Mortgage: Perpetual Trust v. Bolton

 

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

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

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

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

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

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

Perpetual Trust v. Bolton – High Court (11.05.23)

23.066

Wireless Spectrum: Cayman Spectrum v. Spark

 

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

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

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

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

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

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

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

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

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

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

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

23.064

Real Estate: James v. Luxury Real Estate

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

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

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

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

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

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

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

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

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

23.063

Contract: Progressive Livestock Ltd v. Donaldson

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

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

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

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

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

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

23.062

One Pure: Wang v. Kang

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

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

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

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

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

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

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

Wang v. Kang – High Court (9.05.23)

23.061

Bankruptcy: Scott v. BNZ

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

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

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

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

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

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

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

23.060

Whales: Hart v. Director-General Conservation

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

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

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

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

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

23.059

Bankruptcy: Westpac v. Chen

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

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

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

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

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

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

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

Westpac v. Chen – High Court (1.05.23)

23.058

Leaky Home: MacFarlane v. Sewell

Mark Sewell was ordered to pay $524,500 damages for negligence after telling a Lower Hutt purchaser that her intended purchase was ‘definitely not a leaky home’ when it was.

Described as a trade-qualified experienced inspector, Mr Sewell was hired by vendor Alex Sim to provide a building report prior to sale of a two-storey townhouse at McBain Grove, Lower Hutt.  His contract with Mr Sim contained a detailed disclaimer stating it would be a visual inspection only with no invasive testing and that the report could not ‘100% guarantee no moisture ingress issues.’  His subsequent report was neutral; describing the property’s overall condition as reasonable, with only minor maintenance issues.  Purchaser Rosemary MacFarlane was to later find there was extensive damage and decay to framing caused by water ingress with the possibility thirty per cent of timber framing would need replacement.      

The High Court was told a real estate agent gave Ms MacFarlane a copy of the building report prior to her purchase, but not a copy of the initial contract with Mr Sim which severely limited the extent of the then promised inspection.  After receiving the report, Ms MacFarlane contacted Mr Sewell direct.  He told her McBain Grove was ‘structurally sound’ and ‘definitely not a leaky home.’  Mr Sewell was to later say he had no recollection of this conversation.

Justice McQueen ruled both Mr Sewell and his company Informed House Inspections Ltd liable for negligent misstatement and also liable under the Fair Trading Act.

The building report stated it was prepared for the sole benefit of the vendor.  The Fair Trading Act is a consumer protection statute and those in trade cannot contract out of the Act, Justice McQueen ruled.  Building inspectors preparing building reports solely for vendors can expect these will be shown to prospective purchasers, she said.

Mr Sewell and his company were held jointly liable to pay $524,500: remediation costs ($414,000); cost of alternative accommodation during repairs ($18,700); general damages for stress and anxiety ($30,000) and legal fees ($61,700).

 

Mr Sewell was present in court but not permitted to defend the claim.  Justice McQueen ruled that his late compliance in lodging a defence and failure to pay a court filing fee on time plus his failure to comply with court orders requiring production of named documents meant the case would proceed without him.  Mr Sewell has to bear the cost of challenging the order to pay $524,500 damages should he claim there was a miscarriage of justice, Justice McQueen said.

MacFarlane v. Sewell – High Court (26.04.23)

23.057

GST: Aggarwal v. DSD Homes

Dalvir Dhaliwal was ordered to repay fifteen per cent of the purchase price on an Auckland house sale after promising his vendor company was not GST registered and hence ineligible to recover GST, when in fact it was.

The High Court was told his company DSD Homes Ltd sold a property in McKean Road Manurewa to Rajesh Aggarwal and Sakshi Khanna in September 2021.  An extra clause was written into the standard-form sale and purchase agreement: DSD stated it was not GST registered; the price was to be reduced by fifteen per sent if it was registered; and both DSD and its director Mr Dahliwal were liable to repay the fifteen per cent if DSD was in fact registered.

Initially Mr Aggarwal and Ms Khanna intended to occupy McKean Road as a family home.  Plans changed.  Considering the house was not ideal for their family, they decided instead to redevelop the property.  They registered for GST one month before completing the purchase.  Only when applying for a GST credit did they learn DSD was in fact GST registered.  The legal effect of both vendor and purchaser being GST registered was that no GST credit was allowed; the transaction was zero-rated.

They sued both DSD Homes and director Mr Dhaliwal.  Justice Tahana ruled terms of the contract were unambiguous.  Mr Dhaliwal and his company were ordered to repay $166,956.  In addition, they were liable to pay interest at 14 per cent; the default interest rate in the sale agreement.

Neither Mr Dhaliwal nor his company appeared in court to defend the claim.

Aggarwal v. DSD Homes Ltd – High Court (24.04.23)

23.055

Farm Sale: PGG Wrightson v. Routhan

Ordered to pay $1.6 million for negligence on sale of a West Coast dairy unit, PGG Wrightson Real Estate had damages reduced to $300,000 on appeal.  While PGG did negligently provide purchaser Phil Routhan with incorrect milk production figures, it was not liable for all losses incurred following the purchase, ruled the Court of Appeal.

In 2010, Mr Routhan purchased a 105 hectare dairy unit near Hokitika.  He had a high national profile in plumbing and gasfitting.  Farming had been a long-held dream.

The $2.8 million purchase was funded almost entirely with debt finance.  Ten years later, the farm was sold at Rabobank’s insistence for $1.5 million in a forced sale.  Farm-gate milk prices had halved in the five years following his purchase, never returning to 2010 levels by time of the forced sale.

Mr Routhan sued PGG Wrightson, claiming he never would have gone ahead with his 2010 purchase if made aware of the dairy unit’s actual milk production levels.  A PGC Wrightson agent had negligently overstated production levels at time of the sale by about ten per cent.

The Court of Appeal said PGG Wrightson acting as agent on the sale did not underwrite all financial consequences of Mr Routhan’s purchase.  PGG did not advise him on whether to purchase the dairy unit, it merely provided him with information to assess a price at which he might offer to buy.  PGG Wrightson was liable for the direct consequences of providing incorrect production figures.  Overstating milk production by ten per cent resulted in Mr Routhan overpaying $300,000 for the farm, the Court ruled.

PGG Wrightson was not liable for post-sale events which resulted in losses suffered by Mr Routhan such as: market movements (the drop in farm-gate milk prices); and Mr Routhan’s spending on capital improvements, part of his strategy to boost production (building a concrete feed pad, upgrading races, re-fencing and replacing the water supply system).

PGG Wrightson Real Estate Ltd v. Routhan – Court of Appeal (24.04.23)

23.056

Court Delays: PBL Solutions v. AFT Pharmaceuticals

PBL Solutions alleges NZX-listed AFT Pharmaceuticals stole a drug they were jointly developing.  Delays in issuing a court ruling means arguments over the drug’s potential profitability are now affected by a rival’s likely entry into the EU market, confirmed after last year’s High Court hearing.

Called ‘pascomer,’ the drug in dispute treats facial deformities caused by a rare genetic defect.  Pascomer is claimed to be part of an orphan drug programme under development by AFT Orphan Pharmaceutical Ltd, a company owned by AFT and PBL.  Pascomer is yet to receive regulatory approval for sales in the profitable US and EU markets.  PBL is suing to recover its claimed entitlement to a share of the income stream likely to flow from Pascomer sales.

PBL alleges that AFT stole pascomer from their joint venture and that AFT is now developing and commercialising pascomer for its own benefit.  AFT denies any theft and says in any event the present value of pascomer is nil.  PBL values pascomer at between US$53 million and US$67 million; a variance explained by the time it takes to get regulatory approvals and the risk of a rival being first to market.

In 2022, battle was joined in the High Court with hearings concluded early December.  Much of the evidence turned on the statistical possibility of pascomer ever getting regulatory approval or of ever being first.

In February 2023, a rival product cleared the first hurdle for EU regulatory approval.  AFT was immediately back in court.  No judgment had yet been issued subsequent to the December court hearing.  AFT wanted further evidence admitted, requiring the trial judge to take into account that a rival was very likely to beat pascomer into the EU market.  If accepted, this evidence would put a huge dent into any market valuation of pascomer.

Justice Fitzgerald refused to hear further evidence.  The prospect of a rival beating pascomer to market was canvassed at trial, she said.  Experts took this contingency into account when giving their valuations as to the present value of pascomer at date of the trial.

Justice Fitzgerald has yet to hand down her rulings on PBL’s 2022 claim.  Should Justice Fitzgerald rule that AFT did steal pascomer, she has to ignore the fact that at least one contingency affecting future value which was canvassed at trial has come to fruition.

PBL Solutions Ltd v. AFT Pharmaceuticals Ltd – High Court (21.04.23)

23.054

Asset Forfeiture: Commissioner of Police v. Liu

It read as a long rap sheet: smuggling, illegal gambling and loan sharking; none of which led to a criminal prosecution but instead to a court-approved proceeds of crime settlement with payment of $141,480.

A June 2021 combined police and customs search of Yanxian Liu’s home in the Auckland suburb Favona unearthed large sums of cash together with smuggled Chinese cigarettes and tobacco.  A search of his phone proved enlightening; images of individuals gambling with large sums of cash together with a ‘tick list’ which appeared to be a list of debtors owing gambling debts to Mr Lui.  The cash was from gambling on mah-jong games at a Chinese restaurant in Newmarket, Mr Lui admitted.  He also admitted to loan sharking; lending to gamblers.

Customs told the High Court there was no evidence that Mr Lui had paid excise duty or GST on the imported tobacco and cigarettes.  Internal Affairs said no gambling licence had ever been issued for mah-jong gambling in the Newmarket area.  There was no evidence of his registration as a financial services provider permitted to make loans.  No income tax had been paid on these various business activities.

The High Court approved an agreement between police and Mr Liu that the $141,480 seized from his home be forfeit under the Criminal Proceeds (Recovery) Act as proceeds of crime.

The court was told no criminal charges have been laid.

Commissioner of Police v. Liu – High Court (21.04.23)

23.053

Partnership: Moses v. Stark

With their Waikato farming partnership dissolved automatically on George Stark’s death in 2020, family complain son Keith is running down the Ohinewai farm treating farm assets as his own.  Receivers were appointed to take control of farm management and to recover partnership loans made to Keith, his former wife Linda and their company Keilin Farms Ltd.

Juliet Moses was appointed executor of George Stark’s estate.  She is also a partner in the GJ & EM Stark Partnership in her own right.  This partnership farms on Tahuna Road at Ohinewai.  The other partner is George’s widow, Eileen.  Son Keith controls Eileen’s interest in this partnership through a power of attorney triggered after Eileen was judged unable to manage her own affairs.  The High Court was told Keith manages the partnership farm in conjunction with a neighbouring farm he owns through a family company.

Juliet told the High Court that discussions with Keith over farming operations were deadlocked.  She alleges Keith is selling partnership livestock without correctly accounting for the proceeds and further alleges he is taking excessive fees for partnership management.  There was evidence from a farming consultant that the farm is run down and poorly maintained.   As a further complication, there is an application before the Family Court to have Keith removed as Eileen’s property manager.

The Partnership Law Act states partnerships come to an end automatically on the death of any one partner, unless the partnership agreement states otherwise.  The court was told the Stark partnership agreement was signed in 1965.  It was initially for a six year period, terminable on one month’s notice after this six year period finished.   

The GJ & EM Stark Partnership ended on the death of George Stark in July 2020.  In the normal course of events, it is for surviving partners to wind up a partnership.  No agreement could be reached because of the deadlock between Juliet as one partner and Keith acting as attorney for Eileen as the other partner.

Associate judge Brittain ruled appointment of a receiver was necessary because of Keith’s conflict of interest.

Moses v. Stark – High Court (20.04.23)

23.052

Legal Costs: New World v. Wang

A rap over the knuckles for New World, ordered to pay the full legal costs of Shaojun Wang who needed court assistance to extract her Auckland property from a forced sale triggered by the supermarket’s claim that Wang was simply hiding assets owned by a former New World employee who had stolen over $300,000.

Ms Wang was dragged unwillingly into New World’s orbit after its employee Qian Zhang was ordered to repay money stolen from the supermarket chain.  Looking to recover its losses, New World registered a charging order over an investment property in Auckland suburb Hillcrest recorded in Zhang’s name.  New World refused to accept that Ms Wang was the beneficial owner, with Zhang on the title as trustee.  When New World took steps to sell, Ms Wang was forced into court.

The High Court was told Ms Wang and Zhang both provided cash contributions which together with an ASB mortgage funded their 2016 purchase of the property.  One year later, the two agreed Ms Wang would buy out her partner.  She paid $70,000 to buy out Zhang’s share of the equity. There was no dispute that this was a fair market price.  Both signed a deed acknowledging that during such time as Zhang’s name remained on the title, Ms Wang was the sole owner.  This paperwork was drawn up at a time when New World was about to take legal action against Zhang.  There was no evidence that Ms Wang was aware of Zhang’s New World thefts.  New World refused to accept that Zhang no longer had any financial interest in the Hillcrest property.  New World’s unsuccessful argument that Zhang’s shared liability on the ASB mortgage amounted to an interest in the Hillcrest property was taken all the way to the Court of Appeal.

Justice Peters criticised New World for failing to properly consider all the evidence provided by Ms Wang’s solicitors and for pursuing a forced sale in the face of clear evidence as to Ms Wang’s sole ownership. Ms Wang was entitled to recover her legal costs in full, Justice Peters ruled.  The court was told she had spent over $55,000 in legal costs blocking New World’s forced sale.

New World (New Zealand) Ltd v. Wang – High Court (20.04.23)

23.051 

Guarantee: Sika (NZ) v. Lawry

Crossing out references to a guarantee on his company’s credit application with supplier Sika (NZ) Ltd meant company director Gavin Lawry was not personally liable to pay $244,100 owed by his company.

The High Court was told Mr Lawry’s Canterbury company Pegasus Engineering Ltd used Sika (NZ)’s product for fire retardant coatings on steel installed at a Lincoln University site.  About $244,100 of the bill was left unpaid.  There was an unresolved dispute over on-site application of the product.  Sika sued.

In the High Court, Associate judge Paulsen ruled terms of the supply contract required Pegasus Engineering pay the agreed contract price on time and in full.  Any disputed set-off claim had to be sorted out after full payment.

Sika also argued Mr Lawry was personally liable as guarantor. Evidence was given of Sika’s standard term supply contract: a two page document combining both a credit application and a guarantee.  Mr Lawry had signed the credit application on behalf of his company Pegasus Engineering next to the notation director.  He deleted the word ‘guarantor’ when he signed and he also crossed out in the body of the credit application some, but not all, references to the word guarantee. Mr Lawry told the court he does not give personal guarantees on his company’s credit applications and that is why he amended the document.

Judge Paulsen dismissed summary judgment against Mr Lawry on the guarantee.  It was clear no guarantee was intended, he said.  A full court hearing is needed if Sika wants to pursue a detailed claim arguing the document’s amended wording meant a valid guarantee still existed.

Sika (NZ) Ltd v. Lawry – High Court (19.04.23)

23.050

Asset Forfeiture: Commissioner of Police v. Marshall

As the proceeds of crime regime beds in, it is becoming a simple cost/benefit analysis as police and dealers negotiate over the dollar amount to be forfeit as revenue from drug dealing; police are never exactly sure how much cash dealers took in and the cost of any detailed investigation to get a better picture just chews up police resources.  Payment of $200,000 satisfied all parties following one week’s police surveillance of dealing from a Waiuku property.

Evlyn Dawn Marshall, David Simon Marshall and Zach Marshall faced proceeds of crime forfeiture orders after police surveillance of their Waiuku property.  Police told the High Court that on average nearly 120 people each day visited the property over the four full days and two half days of surveillance.  It was conservatively assumed twenty dollars was paid for a drug purchase on each visit.  Police said that if this level of dealing had started three years previously, revenue over three years would total $1.67 million.

Police found $26,700 cash at the property.  The Marshalls’ bank accounts contained unexplained banking of some $47,000.  Restraining orders were placed over the Waiuku house and all their bank accounts.

Forfeiture of assets requires High Court approval.  In approving the $200,000 proceeds of crime settlement, Justice Jagose said he was in no position to second guess the parties’ calculation of $200,000 as being the value of income unlawfully received by the Marshalls.

If the Marshalls cannot pay $200,000 from cash resources including their frozen bank accounts, the Waiuku property is to be sold to make up the shortfall.

Commissioner of Police v. Marshall – High Court (18.04.23)

23.049

Sham: Maryland Bassett Co. v. Taihe Innovation

Auckland mortgage funder Taihe Innovation Management Ltd is in receivership with receiver Chris McCullagh left trying to enforce a deal which appears to have Taihe director Lei Zhang party to a sham transaction with a third party used as trustee to hide Zhang’s increased equity investment in Australian listed company MIE Pay paid for with Taihe’s money.

Allegations of a sham loan were front and centre when the receiver had Taihe Innovation sue Weidong He’s Auckland company Maryland Bassett Company Ltd for nearly $660,000 claimed to be principal and interest due on a loan made by Taihe Innovation in October 2019.  Maryland said the loan was a sham, disguising Zhang’s increased investment in MIE Pay Ltd just prior to its listing.

The High Court was told Taihe Innovation’s Zhang and Maryland Bassett’s He had a business relationship stretching back to 2015 when Alibaba’s online payment platform got underway in New Zealand.  Zhang gifted He an equity interest in his business then known as IE Money in appreciation of He having helped him obtain a New Zealand licence for Alipay.  

Plans to list IE Money on the then secondary NXT market in New Zealand later morphed into a listing as MIE Pay on the Australian National Stock Exchange.

He told the High Court that as part of MIE Pay’s listing process, he was asked to buy shares on Zhang’s behalf with money provided by Zhang.  Zhang wanted to keep this increased equity investment hidden from fellow MIE directors to avoid revealing his increased voting power, He said.

This proposal was documented as a loan from Zhang’s Taihe Innovation to He’s Maryland Bassett with Maryland acknowledging it was holding the shares purchased as bare trustee for Zhang.  Backup documentation required Zhang to indemnify Maryland Bassett for its costs.

Receiver Chris McCullagh told the High Court he had no evidence of any backdoor deal between Taihe Innovation and Maryland Bassett. As far as he was concerned, the loan was a straight-forward commercial debt owed by Maryland Bassett to Taihe Innovation. Taihe’s director Zhang had been uncooperative, the receiver disclosed.  Zhang did not give evidence.

Associate judge Sussock ruled it was arguable that the loan was a sham transaction.  The disputed debt could not be used as part of fast-track summary judgment procedure to have Maryland Bassett Ltd forced into liquidation.

Maryland Bassett Company Ltd v. Taihe Innovation Management Ltd – High Court (17.04.23)

23.047 

Squatter: Pascoe v. Ngati Tama Custodian Trustee

Squatters rights do not exist under New Zealand law, defeating claims by a North Taranaki farmer that his long-term use of neighbouring land for grazing was sufficient to disrupt Waka Kotahi’s plans to develop a bypass around Mt Messenger. 

The Pascoe family has farmed in Mangapepeke Valley for nearly seventy years.  They object to construction of a Mt Messenger bypass through the valley, realigning part of the state highway running between Hamilton and New Plymouth.  Part of Pascoes land has been compulsorily acquired under the Public Works Act for road construction.

The High Court was told the Pascoes had grazing rights over about 3.2 hectares of neighbouring land from the 1950s.  In 1985, the Minister of Forests issued the Pascoes a formal licence, allowing grazing for a six year period expiring in 1991 at a cost of $50 per year.  Subsequently, this land came under control of Department of Conservation.  The Pascoes were offered the opportunity to continue grazing under a Conservation Act concession.  They did not take up the offer.  With the earlier licence having expired, the Pascoes were at law trespassing by continuing to use the land for grazing.

Ownership of the land passed to Ngati Tama in 2003 as part of its Treaty settlement, negotiated with government as compensation for breaches of the Treaty of Waitangi.  At the time, it was recognised that the Pascoes were exercising informal grazing rights over 3.2 hectares of the land.  The Pascoes had long since stopped paying any $50 annual fee.

Justice Grice said the Pascoes had no legally enforceable right to graze stock on the land.  At best, they had informal permission to use the land, permission which had been revoked by Ngati Tama in 2019 when it gave formal notice that grazing rights were at an end.

The Pascoes’s request for a High Court injunction preventing Waka Kotahi from blocking their continued access for grazing was refused by Justice Grice.

Pascoe v. Ngati Tama Custodian Trustee Ltd – High Court (17.04.23)

23.046

Asset Forfeiture: Commissioner of Police v. McQuade

Seized by police as proceeds of crime, Alan McQuade protested that his Holden motor vehicles should not be sold ahead of next year’s scheduled forfeiture hearing.  They were appreciating in value as collectibles now that Australia no longer manufactures Holdens, he claimed.

McQuade was sentenced to five years three months imprisonment in March 2022 for methamphetamine offences.  On his arrest, police seized five vehicles alleging they were purchased with proceeds of crime, including a 2013 Holden HSV Clubsport, a 2016 Holden HSV GST and a 2003 Holden Monaro.

Police applied for an order the cars be sold ahead of a scheduled 2024 proceeds of crime court hearing with the sale proceeds meanwhile to be held in trust.  The High Court was told storage costs are running at $14.30 per day for each vehicle. In addition, market values based on Inland Revenue depreciation rates are falling by thirty per cent each year, police said.

McQuade challenged police assessments of future value. He said Holden vehicles were appreciating in value, as evidenced by asking prices for similar vehicles advertised on Trade Me.

Police had the vehicles inspected by an industry expert. He reported they were not all in the condition claimed: the Holden Clubsport had evidence of previous accident damage and was probably imported from Australia as an insurance write-off; the Holden GTS had double the odometer reading claimed.  Values for second-hand Holden vehicles viewed as collectibles had climbed sharply throughout 2020/21, the expert said, but had since shown a steady decline with vehicles marketed at premium prices remaining unsold for long periods.

Justice Woolford approved the vehicles’ early sale.

Commissioner of Police v. McQuade – High Court (17.04.23)

23.048