessed the system, seeking to delete emails.

Believing Mr Gordon had finalised the AutexPSL purchase, the two family trusts sued.  Mr Gordon denies it is a done deal; he says the deal is conditional on a court ruling that he can go ahead.

Mr Gordon says AutexPSL product line differs from Trans-Space; AutexPSL manufactures and sells aluminium ‘partitioning systems,’ a product Trans-Space has never advertised, nor sold, he said.  Justice Gault declined to issue a temporary injunction blocking Mr Gordon’s AutexPSL purchase.  A full court hearing is needed to argue the finer points of their agreed restraint of trade.  Mr Gordon was ordered to delete all electronic copies of the two Trans-Space invitations to tender he improperly received and to hand over any hard copies together with any other confidential Trans-Space information he may hold.

Christensen & Purdom Family Trusts v. Gordon – High Court (29.06.20)

20.112

Unit Title Repair: re 22 Emily Place

Schemes to remediate leaky apartment buildings must have ‘broad support’ before costs can be forced onto unwilling owners.  Remediation of a ten storey Auckland residential block was sent back for another vote despite a substantial majority in support; no-shows meant only twenty apartment owners out of 62 registered a vote in favour. 

The apartment block in Emily Place, central Auckland, has weather-tightness issues on the roof and upper floors; much of it common area, meaning repair costs generally fall on all apartment owners.  A scheme of repair was put to owners with High Court approval sought under the Unit Titles Act to force dissenting owners into the scheme.  At an owners’ meeting in November 2019: twenty voted in favour, eight against; one abstained.

Justice Lang ruled turnout was insufficient to get court approval.  Implementing repair schemes can cause significant conflict between apartment owners. Broad support is needed before unwilling owners are forced into a scheme.  A second owners’ meeting was ordered, with updated information required: estimated start date, repair duration and cost.

re: 22 Emily Place – High Court (29.06.20)

20.111

Public Works: Aztek Ltd v. Attorney-General

Land taken under the Public Works Act but now surplus to Auckland’s Waterview tunnel connection should first be offered back to the original owner, a defunct company struck off the companies register, ruled the Court of Appeal.

Government officials had plans to offer this surplus land to Auckland Maori as part of ongoing Treaty of Waitangi claim settlements. In 2005, land owned by Aztek Ltd was compulsorily acquired for proposed Waterview roading.  Tresta Prujean owned Aztek.  Her company developed residential properties in the Waterview area.  The court was told Ms Prujean moved to Australia in 2008; Aztek was struck off the companies register in 2009 for failing to file annual returns.  She later learned through her New Zealand lawyers that part of the land compulsorily purchased was surplus to requirements.  The Public Works Act requires surplus land to be first offered back to the original owner.  Land Information New Zealand said there was no original owner; Aztek no longer existed.

The Court of Appeal ruled that struck off companies remain in suspended animation; they can be restored to the companies register following application by any interested party.  Land Information should have contacted Aztek, asking if its shareholder had any interest in reviving her company and then purchasing the surplus land.  The company’s listed registered office was a firm of accountants.  Evidence was given that Aztek was restored to the register in 2015 ready to take legal action.

The Court of Appeal said Aztec’s owner should have been tracked down, despite the company being struck off at the time Waterview land became surplus.  Aztec had first right of refusal to buy at a market price yet to be assessed: the date Aztek would have been restored to the register when properly informed by Land Information of its right to buy back; a date preceding its actual 2015 restoration.

Aztek Ltd v. Attorney-General – Court of Appeal (24.06.20)

20.110

Unit Title Levies: Body Corp 68792 v. Luxe One Ltd

Corporate owners of unit title offices with unpaid levies can avoid threats of winding up by offering mortgage security for delayed payment.  Body corporate administrators must give genuine consideration to any offer and cannot refuse without proper reason.

For the first time, the High Court was asked to rule on validity of offers giving security for unpaid levies. The novel case concerned a block of Lower Hutt commercial units registered under the Unit Titles Act. The High Court was told Luxe One Ltd had defaulted on levy payments totalling $61,323.  The body corporate took steps to put Luxe One into liquidation. Luxe’s then director, Michael Kooiman, said his company had some $420,000 equity in its unit and offered mortgage security over the unit for the unpaid debt.  Companies Act rules block winding up applications where creditor and debtor agree ‘to secure payment of the debt.’  Associate judge Johnstone said offers require genuine consideration by body corporate administrators; offers cannot be refused without good reason.

There were reasonable grounds to reject Luxe One’s offer. Investigations identified Luxe One held no equity in its unit; there were three mortgages already registered against the unit title, contrary to Mr Kooiman’s representation that there was only one.  Luxe One Ltd was ordered into liquidation as insolvent.

Body Corporate 68792 v. Luxe One Ltd – High Court (22.06.20)

20.109

Estate: re Berghan

There was a practical solution enabling her to inherit, but Larissa Sabin made the point that while pakeha-inspired adoption law deemed her to be no longer the biological daughter of her Maori father there were still blood links recognised by Maori culture.

Larissa’s biological father died in 2019.  He left no will.  Under rules governing intestacies the living relatives entitled to inherit were his seven siblings.  His biological daughter Larissa could not inherit; her earlier adoption under the Adoption Act deemed her to be the daughter of her adoptive parents, not her biological father.  Larissa had kept in close contact with her biological father, taking the view she had two fathers.

The High Court was told the seven siblings entitled to inherit all agreed they did not want to share in the estate; it should all go to Larissa.  Any one of the seven siblings could have applied to the High Court for authority to administer the estate, arranging for all siblings to collectively gift the entire estate to Larissa.  Instead, Larissa applied to become administrator.  Special approval was needed; at law she was not a blood relative entitled to inherit.  If her adoption had been an informal whangai adoption, she would at law still be the daughter of her biological father.

Justice Cull ruled the special circumstances justified Larissa’s appointment as administrator.  The value of her biological father’s estate was not disclosed.

Re Estate Tasman William John Berghan – High Court (19.06.20)

20.108

'Take or Pay': Matapiro Olives v. The Olive Press

Hawkes Bay olive grower Matapiro Olives was liable under a ‘take or pay’ contract to pay Wairarapa processor Olive Press a $129,300 processing fee for 2019 harvest even though no crop was delivered for processing that year. 

The High Court was told Matapiro negotiated a three year processing contract with Olive Press Ltd for the 2018-2020 seasons. Matapiro was committed to consigning a minimum quantity of olives each season for processing at a set price. The three year deal did not get off to a good start.  There were grizzles over late payment for the 2018 season.  The following year, Matapiro sold its entire crop to a third party, delivering no olives to Olive Press for processing.

Olive Press sued.  It was entitled to charge Matapiro an agreed 2019 processing charge for the 250 tonnes minimum delivery contracted, Olive Press said.  Wages and contractor fees for each season are fixed; ‘take or pay’ covered these fixed costs, it said.  Matapiro said Olive Press had suffered no loss; no damages were payable even if it was in breach of contract, it said.

‘Take or pay’ contracts seek to allocate up-front costs, Associate judge Johnston said.  A contracting party can elect to ‘take’ or ‘pay’; or more appropriately in this case: ‘use’ or ‘lose.’  Having chosen not to use Olive Press’ facilities for the 2019 year, Matapiro was contractually obliged to still pay the agreed minimum fee.

Matapiro Olives (2008) Ltd v. The Olive Press Ltd – High Court (4.05.20 & 19.06.20)

20.107

Professional Negligence: Drink Tank v. Morrows

Liquor industry specialist Drink Tank Ltd was told to sue in Australia on its US$10.1 million claim for alleged negligence in a forced buy out of its minority interest in Sesion Tequila. 

Hamilton-based Drink Tank Ltd was taken by surprise when told in 2019 its twenty per cent shareholding in Australia-based company Sesion Tequila Holdings Pty Ltd was being compulsorily purchased.  Sesion majority shareholders allege Drink Tank failed to comply with a shareholders’ agreement, giving them the right to force out Drink Tank. The alleged failures have not been disclosed publically.  Unbeknown to Drink Tank, Sesion Tequila’s majority shareholder hired Melbourne accountants Morrows Pty Ltd to value Drink Tank’s minority interest before issuing a compulsory buy out notice valuing Drink Tank’s shares at AU$34,000.  Drink Tank cried foul.  An earlier share placement had offered shares to a US investor at a price valuing Sesion at US$50 million, it said.  On this basis, Drink Tank’s twenty per cent stake was worth US$10.1 million, it claims.

Drink Tank sued valuer Morrows in the New Zealand High Court, alleging negligence in its share valuation.  Justice Gordon ruled the case should be heard in Australia. Sesion is an Australian company; the shareholders’ agreement is governed by New South Wales law.  Morrows is based in Australia and its conduct is to be measured by Australian standards.  Under Australian law, professionals can raise as a defence their compliance with ‘competent professional practice.’  The ‘competent professional’ defence was written into Australian law after a number of Australian judges persisted in substituting their personal views on what constituted proper professional practice over evidence of professional norms.

Drink Tank Ltd v. Morrows Pty Ltd – High Court (19.06.20)

20.106

Fraud: Lochore v. Social Development

Thomas Lochore was refused discharge without conviction after pleading guilty to benefit fraud whilst a commerce student at Waikato University.

Lochore pleaded guilty to receiving student hardship overpayments of $9850 at a time when he was receiving income from self-employment together with scholarship support from Waikato University.  He also pleaded guilty to fraudulently signing a relationship status verification claiming to be only boarding with a woman when he was in a de facto relationship with her.  This relationship continued for over three years.  The High Court was told he has repaid the hardship overpayment and is personally liable to contribute in the repayment of $70,800 fraudulently received by his former de facto spouse.

Lochore told the High Court a fraud conviction will severely hamper his job prospects in IT.  Many jobs require a security clearance with work on client computer systems. Lochore graduated in 2016 with a degree in IT project management and delivery.

Justice Wylie ruled the convictions should stand. It is open for Lochore to find IT work where access to confidential and financial information is not necessary.  Potential employers should be able to find out about Lochore’s convictions, he said.  Lochore’s sentence of 200 hours community work was confirmed.

Lochore has prior convictions for driving with excess blood alcohol and domestic assault.

Lochore v. Social Development – High Court (17.06.20)

20.104

Liquidator's Fees: re Salus Safety Equipment

Deloitte’s Auckland office had liquidator’s fees for a straightforward company liquidation slashed by the High Court after charging large amounts of time for routine work.  Fees claimed of $91,600 were reduced to $30,000.

Salus Safety Equipment Ltd stopped trading in December 2012, subsequently put into liquidation by Inland Revenue for unpaid taxes. The High Court appointed Deloitte liquidator.  Creditor claims totalled $215,000.  Deloitte wrote to Salus directors alleging they were in breach of Companies Act duties, threatening to sue them personally for the full $215,000 Salus owed creditors. The High Court was told Salus directors admitted liability, paid $50,000 immediately promising to pay the balance at $1000 per week.  With all the money in, Inland Revenue preferential claims paid in full and unsecured creditors paid 39 cents in the dollar, Deloitte held a cash balance of $91,100.  It sought High Court approval for its fees: a sum of $91,600.    

Judge Bell said Deloitte’s bill had all the appearances of padding.  Twenty-four different individuals in Deloitte’s office charged time to the job; a total of 422 hours, with 103 hours booked to ‘cash management.’  This was a routine liquidation, Judge Bell said. The company’s business was not complicated.  Directors’ co-operation in promptly settling out of court meant the liquidation ran smoothly. The job could have been done more efficiently achieving the same result with fees of $30,000, he said.

re Salus Safety Equipment Ltd – High Court (17.06.20)

20.103

Asset Forfeiture: Commissioner of Police v. Irwin

High Court ordered surrender of assets valued at $793,000 as proceeds of crime from patched Hawkes Bay Mongrel Mob member Derrick Irwin currently serving a thirteen year term for meth dealing. Son Thomas was entitled to receive $84,260, a life assurance payout on his mother’s death held in his father’s bank account.   

Police seized cash and a Ford Mustang on Irwin’s Te Haroto property near Hastings in a drug bust and had court orders placed over the property.  In prison, Irwin did not contest a police $793,000 proceeds of crime order.

Irwin supported his son’s claim to $84,260, part of the money held in an ANZ bank account in Irwin’s name.  He said this was held in trust for son Thomas, now aged 23. The High Court was told Irwin’s then wife, Thomas’ mother, died when Thomas was aged ten.  The life policy payment was made to Irwin.  Irwin told the High Court Thomas was promised this money would be his at age 21, provided he did not follow his father into a life of crime. Current balances in the ANZ account never fell below $84,260 over the intervening years.  Justice Cooke ruled an express trust existed in favour of son Thomas over the $84,260 payout.  Since he was now older than 21 and had honoured his father’s wishes not to adopt a criminal lifestyle, Thomas was entitled to that money.

The High Court dismissed a relationship property claim by Irwin’s de facto partner to half Irwin’s assets.  She had benefitted from Irwin’s drug dealing over their nine year relationship.   Claiming not to have any knowledge of his meth dealing, Justice Cooke said she was ‘wilfully blind:’ she had banned Mongrel Mob visitors from the Te Haroto house in the knowledge plans for illegal activity were being hatched in discussions outside the front door; she had seen Irwin both bringing drugs into the house and counting large sums of cash; she had acted as a lookout warning Irwin by text when police were in the vicinity.  Social welfare benefits received by Irwin and herself were insufficient to support their lifestyle, Justice Cooke said.  Evidence was given that both Irwin and his de facto spouse are under investigation for social welfare fraud.

Commissioner of Police v. Irwin – High Court (17.06.20)

20.105

Franchise: Water Babies International v. Williams

Franchise holder Water Babies International’s foray into New Zealand was not a resounding success but it hotly pursued Kelly Williams and cousin Silvana Tizzoni to protect intellectual property attached to its swim franchise.  

Based in the United Kingdom, Water Babies extended its infant and toddler swim system to New Zealand with a franchise run by Kelly Williams out of Wellington.  She later set up a parallel Water Babies programme in Auckland, with the informal consent of Water Babies International.  Apparently unprofitable, the franchise ended in 2019 with Ms Williams left owing Water Babies International substantial franchise fees.  She then started working for a similar business based in Auckland called Swim Baby, set up by her cousin Silvana Tizzoni.

The High Court was told Water Babies investigators found Ms Tizzoni’s Swim Baby programme offered similar features to the Water Babies programme.  There was evidence the Water Babies address list was used to approach potential Swim Baby clients.  Swim Baby customers were told Water Babies was no longer operating.  Ms Tizzoni booked pool space and times matching Water Babies’ previous operations in both Auckland and Wellington.

Justice Doogue granted Water Babies International a temporary injunction, blocking Swim Baby’s new operations in Wellington, but not Auckland.  Ms Williams agreed when signing her Water Babies’ franchise agreement not to start a rival business using franchise material for her own use.  Water Babies International alleges Ms Tizzoni acted in cahoots with Ms Williams, knowingly breaching the franchise agreement.  The extent to which the franchise agreement was breached and the amount of damages payable, if any, requires a full trial.

Looking at wording of Water Babies franchise agreement, Justice Doogue said both Ms Williams and Ms Tizzoni are free to teach in Auckland, provided they do not use Water Babies’ teaching format.

Water Babies International Ltd v. Williams – High Court (10.06.20)

20.102

Liquidation Expenses: re Fabri-Cell International

Gerry Rea & Partners insolvency specialists Simon Dalton and Matt Kemp wasted creditors’ money by pursuing an unmeritorious claim against Avanti Finance and by failing to accept a reasonable settlement offer when handling the liquidation of Fabri-Cell International, the High Court said.  As punishment, legal costs awarded against Fabri-Cell were bumped up by just over thirty per cent and the liquidators told they should ‘fess up to Fabri-Cell creditors for their mistakes.

In September 2019, the two liquidators sued Avanti Finance Ltd over a debt-factoring agreement, claiming $208,650 following Avanti’s collection of Fabri-Cell client invoices but allegedly then failing to account by making payment to another company: JSR Group.

JSR Group was related to Fabri-Cell; it had been named in Fabri-Cell’s debt-factoring arrangements by mistake.  A May 2020 trial determined Fabri-Cell had suffered no loss; JSR had paid Fabri-Cell’s bills.  Avanti, already out of pocket for loans made to Fabri-Cell under the debt factoring agreement, did not have to refund the value of invoices it took over for collection.

Associate judge Bell said the case should never have come to trial.  Avanti had explained the background facts to liquidators.  It even went as far as offering $50,000 in settlement to get the problem off its back.  This offer would have cleared liquidators’ legal costs and left something for creditors.  The offer should have been accepted, Judge Bell said.  Instead liquidators upped the ante, expanding their claim to $1.2 million stating they would not settle for less.  At the High Court trial, Judge Bell described the liquidators’ claim as a ‘smoke and mirrors’ exercise; mis-describing transactions between Avanti and Fabri-Cell and failing to acknowledge Fabri-Cell had suffered no loss from Avanti’s actions.

Evidence was given that the debt factoring arrangement was a commercial disaster for Avanti.  Another creditor held prior registered security over Fabri-Cell’s invoices.

re Fabri-Cell International Ltd – High Court (10.06.20)

20.101

Fraud: Robertson v. R.

Steven Robertson touted his expertise in foreign exchange trading being ‘as good as John Key.’  Over a six year period, Robertson fleeced elderly clients of $1.2 million while supposedly acting as their financial adviser.  His six years eight months sentence for fraud was confirmed by the Court of Appeal.

Based in Kumeu, west Auckland, Robertson started in 2009 offering software packages enabling investors to trade in foreign exchange and commodity markets.  The software was not easy to use, particularly for Robertson’s primarily elderly clientele.  He offered to trade customer money on their behalf.  At his subsequent High Court trial for fraud, evidence was given of Robertson using client money to fund a lavish lifestyle: expensive cars, jewellery, frequent travel by private helicopter and overseas holidays with travel by private jet.  Some clients were further deceived with offers of investment ‘opportunities’ in companies he owned.  Client funds supposedly advanced as an equity investment were instead stolen. Robertson’s theft of $200,000 from one client in his seventies was described as an instance of Robertson recognising the client as being particularly vulnerable and exploiting him shamelessly.

Robertson’s claim to an allowance for remorse was dismissed by the court.  He made no prompt confession when confronted by the authorities and made no effort to make amends to victims.  Robertson undoubtedly now regrets what he did, said the court, but this is not the same as genuine remorse.

When sentencing, the trial judge gave a five per cent allowance (representing a four month reduction) for Robertson’s written promise to co-operate with authorities in recovering money due to clients.  The Court of Appeal dismissed Robertson’s claim this promise was worth more than five per cent.  Robertson’s tangled financial affairs, intermingling assets across various companies and trusts, meant the final position is proving difficult to evaluate, even with Robertson’s promise not to challenge legal action underway since 2016 by receivers and the Financial Markets Authority.  

Robertson v. R - Court of Appeal (5.06.20)

20.100

Perpetual Trust: Pyne Gould Corp v. Bath Street Capital

George Kerr and Andrew Barnes continue shadow boxing over the disputed consequences of Pyne Gould’s 2013 sale of Perpetual Trust to Bath Street Capital.   Each complains the other has not provided court-ordered documents. Kerr’s Pyne Gould Corporation claims to be owed $22 million; Barnes’ Bath Street Capital claims yet-to-be calculated damages alleging Kerr’s Pyne Gould stymied chances of a public listing. 

In happier times, Pyne Gould (then under George Kerr’s control) sold its shareholding in Perpetual Trust to Bath Street in 2013 for $11.9 million. Pyne Gould was promised extra if Bath Street sold on at a profit within a defined ‘carry period.’  Andrew Barnes’ plans twelve months later to fold subsequent acquisition Guardian Trust in with Perpetual Trust triggered an extra payout for Pyne Gould.  The High Court was told a variation was agreed: payment would be delayed; Pyne Gould to get $22 million when Guardian/Perpetual was floated on the stock exchange as Complectus.  Complectus never listed.  Mr Kerr says $22 million is still owed; Bath Street represented that listing would go ahead. Mr Barnes says payment was conditional on listing and there was no promise of a listing.  He alleges public accusations by Pyne Gould that Bath Street had defaulted on a $22 million debt made it impossible for Bath Street to raise capital for a listing.

In the High Court, each accused the other of not disclosing all relevant documents in readiness for trial.  Justice Katz requested they put their heads together and sort out what was required.  They had seven days to reach agreement.  Failing that, Justice Katz said she would set the rules.

Pyne Gould Corporation Ltd v. Bath Street Capital Ltd – High Court (5.06.20)

20.099

Lease: Mt Wellington Race Park Club v. Auckland City

Motorcycle enthusiast Liam Venter was a man on a mission, setting up Mt Wellington Race Park Inc for the sole purpose of blocking Auckland City plans to get a commercial rent for twenty hectares of land surrounded by light industrial properties in the suburb of Mt Wellington, land used by karting enthusiasts for more than half a century. 

Amateur kart racers rolled up their sleeves in the late 1950s and early 1960s developing a race track at Mt Wellington. What started as a dirt track off Tainui Road developed into a sealed track spread over about one hectare, complete with racing facilities and Club rooms.  To them it was waste land put to good community use.  In fact, the land was government owned, held for planned railway development.  Transport plans altered, resulting in the land being purchased by Auckland City in 2009 at a cost of $4.8 million.  It is currently designated for future roading.  KartSport Mt Wellington signed a formal lease in 1976, which with subsequent renewals expired in 2012.  At this point it was paying a concessionary annual rent of some $15,000 and was on notice that it needed to find an alternative site.  Other karting sites had been under discussion with Council.  The High Court was told KartSport allowed other sports to use its track on an informal basis: roller blading, cycling and ‘bucket racers,’ racing scaled down motorcycles.  Mr Venter is a bucket racing aficionado.

From 2012, KartSport was in occupation on a monthly tenancy; it could be pushed out on one month’s notice.  Kartsport signalled to Council it was ready to shift to an alternative site when Auckland City terminated its tenancy with the necessary one month’s notice in late 2018.  Council then set about finalising arrangements for lease of the site to a commercial tenant with a seven year term at an annual rental of $150,000 for the first two years and $290,000 for subsequent years.  Mr Venter protested, on behalf of bucket racers.  The High Court was told he did not respond when invited to discuss lease terms, with payments at commercial rates.  His response was to challenge Council’s right to lease the site commercially; it was a ‘public park,’ he said.  The Local Government Act requires public consultation on any plans to lease park land.  This had not been done; any commercial lease was invalid, he said.  Justice Wylie ruled the Tainui Road site was not a park. It was not open round the clock for general recreation use.  It was a fenced and locked site open only to certain users.  Council was free to find commercial tenants with no need for prior public consultation.

As the losing litigant, Mt Wellington Race Park Club Incorporated is liable to contribute towards legal costs for Auckland Council and the new leaseholder.  Race Park’s most recently filed financial statements show that its only source of revenue is donations and that its debts currently exceed its assets. The Club was incorporated in 2019.  Mr Venter is president.

Mt Wellington Race Park Club Inc v. Auckland Council – High Court (5.06.20)

20.098

Post Judgment Note: Subsequently, the High Court ordered the Club pay legal costs totalling $55,000.

Debt: NZ Bloodstock Finance & Leasing v. Jones

Short of cash and alleging a conspiracy by the bloodstock industry, Auckland barrister Greg Jones refused to pay money owed NZ Bloodstock Finance and Leasing.  The High Court ruled in favour of NZ Bloodstock on its claim for $431,632. 

A turbulent history between Mr Jones and financier NZ Bloodstock played out in the High Court after Mr Jones unilaterally stopped loan repayments in 2018.  With touted expertise in insurance law developed over a forty year legal career, Mr Jones also breeds thoroughbred horses.  In May 2016, he signed a standard-form loan contract with NZ Bloodstock Finance & Leasing Ltd allowing an overdraft of up to $200,000 repayable on demand with interest on current balances at ten per cent.  NZ Bloodstock took security over horses he purchased and their progeny.  Mr Jones was committed to selling his bloodstock through NZ Bloodstock; sale receipts used to pay down current advances.

Evidence was given that in excess of $400,000 had been drawn down by the end of 2016, a total later reduced by bloodstock sales. NZ Bloodstock gave further financial assistance with a horse sold on lease-to-buy.  By the end of 2017, just under $340,000 was owed.  NZ Bloodstock was getting nervous.  It invited Mr Jones to outline his plans ‘going forward.’  Saying he was ‘stitched for cash,’ Mr Jones requested a credit extension; NZ Bloodstock offered him twelve months, warning there would be no further extensions.  Subsequent correspondence became less friendly: Mr Jones stating he needed more time and further funding to establish a profitable breeding programme; NZ Bloodstock sending formal legal letters demanding immediate repayment.  When NZ Bloodstock sued, Mr Jones alleged breaches of the Credit Contracts Act together with allegations of a widespread conspiracy within the thoroughbred industry to harm his breeding programme (involving allegations of sales to him of horses at vastly inflated prices and refusals to enter his bloodstock on premium sale cards). Mr Jones coupled this with allegations against his former wife, the legal firm in which he was previously a partner and an insurance company.  Justice Jagose noted most of these allegations were of no relevance to NZ Bloodstock’s claim for repayment of money lent.  There was no evidence to support his claimed defences under the Credit Contracts Act, Justice Jagose ruled.  Judgment was entered in favour of NZ Bloodstock.

New Zealand Bloodstock Finance & Leasing Ltd v. Jones – High Court (5.06.20)

20.097

Fraud: APIC Trustees v. Flanders Field Investment

Living at various times in Belgium and England, Erwin Verplaetse inherited some seven million euro when his mother died.  Reginald van Hulle, business adviser to Erwin’s late mother, then proceeded to loot this money for his own personal benefit using a New Zealand resident trust company to gain control of Erwin’s inheritance, the High Court was told.  

Distant New Zealand became the legal battleground over assets held in Belgium, the United Kingdom and Switzerland.  Mr Verplaetse told the High Court a New Zealand trust was established in 2011 to hold his inheritance on the advice of Mr van Hulle. New Zealand registered company Flanders Field Investment Ltd become the corporate trustee, with Mr van Hulle as sole director and Mr Verplaeste as sole shareholder.  Lawyer Joanne Thumiger was also added as a director to satisfy New Zealand money-laundering rules which specify all companies must have at least one New Zealand resident director.  It was to come out in evidence that Ms Thumiger was in fact an Australian resident who now lives in Singapore.

Mr Verplaeste was confident he had control over his investment; Mr van Hulle would be responsible for day to day paperwork but he could remove Mr van Hulle as director at any time.  This confidence was misplaced.  The High Court was told Mr Verplaeste became aware in 2016 of substantial sums of money being moved into companies controlled by Mr van Hulle. When he protested, Mr van Hulle produced documents supposedly signed by Mr Verplaeste stating that Mr van Hulle had full ownership of Flanders Fields Investments and consequently ownership of all its assets.  Mr van Halle blocked access to the company’s Swiss bank account by telling the bank Mr Versplaeste had mental health issues.  Mr Versplaeste provided medical evidence that the only chronic medical problem he faced was high blood pressure; he had no mental health issues.   In the New Zealand High Court, Justice Grice ruled documents purporting to transfer ownership of trust assets into Mr van Hulle’s control were a forgery.  Mr Versplaeste remained the beneficial owner of all trust assets and his action in appointing Jersey-based trustee company APIC Trustees Ltd as replacement trustee was valid, she said.

Complaints about Mr van Hulle have been laid with authorities in both Belgium and Switzerland, the High Court was told.

APIC Trustees Ltd v. Flanders Fields Investment Ltd – High Court (3.06.20)

20.096

Family Trust: re HJ Bourke Family Trust

Distribution of Waikato farm assets valued at some $4.45 million held by the HJ Bourke Family Trust was delayed for over a year with legal argument over who was entitled to benefit. 

The Trust was set up in 1979 by farmer Henry Bourke at a time when estate duties weighed heavy on the estates of deceased farmers. Unusually, the Trust had a fixed forty year time limit with an expectation the Trust would come to an end and the assets returned to his legal ownership when he was ready to retire from farming.  He did not survive the Trust.  When the Trust expired in May 2019 subsequent to his death, lawyers teased apart wording in the Trust deed, bickering over who were now the beneficiaries.    

Named in the Trust deed were Henry’s children and grandchildren.  Legal argument was whether all ten children and grandchildren should share (per capita) or just his three children take in equal shares (per stirpes).  Per stirpes is legal shorthand for the concept that assets should be divided by lineage: the next generation inherit sharing as ‘first takers;’ their children do not compete by taking concurrently.

Justice Duffy ruled Trust deed division of assets ‘by stocks’ amounted to a per stirpes distribution and created a presumption that Henry’s three children alone were to share equally in distribution of Trust assets.  While there was mention of grandchildren in the Trust deed, explicit language was needed to instead have assets distributed per capita.

Re HJ Bourke Family Trust – High Court (2.06.20)

20.095

Supply Chain: Adama New Zealand v. Raam Chem

Nelson agrichemical supplier Adama paid thirteen million dollars compensation following crop damage to apples caused by contaminated fungicide.

A 2017 importation of fungicide Mancozeb was found to be contaminated with azoxytrobin.  Adama New Zealand Ltd is suing Singapore-based supplier Raam Chem Pte Ltd.  Raam denies liability.  Claiming only to be a ‘fixer,’ it says the problem lies further down the supply chain. The High Court was told of a comprehensive list of separate India-based companies all involved: supplying raw stock, blending chemicals, packaging and labelling.  Six different companies in India had input into the final product.

Seeking compensation, Adama did not chase companies down a long supply chain into the notoriously problematic India legal system. It sued Raam in the New Zealand courts, alleging breach of contract.  This case has yet to be heard.

Raam in turn is taking legal action in New Zealand against supply chain companies in India it alleges are to blame.  Notices of its claim were served on companies in India. The High Court was told all companies bar one simply ignored Raam’s claim.  Evidence was given that Raam may have trouble enforcing in the India courts a New Zealand court judgment where the defendant did not appear.  One company in the supply chain challenged Raam’s right to sue in New Zealand.  Chemical supplier UPL Ltd said New Zealand courts had no jurisdiction.  Associate Judge Johnston ordered UPL to file a statement of defence; the crop damage occurred in New Zealand and UPL’s alleged role was tied to litigation between Adama and Raam. 

Adama New Zealand Ltd v. Raam Chem Pte Ltd – High Court (29.05.20)

20.094

Family Trust: Ruocco v. Ruocco

Putting fishing ITQ into a family trust was easy, getting out caused heartbreak and heavy legal expenses as Wellington’s Ruocco family found.

Sons of Italian-born Luigi Ruocco followed their father into the fishing industry.  Issued with Individual Transferable Quota when deep sea fishing stocks were privatised, the families’ quota was put into a family trust.  As at 2019, the Trust held ITQ valued at $3.4 million plus $500,000 cash.  The High Court was told one of Luigi’s sons, also called Luigi but universally known as Bidgi, wanted out.  A family scrap followed.  Legal expenses mounted.  Eventually, all family members came to an agreement; Bidgi could take a one fifth share of the Trust’s ITQ plus a similar share of remaining assets, with Bidgi and his family then excluded as future Trust beneficiaries.  Court approval was needed.  Named as Trust beneficiaries are children, grandchildren and great-grandchildren of Luigi.  For those aged under 18, their parents consented.  Children yet born cannot give consent; the High Court stands in their stead, scrutinising changes to Trust arrangements on their behalf.  The High Court does not act as a ‘rubber stamp,’ nodding through anything put in front of it.

Justice Grice approved the deal.  Splitting off a one fifth share was equitable.  It removed stress and disruption within the wider Ruocco family and brought ongoing legal costs to an end.

Ruocco v. Ruocco – High Court (28.05.20)

20.092

Land Subdivision: Northwest Developments v. Zhang

Having agreed collaboration with a neighbouring developer to complete infrastructure works for a Special Housing Area development in west Auckland, Cheng Zhang, Jin Jung and Pill So could not avoid payment simply by selling their interest in the project.  The three were ordered to pay over $4.1 million damages to neighbour Northwest Developments, controlled by David Sun. 

Subdivision of the 65 hectare Huapai Triangle in west Auckland has been underway since 2013.  Mr Zhang together with Mr Jung and wife Ms So were owners of a seven hectare block in one corner of the Triangle.  In June 2015, neighbours joined forces in what was described as the ‘Five Owners Agreement’ spelling out shared liability for costs of roading, water reticulation and sewage to be installed for the benefit of both groups of investors.  This after the collapse of an earlier agreement which stalled with arguments over the placement of roads and services across the subdivision.

The High Court was told Northwest Developments Ltd, controlled by David Sun, bought out one group of the ‘Five Owners’ investors; Zhang, Jung and So later sold their interest in Huapai Triangle to Sanli Group. Sanli denied liability for any share of infrastructure costs; it had never signed the Five Owners Agreement.

Zhang, Jung and So were ordered to pay.  They sold their land to Sanli Group in an unconditional sale, remaining liable to honour the Five Owners Agreement they had signed previously.  Damages were calculated in excess of $4.1 million: their share of infrastructure costs ($1.17 million); interest for late payment ($1.65 million); and damages for extra financing costs incurred by Northwest ($1.34 million).

Zhang, Jung and So said a twenty per cent interest rate for late payment written into the Five Owners Agreement was an unenforceable penalty.  Twenty per cent was not disproportionate, Justice Gault ruled.  It reflected the level of risk in property development plus the need for projects to be progressed and expenditure recovered as quickly as possible.  Liability for penalty interest was reciprocal; Zhang, Jung and So could equally have claimed interest at that rate if they had completed the agreed infrastructure work at their cost and similarly had to wait for reimbursement.

Northwest Developments Ltd v. Zhang – High Court (28.05.20)

20.093

Fraud: Malapaka v. Police

Potential deportation was not grounds for India national Krishna Malapaka being discharged without conviction following thefts from credit union customers. 

Malakapa was convicted of multiple thefts from bank accounts belonging to clients of an un-named credit union.  The High Court was told Malakapa obtained bank PIN numbers from customers when they applied for loans, using ATMs to steal from customer accounts.  Credit union customers were predominately Maori and Pasifika.  Over a five week period, some $5200 was stolen.  The credit union promptly reimbursed clients after uncovering the frauds; Malakapa subsequently reimbursed the credit union.

At trial, Malakapa said deportation was likely if convicted; he held a resident visa but was not a permanent resident.  He wanted to stay in New Zealand.  The trial judge was sympathetic, but commented: you have breached the trust that has been placed in you, not only by your employer but also by the people of New Zealand; the normal and natural consequences of conviction should follow.  

On appeal, Justice Lang ruled potential deportation was not out of all proportion to the offending.  The conviction stood.

Malapaka v. Police – High Court (26.05.20)

20.090

Insolvency: re Brown

Marketing meets law: related party debt was used as a teaser to get creditors onside in an Insolvency Act part-payment scheme offering creditors a derisory amount in full settlement of debts. 

Former restauranteur Keppel John Brown’s scheme of arrangement settling his debts with payment at six cents in the dollar received High Court approval despite fifty per cent of debt voted in favour being related party debt which pulled out after the necessary majority of creditors voted in favour.   

The High Court was told Mr Brown’s multiple failed restaurant businesses owed $1.26 million, including $610,000 owed close relatives.  His proposal offered creditors a lump sum payment of $40,000; payment of three cents in the dollar.  The legal twist was that while family creditors owed $610,000 would vote, they agreed to stand back if the proposal was approved, raising payment for remaining creditors to about six cents in the dollar.  Their voting power gave momentum to the deal; once it was on its way, they pulled out.

Insolvency Act schemes of arrangement require High Court approval following votes in favour by a majority of affected creditors holding 75 per cent in value of compromised debt.  The court routinely turns down proposals where voting is gerrymandered by having relatives voting in favour.

At Mr Brown’s creditors’ meeting held using Zoom, a majority of creditors owed 80 per cent by value voted in favour the proposal. In the High Court, Associate Judge Smith discounted related party debt in determining creditor majorities. Notionally removing $610,000 related party debt from the creditors’ meeting saw remaining in favour a majority of creditors by number and a narrow majority of 75.8 per cent by value.  The scheme of arrangement was approved.

Evidence was given that Mr Brown currently manages a commercial cleaning business on a $140,000 salary.

Re Brown – High Court (26.05.20)

20.091

Scene One: Gibson v. Kupe Trustee Company Ltd

Scene One apartment owners on leasehold land in central Auckland failed in their bid to force $35 million remediation costs on to management company Kupe Trustees.

Scene One consists of over one hundred residential apartments together with eight commercial premises.  Built on Ngati Whatua Trust Board land, Scene One has weather tightness issues.  A two-tiered leasing structure exists: Kupe Trustee Company Ltd holds the land on a 150 year lease from Ngati Whatua; Kupe in turn leases to individual apartment owners with each owner leasing from Kupe on similar terms.  Apartment owners have no legal control over Kupe; they are subject to their Kupe lease.  Owners pored over these leases when costs of remediation surfaced.  A November 2019 arbitration determined owners had to foot the bill.  A High Court challenge followed.

Remediation costs were operating expenses, Justice Jagose ruled.  Any operating expenses ‘properly incurred’ could be recovered from apartment holders, as ‘all and any costs’ incurred by Kupe.

Gibson v. Kupe Trustee Company Ltd – High Court (25.05.20)

20.089

Land Subdivision: Xie v. 126 Waimumu Ltd

Seeking to enforce a claimed ten per cent interest in a west Auckland property development, it was not clear whether Chunhong Xie was part-owner of the land or shareholder in a company owning the land.

Confusion followed a failure to have any clear written agreement, Associate Judge Bell said.  A 2.5 hectare property on Waimumu Road, Massey, was purchased in November 2016 for $1.6 million.  Some $666,000 was lent on mortgage by FM Custodians; the balance funded by an ever-changing rota of investors.  The High Court was told status of identified investors changed over time as some contributed money by instalments and several investors bought out the interests of existing investors.  Ms Xie contributed $79,000.  In early 2017, resource consent was granted for subdivision.  Title was held in the name of a corporate: 126 Waimumu Ltd.  By 2019, a company called Luffy Home Ltd had bought out all investors, bar Ms Xie.  She was listed on the company register as a ten per cent shareholder of 126 Waimumu Ltd.       

The High Court was told of a December 2019 meeting with Luffy Home where Ms Xie took exception to its development plans and to its proposed management fees.  No agreement could be reached on a price to buy her out.  She lodged a caveat over the land.  This had the effect of preventing 126 Waimumu from refinancing the project, or from selling.  Judge Bell ruled the caveat should stand.  Ms Xie had an arguable case that she was a part-owner of the land, owning ten per cent with 126 Waimumu owning the balance.  She never signed any documentation agreeing to be a shareholder of 126 Waimumu Ltd.  Her name on a list of supposed shareholders in a shareholders’ agreement was unsigned. A full court hearing is needed to determine whether she is in fact part-owner of the land or a shareholder in 126 Waimumu.

While the caveat remains, Judge Bell ordered Ms Xie to sign off on any reasonable refinancing or sale negotiated by Luffy Home. Ten per cent of any sale price is to be held in trust pending a decision on her status as part-owner.

Xie v. 126 Waimumu Ltd – High Court (25.05.20)

20.088

Corruption: R. v. Chand

Sunil Chand was sentenced to six months night time curfew for paying a backhander to an Auckland City employee corruptly pushing office supply contracts in his direction.

City employee Sundeep Kilip Rasila was earlier sentenced to home detention for his part in the fraud.  As procurement officer for Auckland City, Rasila arranged for friend Chand to quote for supply of 22,000 USB devices.  The contract was put to tender.  Rasila supressed bids below Chand’s offered price.  The fraud resulted in Auckland City paying $27,000 more than the better price.  Chand’s business On Time Print stood to make a $57,000 profit.  The High Court was told Chand agreed to pay Rasila a kickback calculated at just under ten per cent of the contract price; $15,000, payable in two instalments.

Justice Lang sentenced Chand to six months community detention, requiring him to remain at home overnight: from 5 pm to 5 am.  At time of sentencing, Chand was working as an Uber driver.

R. v. Chand – High Court (21.05.20)

20.087

Relationship Property: Brown v. Akulinin

Finding that the facts supposedly supporting a one-sided relationship property agreement between a couple married in Russia appeared contrary to the true position, the High Court ordered their case re-opened.  

In 1999, Natalia Brown and Oleg Akulinin married in Vladivostock.  Relocating to New Zealand, they separated in 2014.  Their major asset was a family home in the Auckland suburb Avondale.  Subsequently, a relationship property agreement was agreed with Oleg receiving 0.05 per cent as his share: a total of $2120.  The agreement stated Natalia’s family had provided all the money for purchase of their family home.  Later seeking to overturn the one-sided agreement, Oleg told the High Court he provided one-third of the cash for their home purchase; the balance came from mortgage finance with both contributing to mortgage repayments.  Given confusion over the true financial position, Justice Jagose sent the case back to the Family Court for a full rehearing.

The High Court was told Oleg claimed Natalia had broken an understanding that the Avondale home would be kept by her as a family home for their children: a son and a further child from her earlier relationship. After her relationship with Oleg ended, she sold; lending the money to her new partner for his purchase of a Kerikeri property.  The two later married.  Ownership of the Kerikeri property was registered in her second husband’s name alone.

Brown v. Akulinin – High Court (20.05.20)

20.086

Quantum Meruit: Tervoert v. Scobie

After six years unpaid part-time work on the Scobie family farm in Taranaki, daughter Jan-Marie was awarded $163,500 but could not claim this work allowed her a one-third interest in the farm itself.

Jan-Marie Tervoert was at odds with parents Noel and Marie Scobie over her entitlement to a share of the family farm at Huinga, near Stratford.  Her parents moved from South Canterbury in 2009.  Jan-Marie followed them north the following year, getting a full-time job with Tegel Foods at Bell Block, near New Plymouth.  Marie Scobie told the High Court she was concerned then about her daughter’s financial and mental health following the break-down of her first marriage. Jan-Marie was offered rent-free accommodation in the farm cottage in return for help around the farm.  Over the next six years she worked irregular hours on the farm, fitting work around her Tegel job 62 kilometres away.  In 2017, Jan-Marie’s sister and her husband came to live on the farm, at Mr and Mrs Scobie’s request.  They were paid a weekly wage, working as fulltime farmhands. Evidence was given that this change in circumstances led to major rifts within the family: Jan-Marie said her previous work entitled her to a one-third interest in the farm; her parents belittled the amount of work done, saying she had benefitted from rent-free accommodation in return for this work.

Justice Cull ruled Jan-Marie had made considerable contributions benefitting the farm: first, labouring work around the farm, arranging contractors to come on site and buying in items needed for the farm; and secondly, financial contributions helping pay farm mortgage interest when liquidity was tight.  Most of the money she advanced was recorded in a deed of debt, with interest due on the loan.  There was no agreement Jan-Marie’s work entitled her to a beneficial share in the farm, Justice Cull ruled.  And her contributions did not create a constructive trust, Her Honour said. 

Jan-Marie was awarded compensation assessed on quantum meruit; legal jargon as payment for the work done.  The value of her farm labour was assessed at $163,506, which included reimbursement of $13,500 for direct farm expenses she incurred.

There was no deduction for the value of her farm accommodation.  Her occupation of a farm cottage was merely part of a general family arrangement, Justice Cull said.  Jan-Marie did not have exclusive occupation; other family members joined her at the property when visiting.  Her sister and husband took over the cottage from 2017 when they came to work fulltime on the farm.

Tervoert v. Scobie – High Court (19.05.20)

20.085

Justice: Faloon v. Planning Tribunal

Access to justice is a human right, but there are limits said the Court of Appeal when facing yet another court hearing in a line of sixty court sittings triggered by a dispute over land owned by the Faloon family near Palmerston North airport.

Clarence Faloon took exception to a stream diversion created in 1977 as part of runway construction at Palmerston North airport. A family company owned land adjoining the airport.  In the course of nineteen separate court proceedings variously involving Palmerston North airport, the Planning Tribunal, Lands, Inland Revenue and the bankruptcy courts Mr Faloon has been bankrupted and told enough is enough. The Court of Appeal dismissed his most recent court application, protesting a High Court order suspending for five years any further litigation.  His continuing claims were an abuse of process and totally without merit, the court ruled.  Finality and Mr Faloon are strangers to each other, the court said.

Civil justice operates under seven basic principles, said the Court of Appeal:

·      Standing: Litigants must have a legitimate interest in the subject matter of dispute.

·      Joinder: Everyone likely to be affected should take part.

·      All-embracing: Everything in dispute must be brought together as one claim; claims cannot be litigated by instalment.

·      Costs: Claimants who fail must contribute to the other side’s costs.

·      Execution: A court judgment determines all issues before the court and must be implemented, unless appealed.

·      Appeal: Generally, there is only one right of appeal; a further appeal is allowed, with court permission.

·      Finality: Once all appeal rights are exhausted, a court ruling cannot be subverted by any collateral challenge litigating the same subject.

Faloon v. Planning Tribunal - Court of Appeal (19.05.20)

20.084