Valuation: YMCA North v. Auckland City

 

It was a test of valuation principles for land compulsorily acquired under Auckland’s CBD for the city’s underground rail network; there is no general market for subterranean land.  YMCA was eventually awarded $858,400, a far cry from its initial claim for $18.4 million compensation.

General principles of land law inherited from England have it that the ownership of freehold land includes all land below the surface.

That general principle has been heavily eroded by statute; the crown has rights to exploit oil, gas and mineral resources and has further rights to take subterranean land under the Public Works Act.

YMCA North Incorporated owns a substantial site on Greys Avenue in Auckland’s central business district.  By proclamation under the Act, Auckland City assumed ownership of a slice of land starting about ten metres below the surface of YMCA’s land to accommodate proposed underground rail.  In addition, a restrictive covenant was imposed on a further slice rising about five metres above this railway land, having the effect of limiting potential excavation by YMCA of underground carparking, part of any possible site re-development as high-rise apartments.  

Compulsory acquisition triggered rights for YMCA to receive Public Works Act compensation.  Auckland City offered some $262,900, primarily compensation for disturbance as work proceeded.  YMCA countered seeking $18.4 million, which included $18 million for ‘injurious affection;’ the negative impact resulting from the land taken and restrictive covenant imposed.

Injurious affection is measured by a ‘before and after’ test: the highest and best value of the land before compulsory acquisition compared with after.

Their dispute over valuation went to the Land Valuation Tribunal.  It fixed the level of compensation at two million dollars.  Neither side was happy with this.  Both appealed to the High Court.  Compensation was fixed at $858,400.

YMCA’s application to further appeal this result was dismissed.

It said a ruling is needed from higher courts to clarify an irreconcilable tension in valuer’s ‘before and after’ test where there is a ready market for sale of properties generally, but not for subterranean land itself.

There is no tension, Justice Gault ruled.  The evidence is that properties with tunnels under them do not suffer any reduction in market value.

The effect of the restrictive covenant was taken into account by valuers with an estimate of likely costs facing YMCA in getting pre-approval and consent for any proposed excavation penetrating the restricted zone.

YMCA North Inc v. Auckland Council – High Court (14.12.23)

24.029

Software: Corrections v. Fujitsu NZ

 

Software supplier Fujitsu NZ was ordered to pay Corrections $3.8 million for wasted expenditure after the 2019 cancellation of Fujitsu’s contract to manage a proposed integration of Corrections staff rostering schedules into its existing SAP payroll system.  The High Court ruled Fujitsu in turn is entitled to recover up to $1.8 million from its subcontractor, software supplier Dassault Australia, after the court heard evidence of deliberate misrepresentations by Dassault of its ‘Quintiq’ system and its subsequent behaviour in hiding ongoing problems from both Corrections and Fujitsu.    

Dassault’s deceptive behaviour was exposed in nearly three weeks of evidence before the High Court in Wellington including evidence of: manipulation of data in a product presentation; arch use of terminology for ‘customisation’ as against ‘configuration’ in light of Corrections demand for an ‘out of the box’ solution; attempts to slyly re-scope the project while hiding from both Corrections and Fujitsu where problems were going to arise, and; allegations Dassault destroyed key documents when the project imploded.  

Back in 2017, Corrections called for registrations of interest to supply software for its rostering system, covering some 6000 staff spread across eighteen operational sites.  It specifically required a product that was flexible, scalable and integrated with its existing payroll system.

A contract was signed in 2018 with Fujitsu New Zealand Ltd, which had teamed up with Australian software supplier Dassault.  A strong selling point had been a demonstration of Dassault’s proprietary Quintiq system.  This presentation demonstrated selected case studies of employee data showing seamless integration of Corrections rostering system with its payroll.  Unbeknown to both Corrections and Fujitsu, Quintiq software had been adjusted to specifically accommodate ten of the individual case studies demonstrated.  Internal emails within Dassault signalled potential downstream problems from this use of ‘dodgy data.’

In response to direct questions from Corrections, Dassault represented its product as requiring no ‘customisation’ to operate functionally; no significant changes were needed.  Later, bidding for an increase in the contract price, Dassault said increased work was needed to ‘configure’ the software in order to accommodate Corrections diverse staff schedules.

Evidence was also given of Dassault hustling for pre-payment of an upfront fee licencing use of its Quintiq product over protestations from Corrections that it wanted to see the product in operation before committing to the fee.

Justice Cooke ruled Dassault had misrepresented its product.

Fujitsu was ordered to pay Corrections $3.8 million for breach of contract.  As head contractor it was responsible for the failures of sub-contractor Dassault.  The product delivered did not meet contract requirements to integrate seamlessly with Corrections’ SAP payroll system.

Fujitsu’s separate action against Dassault was partially successfully.  Justice Cooke ruled Dassault was liable both for misrepresentation under the Contract and Commercial Law Act and for misleading and deceptive conduct under the Fair Trading Act.

Contracts between the two contained exclusion clauses limiting liability for any damages.  Justice Cooke used powers in the Fair Trading Act to override Dassault’s standard clause limiting liability to one hundred thousand euro.  Dassault should not be allowed to keep the $1.8 million licence fee charged Corrections, he said.  This fee was paid for a product which was not in use and did not provide the service promised.

The $1.8 million fee paid by Corrections includes a margin Fujitsu added when on-selling the licence to Corrections.  Fujitsu can recover from Dassault a lesser figure; the dollar amount Fujitsu actually paid Dassault.

Corrections v. Fujitsu New Zealand Ltd – High Court (8.12.23)

24.028

Option: Seaglass Holdings Ltd v. Giacon

 

Family refinancing over a decade ago was revisited in the High Court in what one side to a dispute between step-siblings described as a personal vendetta.

What started as a family bail-out to avert a liquidity crisis following the 2008 global financial crisis had its denouement fourteen years later with the High Court ruling an option to purchase an Auckland industrial property written into a will was enforceable.

On one side stood Gary Young, son of father Wayne’s first marriage; on the other, Andrew and Adrienne Giacon.  Adrienne was raised by Wayne after he and her mother married when Adrienne was aged eight.

Back in 2005, the Giacons built a factory on O’Neills Road in the west Auckland suburb Swanson.  They leased the premises to their manufacturing company Terazzo & Stoneworks NZ Ltd.

When they came under financial pressure following the global financial crisis, Wayne came to the rescue.  He purchased both the Swanson building and the Giacons’ home, releasing cash to pay down bank debt.  They paid rent on their home, before later buying it back.

Ownership of the Swanson building was taken in the name of Seaglass Holdings Ltd, then one of Wayne’s companies.  Control passed to son Gary on Wayne’s death in 2014.

Nearly ten years on from Gary taking control of Seaglass, differences between the step-siblings came to a head.  Seaglass was claiming some $220,000 rent arrears; the Giacons claimed the right to buy the Swanson building from Seaglass.

Terms of the lease between Seaglass and the Giacons had been varied over time.  As is common with family dealings, payments due had been varied and at times deferred.  Arguments about amounts due were complicated by claims of set-off, with claims of work for or on behalf of Wayne being done in lieu of rent.  The Giacons said nothing was due to Seaglass; a clean slate followed their earlier sale of Terazzo.

In the High Court, Justice Gordon ruled any outstanding rent Seaglass claimed could not be recovered.  Limitation Act rules meant its claims were statute-barred; out of time.

Seaglass’ legal argument that statute-barred debts had been acknowledged and again now fell due were dismissed.  Lawyer’s recent letters had merely acknowledged there was a dispute.  They did not admit there was a debt due.

Separately, Justice Gordon ruled the Giacons had an enforceable option to buy the Swanson building from Seaglass.

At the time he bailed out the Giacons in 2009, Wayne added a codicil to his will stating that should Seaglass choose to sell, the Giacons had first option to buy.

As with contracts for sale of land, options to buy land require evidence of a benefit provided to be enforceable; consideration in legal jargon.  Giacons said they sold to Seaglass in 2009 at a price below the then market price.  And after the contract was agreed, the Giacons agreed to include in the sale at no extra cost an on-site industrial gantry crane.  Both amount to consideration supporting an enforceable option to buy, they said.

Terms of the option allow the Giacons to buy at $1.1 million, adjusted by increases in the consumer price index from September 2009.  Seaglass paid $1.1 million to buy the Swanson property in 2009.

Seaglass Holdings Ltd v. Giacon – High Court (7.12.23)

24.027

Mortgagee Purchase: re Hall

 

Law changes allowing a mortgagee selling up on default to buy the secured property without first going to auction are in operation, potentially assisting resolution of intra-family debt defaults.  Direct purchases require prior court approval, supported by evidence of current market value. 

The High Court was asked to approve a mortgagee’s purchase of a property at Oruawharo, on the Kaipara Harbour in Northland.  In April 2108, Shuqing Wang borrowed $150,000, this loan secured over the property.  Twelve months later, the secured creditor sold her interest in the mortgage to a Mr Hall.

No interest payments were ever made.  Mr Hall held off any enforcement during the covid-19 pandemic.

In June 2023, he set in train procedures for a mortgagee sale.  By now, Ms Wang was living in China.

Evidence was given that the property was passed in at auction in August 2023, after a six week marketing campaign.  There was one bid at $150,000.  A registered valuation obtained one month later appraised the market value at $450,000, but discounted the value to between $292,500 and $337,500 given that it was a forced sale and that the market had weakened during the previous year.

To avoid the need for a second auction, Mr Hall sought High Court approval under the Property Law Act to buy at $350,000; the unpaid loan plus accrued interest. 

Giving approval, Justice La Hood said the price offered by Mr Hall was reasonable.

re Hall – High Court (7.12.23)

24.026

Family Trust: re W & H Blakeborough Trust

 

Concerns over a beneficiary’s ability to handle family trust money led to the High Court giving its ‘blessing’ to resettlement of trust funds on a new trust allowing funds to be released in a controlled fashion.

The High Court was told of William and Hilda Blakeborough setting up a family trust for benefit of their children and grandchildren.  Son John and daughter Linda are two of the beneficiaries.  John is a trustee.  The two do not get on.

Evidence was given of Linda accusing her brother of ‘stealing her inheritance.’

Their parents had expressed the wish that an Auckland property in Papatoetoe owned by the Trust but occupied by Linda would eventually be handed on to Linda.  They also expressed the wish trustees use ‘common sense’ in ensuring any distribution to Linda be protected from possible matrimonial or financial problems.

Subsequently, trustees questioned Linda’s ability to deal prudently with such a substantial asset.  There was evidence of Linda failing to maintain the property and of Linda being sued by a tenant.

In 2021, the Papatoetoe property was sold, leaving a cash balance two years on of some $729,000 dollars after deducting costs of sale and legal fees following the earlier tenancy dispute.  The Trust has been paying Linda one thousand dollars per week from the sale proceeds to assist with her accommodation costs.

A conflict arose between beneficiaries.  Linda said she was entitled to the remaining balance; other beneficiaries wanted a share.

To avoid further conflict, the trustees put a proposal before the High Court for its blessing.  The trust deed does allow trustees to resettle trust assets on a new trust at their own initiative.  Getting a judicial tick saying the trustees’ proposed resettlement was okay had the advantage of forcing warring beneficiaries to accept the outcome.       

Justice Harvey directed net trust funds be transferred to a new trust naming Linda and her children as beneficiaries.  Perpetual Trust Ltd was appointed trustee.

Re W & H Blakeborough Trust – High Court (4.12.23)

24.025

America's Cup: Team NZ v. Mayo & Calder

 

Team New Zealand’s allegation of an inappropriate claim for $1,240.49 lunch expenses as office expenses by event organisers Mayo & Calder pales into insignificance against the larger claim of $2.814 million allegedly lost by Mayo & Calder through an online bank fraud.  Mayo & Calder was subsequently fired as event organiser for Team New Zealand’s 2021 Auckland defence of the America’s Cup.  

Preliminary rounds are being fought out in the High Court, with Team New Zealand keen to pin down who released confidential information to the media as their dispute escalated mid-2020.

After Mayo & Calder was fired from its job as event organiser in June 2020, Team New Zealand filed legal action against Mayo & Calder Ltd, principals Grant Calder and Thomas Mayo together with Mayo & Calder accountant Michael Choy.  It alleges negligence in their performance as event organisers.  They in turn sued, alleging Team New Zealand unlawfully terminated their contract.

This dispute has yet to be heard in court.  Mr Calder has died.  His estate takes his place as litigant.    

As part of pre-trial procedures, Team New Zealand demanded copies of documents held by Mayo & Calder.  Response has been slow and inadequate, Team New Zealand says.  Justice Venning ordered Mayo & Calder to fully comply with an earlier court ruling requiring disclosure.

Team New Zealand also demanded Mayo & Calder answer a specific series of questions, on oath, pre-trial.  Many of these questions concern the content of telephone conversations Mayo & Calder had with public relations companies and journalists.  Both Mr Mayo and Mr Choy refused to answer most of these questions, saying many were premised on issues of disputed fact.  Justice Venning listed the questions required to be answered, allowing that the two may include in their answer reference to what facts, if any, they disagree with.

Team New Zealand was particularly enraged that details of Team management meetings found their way into the media together with information from a confidential Business, Innovation & Employment interim report triggered by allegations of financial wrongdoing made against Team New Zealand by a whistleblower.  The final report found no financial impropriety by Team New Zealand.  The High Court was told Team New Zealand suspects the whistleblower was associated with Mayo & Calder. 

America’s Cup Event Ltd v. Mayo & Calder Ltd – High Court (1.12.23)

24.024

Liquidation: Tobem Holdings Ltd v. Grant

 

It had reached a standoff: on one side, Tobem Holdings owed $2.7 million by insolvent childcare operator Kid Country Holdings wanted access to Kid Country’s records suspecting assets had been spirited away prior to liquidation; on the other, Kid Country liquidators Damien Grant and Adam Botterill refused access saying this was simply a challenge to their professional expertise and competence.

Justice Tahana allowed access under strict conditions.

Kid Country Holdings Ltd is a joint venture company controlled by Auckland-based David Lowry and Papamoa-based Paul and Marilyn Hamlyn with investments in childcare centres.  Kid Country’s liquidation followed a dispute with Tobem Holdings Ltd as landlord of premises on Lincoln Road at Henderson in west Auckland.  Kid Country was ordered to pay $2.7 million damages.

Grant and Botterill were appointed liquidators in May 2022 with the benefit of proxies given by two Kid Country creditors owed between them some $7500.  The High Court was told Tobem has no confidence in the liquidators.  It is particularly annoyed that it is owed nearly one hundred per cent of Kid Country’s debt but is saddled with liquidators not of its choice.

Liquidators say Kid Country has no assets.  Tobem wants to know why a number of Kid Country subsidiaries running child care businesses were removed from the companies register prior to Kid Country’s liquidation.  The suspicion is that these were profitable businesses removed from the orbit of Kid Country before liquidation.  Tobem wants access to Kid Country’s records.

Grant and Botterill say they are open to discussions with Tobem about funding a detailed investigation.  In turn, Tobem says it has no confidence in working with the liquidators.  It wants to set its own investigation in train.

Justice Tahana ruled Tobem could view Kid Country documents held by the liquidators.  Commercially sensitive documents are not to go to Tobem directly, but can be viewed in confidence by their investigative team.

Tobem Holdings Ltd v. Grant – High Court (30.11.23)

24.023

Joint Venture: Upland Business Management v. Ghee

 

Investors in an Auckland joint venture property development got a court order freezing family trust bank accounts of fellow investor Teik Huat Ghee alleging he has wrongly misappropriated some of their profit share from a Remuera development.

Family interests associated with Auckland investors Adonis Souloglou and Peter Cossey joined with Mr Ghee in March 2020 to redevelop a site on Upland Road, in Remuera.  Profits or losses were to be split 65 per cent to interests associated with Mr Ghee, 35 per cent to Souloglou/Cossey investors grouped together in a company called Upland Business Management Ltd.

The High Court was told the Upland Road redevelopment generated gross sales of $14.6 million.  The level of profit available for distribution is disputed.  Upland Business investors say their share is $1.8 million.  Mr Ghee says it is in the range of $750,000 - $885,000.  The amount of finance secured against the project requiring repayment before determining profit shares explains the difference.  This difference is hotly disputed.

Upland Business investors allege Mr Ghee has dishonestly claimed his family trust stands as a secured creditor, extracting funds before determining net profits.  They complain that there was no reference to funding from Mr Ghee’s family trust in their 2020 agreement and similarly there was no mention in a feasibility study attached to the agreement.

Upland Business investors allege Mr Ghee has a commercial history of moving assets between companies to defeat creditor claims.  They pointed to unrelated court proceedings where Mr Ghee was described as being a director of some 65 different companies and having been director of a number of failed construction companies.

Justice Whata ordered a freeze on bank accounts held on behalf of Mr Ghee’s family trust with bank statements to be disclosed to Upland Business investors.

The level of profits owed Upland Business is yet to be resolved.  To date, they have received nothing.

Upland Business Management Ltd v. Ghee – High Court (30.11.23)

24.022

SkyCity: SkyCity Entertainment Group v. MPF Parking

 

Auckland’s SkyCity says Macquarie Group is entitled to $188 million compensation on loss of its 29 year car parking concession, following SkyCity’s devastating 2019 convention centre fire. Macquarie argues for at least $240 million.  For aficionados of discounted cashflow analysis, a $52 million difference might lie in the assumptions used.  For Justice Campbell, finding in favour of SkyCity, it was a case of deciding what their car parking contract actually said.  

In 2019, Australian investment bankers Macquarie Group agreed to pay SkyCity $220 million upfront for the right to collect car parking fees from SkyCity customers for the next 29 years.  This agreement covered 3200 car spaces: nearly 2000 spaces already available at the main casino site and a further 1200 spaces becoming available on completion of SkyCity’s nearby convention centre.

Six months after signature, convention centre construction was set back years following a fire starting in the building’s roof.

The High Court was told terms of the parking concession contained a formula compensating Macquarie for loss of parking spaces, known colloquially as a ‘ticking fee.’  After the fire, this fee was costing Sky City about $30,000 per day.  Macquarie was still earning revenue from unaffected parking spaces.

In 2022, Macquarie cancelled the concession, as it was entitled to do, because of delays in reinstating car parks at the convention site.  This triggered a contractual right to compensation; part-repayment of the $220 million paid upfront for a 29 year carpark concession which did not run its full course.

Macquarie says it is entitled to $240 million dollars compensation, being the correct value of future cashflows now lost.  This was based on the market value of its concession being valued as at the November 2022 termination date.  SkyCity says valuation date should be October 2019, date of the fire.

The $52 million difference in potential compensation arises because of differing economic conditions three years apart.  Markets and market conditions change.  Macquarie complains that using SkyCity’s date means it is being compensated for cashflows lost since 2022 calculated on a valuation set in 2019 dollars.

Justice Campbell pointed out that their 237 page parking concession contained nine different definitions of ‘compensation sum,’ with differing definitions applying to differing circumstances.  He ruled the relevant date for determining the concession’s ‘market value’ on termination was date of the fire, with discounted cashflow methodology to be used to value future cash flows lost from 2022 to 2048 but discounted to date of the fire in October 2019.

Justice Campbell said Macquarie’s claim to $240 million was based on how it considers the parking concession should have been drafted, rather than how it was in fact drafted.

The High Court was not asked to decide the exact amount of compensation to be paid by SkyCity to Macquarie.  It was asked to rule on how the contract is to be interpreted, with calculation left to an arbitration process.

Evidence was given that Macquarie reserves the right to challenge how the now-interpreted contract is to be applied to its on-going claim for compensation.

SkyCity Entertainment Group Ltd v. MPF Parking NZ Ltd – High Court (30.11.23)

24.021

Building Contract: Wilson McKay v. van Den Anker Construction

 

An Auckland building company could not avoid liability for a subcontractor’s poor roofing work, part of a house renovation, by simply cancelling the contract and walking off the job.

In 2018, van den Anker Construction Ltd contracted with the Jess family to alter their garage, creating additional living space.  A standard-form Certified Builders Association ‘charge-up’ contract was used; its Cost & Margin (Labour Only) Building Contract. 

The family were agreeing to pay for hours worked plus costs of materials and any sub-contractor costs with a nine per cent margin added by den Anker to these extra costs.

The High Court was told the Jess family were overseas for nearly three months while renovations were carried out.  On return, they were dismayed by the standard of work.  They paid some, but not all of den Anker’s invoices.

Den Anker cancelled the contract, refusing to deal with their complaints.

Quality of the work done got a thorough hearing at a District Court trial where den Anker sued on unpaid invoices totalling $49,900.  The trial judge ruled only the roofing work required remedying.  But den Anker’s cancellation of the contract meant the building contract was now at an end and it was not liable for roofing repair costs, she said.

On appeal, the High Court ruled cancellation under the Contract and Commercial Law Act discharged all parties to a contract from future performance but still held them liable for obligations accrued up to the point of cancellation.

At time of cancellation, den Anker was liable to make good deficiencies in the roofing installation.

Jess family were entitled to set off their roof remediation costs of $25,800 against den Anker’s $49,900 unpaid invoices, the High Court ruled.

Evidence was given that while den Anker had invoiced the Jess family for the roofing subcontractor’s work, it had not itself paid the subcontractor’s bill.

Wilson McKay Trustee Company Ltd v. van den Anker Construction Ltd – High Court (30.11.23)

24.020

Land: Son v. Le

 

Having a work colleague join in financing a south Auckland home purchase led to later complications when the colleague vanished without trace to Australia, leaving his name on the title as part-owner.

The High Court was told when Hiep Xuan Son did not meet income thresholds demanded by a financier for his proposed 2003 purchase of a family home in Glenveagh Park Drive, Manurewa, his work colleague, Hai Dan Le offered to assist.  Mr Le was the then partner of Mr Son’s daughter.

The agreed deal was that both would apply for a loan and title would be taken in their joint names.  In what was in substance a guarantee with Mr Le having backup security over the land, Mr Son agreed to pay all outgoings for the Manurewa property.

Mr Le came to live rent free with the Son family at Glenveagh Park.  He did not contribute to mortgage payments.  Mr Son paid all costs, including food and power.  Mr Le started making weekly contributions of one hundred dollars for living expenses after living with the family for two years.      

The court was told Mr Le left for Australia in 2007.  Nine years later, Mr Son received a letter from lawyers in Perth representing Mr Le requesting Glenveagh Park be sold and that Mr Le’s half share of the proceeds be remitted to him in Australia.  Subsequent attempts to have Mr Le’s agreement to be taken off the title proved fruitless; he had moved on without leaving contact details with his Perth lawyers.

Mr Son was unable to sell or refinance Glenveagh Park Drive without Mr Le’s signature as co-owner.       

In New Zealand, Justice Tahana ordered Mr Le’s name be taken off the title to Glenveagh Park as part owner, leaving Mr Son as sole owner.

The normal rule is that ownership of land cannot be changed without prior written agreement.  Mr Son said there was an oral agreement with Mr Le that Mr Le’s half share would be transferred into his name at a later date.

Oral agreements for sale of land are enforced if there has been ‘part-performance’ of the oral agreement.  Courts take the view that while the need for written contracts for sale of land is intended to prevent fraud, failure to complete a partly performed oral contract for sale of land on the simple ground that it is not in writing is itself a fraud.

Justice Tahana said the oral agreement was both evidenced and partly performed by Mr Le living at the property rent-free and not at any time contributing to mortgage costs.

Notice of intended New Zealand proceedings was served on Mr Le in Australia after a process server managed to track him down in late 2022.  Mr Le did not defend the claim.

Son v. Le – High Court (29.11.23)

24.019

Estate: re Estate Violet Tata

 

Fifteen years after Violet Tata died, the High Court ordered recovery of estate assets wrongly handed over to a grandson.

Violet Tata died in 2008.  Her only major asset was the family home.  It was over a decade later that a sale was considered.  In the interim, a relative occupied the house.

By this time, Violet’s daughter Donna was the remaining surviving executor.

The High Court was told of a family conference in August 2019 agreeing the house should be sold to a relative, keeping the property in hands of whanau; a Maori tradition.  Whanau were invited to make offers.  An offer at $760,000 from Donna’s son Joseph was the best offer made.

There was evidence the property then had a market value of about one million dollars.  Lawyers acting for Violet’s estate recommended to Donna that all beneficiaries should sign a deed of family arrangement agreeing that Joseph could buy at less than market value.  Donna did not take up the suggestion; whanau had agreed, she said.

Beneficiaries later learnt that not only had Joseph purchased at below market value, but Donna had given him $300,000 cash from Violet’s estate.

Joseph defaulted on a loan secured over his new purchase, resulting in a mortgagee sale.  Whanau lost the family home.  Joseph was set to receive $164,000 after repayment of the mortgage and forced sale costs.

Justice Whata ruled both Donna and son Joseph were liable to return the $300,000 gift to Violet’s estate.  The $164,000 surplus held by the mortgagee’s solicitors also goes to Violet’s estate, he ruled.

Donna was in breach of her duties to beneficiaries by selling at an undervalue and wrongly gifting cash; Joseph at the time was aware of his mother’s wrongdoing.

The court was told Donna died in September 2023.  Administrators previously appointed to oversee management of Violet’s estate were instructed to deduct from any inheritance going to Donna’s estate that part of the $300,000 gift ordered repaid which Joseph fails to repay.

Neither Donna’s estate nor Joseph appeared in court to defend the claim.

re Estate of Violet Tata – High Court (27.11.13)

24.018 

Carbon Credits: Leckie v. Beverley

 

Wellington-based investment bankers Will Leckie and Chris Morrison failed in attempts to block legal action alleging they diverted for their own benefit management of carbon trading investments, bypassing a deal initially negotiated with Anthony and Wendy Beverley.

Leckie and Morrison provide investment services to the agribusiness and forestry sectors through their business Lewis Tucker & Co.

The Court of Appeal was told they joined forces with the Beverleys in 2017 to exploit investment opportunities arising from New Zealand’s emissions trading scheme.  A limited liability partnership called Drylandcarbon One Limited Partnership was set up to hold investors’ money.  It was intended investors would receive a return on carbon credits generated from afforestation.  Harvesting and sale of trees was a secondary priority.     

The money pot for Lewis Tucker and the Beverleys was intended to be base fees calculated on capital employed plus performance fees from ongoing operations, all channelled through a management structure they both controlled: DC One H1 Ltd.

Evidence was given that Mr Beverley’s relationship with Messrs Leckie and Morrison broke down irretrievably within months of the first investment partnership being established.  Shortly after, Lewis Tucker & Co set up its own carbon trading fund.

The court was told of Lewis Tucker & Co using publicity material for its new fund similar to that used by DC One’s operations and also transferring staff managing the earlier fund across to Lewis Tucker’s new operations.

The Beverleys sued.  The High Court approved legal action being taken against Messrs Leckie and Morrison in DC One’s name on grounds there was an arguable case that they had misused DC One’s information to set up in opposition, seizing business opportunities otherwise available to DC One, part owned by the Beverleys as joint managers.

Company information from DC One allegedly used to set up Lewis Tucker’s competing alternative fund included the content of investment flyers, the pool of potential investors and details of investment structures likely to attract new investors.

Leckie and Morrison claim this information is generic.  It is general business information known to any knowledgeable business investor, not corporate information particular to DC One, they said.  If the Beverleys have a complaint, they should sue personally, rather than sue through a derivative action in the name of DC One, they said.  It was indicated litigation costs will likely exceed one million dollars.  DC One, part-owned by Lewis Tucker, should not have to bear the cost of legal action against Lewis Tucker, they said.

The Court of Appeal confirmed a High Court ruling that the dispute go to trial, with DC One bearing the Beverleys’ costs.

Leckie v. Beverley – Court of Appeal (17.11.23)

24.017

Fraud: Thompson v. Police

 

Canterbury fraudster Nigel Terrence William Thompson left a trail of victims ranging from an elderly resident in a retirement village to Inland Revenue.  There was little subtlety in his fraudulent conduct, with Thompson’s behaviour including stealing bank card details, selling customer’s cars and not accounting for the proceeds, failing to account for company PAYE to Inland Revenue, and attempting fraudulently to claim tax refunds on his own tax return when no refund was due.

The High Court was told of Thompson committing the bulk of his offences through the car trade.

Thompson set about defrauding taxpayers by not accounting to Inland Revenue for PAYE deductions of some $288,000 owed by his car dealerships trading variously as Nigel Thompson Motor Co Ltd and Nigel Thompson Motor Co (2016) Ltd.  He used company money without authority to pay personal expenses.  He submitted false applications to a finance company, taking money for financing deals on non-existent customer car purchases.

Evidence was given of Thompson contacting TradeMe customers looking to sell their vehicles.  Several customers accepting his offer to sell on their behalf saw Thompson pocket the proceeds.

Business, Innovation and Employment intercepted attempts by Thompson to set up a car dealership in 2018 under a false name.  Registration of a new company was blocked by Companies Office after Thompson was unable to verify the name he listed as director.

The court was told of Thompson committing multiple bank frauds after gaining access to victim’s bank cards.  Victims included his landlord who mistakenly left his wallet at a property Thompson was renting and a retirement home resident employing Thompson to groom her car.  He took $20,000 out of her bank account.

A church group was gulled into giving Thompson a blank signed cheque to pay for registration required on a car the church purchased.  He stole $1100 dollars.     

The level of sentence on conviction proved problematic, given the multiplicity of offences.

The general principle in the Sentencing Act is that similar offences result in sentences for each separate offence running concurrently (with the longest individual sentence setting the total term of imprisonment), while sentences for offences different in kind run concurrently (with each separate sentence being added together to give a total for the term of imprisonment).

In the District Court, Thompson was sentenced to three years seven months’ imprisonment.  This was reduced to three years’ imprisonment on appeal to the High Court.  Thompson’s frauds against his companies and the PAYE fraud against Inland Revenue should have been treated as connected offences sufficiently similar to result in concurrent sentences, Justice Hinton ruled.

Thompson v. Police – High Court (17.11.23)

24.014

Disqualification: Registrar of Companies v. Andrews

 

Raymond Anthony Andrews has been permanently prohibited from ever again managing a company after conviction multiple times for bankruptcy offences together with associated convictions for fraud, forgery and tax evasion.  He is now aged 74 and enrolled as a law student.

Andrews has remained bankrupt since 2008.  Creditors owed some $684,700 in that bankruptcy were left unpaid.

Insolvency legislation prohibits individuals, whilst bankrupt, from running a business.

The High Court was told of Andrews contemptuously ignoring rules governing his bankruptcy, being convicted in 2013, 2017 and 2019 of operating businesses whilst bankrupt.  He defrauded both customers and suppliers.

Conviction in 2013 for the first series of offences followed offending in Tauranga and the northern half of the North Island.  His 22 month jail sentence did not deter subsequent offending.

Business revenue, which should have been declared, was hidden from Insolvency Service. In one instance, Andrews used his daughter’s bank account without her knowledge to hide cash.   

He was sentenced to terms of imprisonment three times, the longest sentence being in 2019: six years and six months.  He was released on parole in 2022.

When permanently banning Andrews from ever again managing a company without prior court approval, Justice Hinton said he had shown complete disregard for the law and for his bankruptcy.  Andrews had shown no remorse, she said.  His offending had not lessened over time, it had escalated with longer prison sentences imposed for subsequent convictions.

Permanent prohibition is uncommon.  Andrews is only the second person to be permanently barred from managing a company.

Registrar of Companies v. Andrews – High Court (17.11.23)

24.016

Eric Watson: Kea Investments v. Wikeley Family Trust

 

A USD123 million judgment against Sir Owen Glenn’s Kea Investments was obtained by fraud the High Court ruled, curtailing attempts by entrepreneur Eric Watson in league with Australian resident Ken Wikeley to tie up Kea’s legal team in expensive litigation at a time when Kea is struggling to recover GBP129 million an English court ordered Watson pay Glenn.

In 2018, Kea Investments successful sued Mr Watson in the United Kingdom for fraud in relation to their earlier joint investments.  He did not roll over and pay up.  Mr Watson served time in jail for contempt of court following his initial failure to hand over business records.

Four years later, Kea Investments was surprised to receive a letter demanding payment of USD123.7 million, supposedly court-ordered damages for breach of contract.  A Kentucky court had ruled Kea Investments was in breach of a joint venture agreement with Ken Wikeley’s family trust, described as the 2012 Coal Agreement.  Kea had no knowledge of any such agreement and had not taken part in any Kentucky court hearing.  It was told notice of the proposed hearing had been sent to Kea’s office in the British Virgin islands.

Kea had to move smartly.  Wikeley’s family trust was looking to seize cash in Kea’s bank accounts.

Attempts to get a rehearing in Kentucky failed.  Kea had notice of the hearing, but failed to turn up, the court said.

Kea sued in New Zealand, where Wikeley Family Trustee Ltd is registered.

It alleged Mr Watson conspired with Mr Wikeley, using fraudulent Kentucky litigation and threats to wind up Kea Investments in order both to get information about Kea’s assets and to frustrate Kea’s attempts to recover money as ordered by United Kingdom courts.    

Justice Gault ruled the supposed 2012 Coal Agreement was a forgery.

There was evidence of the agreement being a ‘cut and paste’ photocopy of sundry other documents.  Page numbers were not sequential.  Terminology and currency amounts were not consistent throughout the document.  Circumstances of Mr Watson’s signature as witness to the agreement raised suspicions.

Kea Investments had no record of any negotiations prior to the 2102 agreement despite clauses in the agreement making reference to a prior feasibility study and due diligence.

A US lawyer with expertise in the mining industry gave evidence that terms of the 2012 agreement were non-sensical. Kea was supposedly committing to pay substantial annual ‘royalties’ for the next twenty years regardless of whether any project got underway.  Kea was also agreeing to loan at least USD75 million to Mr Wikeley for twenty years at three per cent.

There was never any demand for payment of the stated annual royalties over the nine year life of the supposed contract prior to the Kentucky litigation, Justice Gault commented.

Justice Gault ruled the Kentucky judgment was obtained by fraud.  The 2012 agreement was fictitous.  He imposed a world-wide order blocking attempts by Wikeley’s family trust to enforce the Kentucky court judgment.

Kea was ruled entitled to recover all its legal costs.

Evidence was given that Mr Wikeley previously attempted to avoid any adverse ruling from New Zealand courts by changing residence of his family trust to Kentucky and by assigning benefit of the Kentucky court judgment to a newly formed company having as its place of business a ‘virtual office.’  Justice Gault ruled these moves invalid and of no legal effect.

Kea Investments Ltd v. Wikeley Family Trustee Ltd – High Court (17.11.23)

24.015