Archive | Court

Judge told to reconsider 19 dismissed charges against Hawkins loan companies

The Commerce Commission has won its appeal against a district court decision to dismiss 19 charges against 2 finance companies controlled by former Equiticorp chief Allan Hawkins.

In the Auckland High Court, Justice Rebecca Edwards found in the commission’s favour in a judgment issued on 11 April and remitted the 19 charges back to Auckland District Court judge David Sharp for determination.

Judge Sharp found the 2 companies guilty on 106 charges last year. Dismissing the other 19, he said they concerned representations about the companies’ right to charge interest & costs on contracts entered into before 6 June 2015, following repossession & sale of borrowers’ property where Budget & Evolution had security interest over multiple items.

The commission’s case was that, for loans entered into before 6 June 2015, lenders were prohibited under the Credit (Repossession) Act from charging interest & costs after the first security item had been repossessed & sold. Budget & Evolution argued that where a loan was secured over multiple items, all items had to be repossessed & sold before they needed to stop charging interest & costs.

Budget & Evolution also appealed all 106 convictions on multiple grounds, but Justice Edwards rejected all appeals.

Mr Hawkins headed the Equiticorp finance group in the 1980s but, after the 1987 sharemarket collapse, he ended up in civil & criminal trials over the group’s activities and was sentenced to 6 years’ jail for fraud.

He formed the Cynotech group of finance companies about 12 years ago, using the shells of his 1980s companies.

Mr Hawkins’ listed company, Cynotech Holdings Ltd, was delisted in September 2013 after his private company, Cynotech Securities Ltd, acquired 71% of the shares in 2010 in a bid to fully privatise it. In July 2013, Cynotech Holdings went into liquidation after his backers ended their support.

Mr Hawkins resigned as sole director of Budget Loans on 9 July 2013 but was reappointed on 13 August 2013. He remains a director of Broadway Mortgage Custodians Ltd, Cynotech Finance Ltd & Evolution Finance Ltd, and is one of 4 directors of Budget Loans Group Ltd (renamed from Cynotech Securities Group Ltd in July 2013; in liquidation November 2013).

Commerce Commission enforcement response register, including judgments

Earlier stories:
18 July 2016: Hawkins’ finance companies guilty on loan contract enforcement
17 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
11 July 2013: Cynotech share trading halted after backers end support
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee

Attribution: Commission release, judgments, Companies Register.

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Remand on Celestion development fraud allegations

The developer of the Waldorf Celestion apartments hotel at the foot of Anzac Avenue in Auckland, Tasman Cook Group Ltd owner Leonard Ross, and 3 associates were remanded in the Auckland District Court today until 22 June, on 4 Crimes Act counts of obtaining by deception and 2 of using forged documents, with the expectation that the case will be sent to the High Court for a jury trial.

Mr Ross (50) is living in Melbourne and was excused from appearing in court today. One of the other defendants whose name is suppressed was also excused from appearing.

The other 2 defendants, company director Michael Wehipeihana (45) & self-employed consultant Vaughn Foster (54), appeared in court and were remanded on bail.

The charges arose in relation to allegedly making false statements & using forged documents to obtain a credit facility from ANZ Bank NZ Ltd to allow the project company, Emily Projects Ltd, to develop the Waldorf Celestion, which opened in 2009. It’s alleged that a loan facility of about $40 million was obtained.

Emily Projects, 88% owned by Mr Ross, went into voluntary liquidation on 22 December 2011. Original liquidator Chris Horton was replaced in 2014 by Tim Downes & Greg Sherriff (Grant Thornton), who said in their final report in 2015 they’d recovered $610,244 of assets. 2 unsecured creditors claimed $671,000 and 53 investor claims totalled $2,890,951.

The one distribution to unsecured creditors was 11.8c in the dollar for a total $420,310.

The whole project was controversial because Mr Ross, who’d developed property for Mark Bryers’ Blue Chip NZ Ltd, acquired the Celestion site at mortgagee sale from a lender to Blue Chip.

A Blue Chip company bought the 1081m² site between Anzac Ave & Emily Place, on the eastern fringe of the cbd, for $4 million in 2004 and it was transferred in 2006 for $10.9 million to another of Mr Bryers’ companies.

Under Blue Chip, the development was known as the Emily and it was to have had 149 units. 85 were sold and investors paid an estimated $11.2 million in deposits.

Emily Projects bought the property after it was put up for mortgagee sale in 2008 by the NZ Guardian Trust Co Ltd, owed $4.475 million. The purchase price covered the Guardian Trust debt and Guardian Trust stayed in behind ANZ Banking Group Ltd as second mortgagee on the new project.

Earlier stories:
17 February 2017: SFO alleges fraud in Celestion development loan deal
9 October 2009: Apartments at centre of Blue Chip case go on market
8 May 2009: Ross’ Emily Projects starts work on ex-Blue Chip site

Attribution: Court hearing.

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$8 million Masala assets forfeiture agreed

The High Court has agreed to an $8 million assets forfeiture order between the Commissioner of Police and 8 companies & 2 individuals associated with the Masala restaurant chain.

Justice Rebecca Edwards said in her decision approving the settlement today: “The settlement sum of $8 million represents almost all of the unlawful benefit said to have been derived from the tax evasion offending. The settlement sum is expected to be met in full through the sale of restrained properties. Forfeiture in that amount meets the deterrence purposes of the forfeiture regime as set out in section 3 of the Criminal Proceeds (Recovery) Act. It also reduces the ability of those associated with the criminal activity to continue with that criminal enterprise.”

Inland Revenue, Immigration NZ & the Department of Labour began investigations in 2012 into companies & individuals involved with Masala. Justice Edwards said: “Those investigations identified widespread & systemic tax evasion & immigration-related offending by those involved with the Masala group….

“It has also been agreed as a condition of the proposed settlement that upon the assets forfeiture order being discharged by the Official Assignee, Inland Revenue will refrain from taking any steps to recover the outstanding tax, any related penalties & use-of-money interest.

“Neither this undertaking nor the settlement affects the ability of Inland Revenue to bring criminal charges for the conduct underlying the proceeding against the respondents, for example, in relation to tax evasion.

“As that particular condition does not concern the forfeiture of assets, it falls outside the terms of the settlement to be approved by the court.

“The respondents have also executed separate deeds of agreement as between themselves which relate to certain of the properties. Those agreements do not form part of the settlement for which approval is sought by the court.”

The 10 Masala group parties to the settlement were Joti Jain & Supinder Singh individually and 8 companies – Investments Ltd, JKK Holdings Ltd, JKK Trustees Ltd, Bluemoon Group Ltd, Akl Sunrise Co Ltd, DC Empires Ltd, CHK Investments Ltd & SRKK Group of Trustees Ltd.

Ms Jain & Rajwinder Singh Grewal were sentenced in 2015 to home detention and ordered to pay reparations on a long list of immigration & exploitation charges.

Attribution: Judgment.

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SFO alleges fraud in Celestion development loan deal

The developer of the Waldorf Celestion apartments hotel at the foot of Anzac Avenue in Auckland, Tasman Cook Ltd owner Leonard Ross, and 3 associates were charged in the Auckland District Court yesterday on 4 Crimes Act counts of obtaining by deception and 2 of using forged documents.

The defendants with Mr Ross (50) are company director Michael James Wehipeihana (45), self-employed consultant Vaughn Stephen Foster (54) & one other. Their next appearance in court is scheduled for Wednesday 12 April.

The Serious Fraud Office, which laid the charges, said name suppression had been lifted on 2 of the defendants and wasn’t sought by another.

SFO director Julie Read said the charges arose in relation to allegedly making false statements & using forged documents to obtain a credit facility from the ANZ Bank NZ Ltd to allow the project company, Emily Projects Ltd, to develop the Waldorf Celestion, which opened in 2009. It’s alleged that a loan facility of about $40 million was obtained.

“The SFO alleges that the defendants conspired to mislead ANZ to secure a loan facility. The banks are entitled to expect that businesses will provide accurate information in support of their loan applications and a failure to do so may have cost implications for all.”

Emily Projects, 88% owned by Mr Ross, went into voluntary liquidation on 22 December 2011. Original liquidator Chris Horton was replaced in 2014 by Tim Downes & Greg Sherriff (Grant Thornton), who said in their final report in 2015 they’d recovered $610,244 of assets. 2 unsecured creditors claimed $671,000 and 53 investor claims totalled $2,890,951.

The one distribution to unsecured creditors was 11.8c in the dollar for a total $420,310.

The whole project was controversial because Mr Ross, who’d developed property for Mark Bryers’ Blue Chip NZ Ltd, acquired the Celestion site at mortgagee sale from a lender to Blue Chip.

A Blue Chip company bought the 1081m² site between Anzac Ave & Emily Place, on the eastern fringe of the cbd, for $4 million in 2004 and it was transferred in 2006 for $10.9 million to another of Mr Bryers’ companies.

Under Blue Chip, the development was known as the Emily and it was to have had 149 units. 85 were sold and investors paid an estimated $11.2 million in deposits.

Emily Projects bought the property after it was put up for mortgagee sale in 2008 by The NZ Guardian Trust Co Ltd, owed $4.475 million. The purchase price covered the Guardian Trust debt and Guardian Trust stayed in behind ANZ Banking Group Ltd as second mortgagee on the new project.

Earlier stories:                    
9 October 2009: Apartments at centre of Blue Chip case go on market
8 May 2009: Ross’ Emily Projects starts work on ex-Blue Chip site

Attribution: SFO release.

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Meridian fails to overturn windfarm rating differential

Meridian Energy Ltd has failed in a High Court judicial review to convince Justice David Collins that Wellington City Council acted unlawfully by dividing Meridian’s windfarm properties in 2 for rating purposes.

The council relied on the use to which the land was put and the value of the wind farms, and used these criteria to set differential rates for the windfarm facilities and the rural land where they were built. The council placed the windfarm facilities portion of the rating units into the council’s commercial, industrial & business differential rating category.

Justice Collins said section 27(5) of the Local Government (Rating) Act 2002 enabled a local authority to divide rateable units into 2 or more parts when setting differential rates, and he was satisfied that the council didn’t act unlawfully.

The judge wrote his judgment in 2 parts, first setting out the background and explaining how rates are set, assessed & collected, the council’s rating instruments, how the council set the rates in this case and the basis of Meridian’s claim for judicial review. In the second part he analysed the issues and explained the reasons for his conclusions.

Link: Meridian v Wellington City Council decision

Attribution: Judgment.

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Moral victory only – no money – for bank clients in swaps case

High Court judge Dr Matthew Palmer issued a moral judgment on Monday in favour of a Taranaki farming couple who lost heavily in a swaps deal with the National Bank when the global financial crisis hit in 2008 – moral only, because he said the law precluded awarding damages.

The judge explained his predicament in the case of dairy farmers Craig & Lisa Swan, who borrowed $6 million from the National Bank to buy a dairy farm through their company, Cygnet Farms Ltd.

Theirs is the first of several cases brought by farmers who entered similar interest rate swaps agreements with banks a decade ago.

Justice Palmer said: “The difficulty with the outcome of this case lies in the lack of availability of damages as a remedy. Damages in tort restore the plaintiff to the position of the tort, the misrepresentation, not having occurred. Damages in contract restore the plaintiff to the position where the contract is performed on the basis the misrepresentation is true. And section 6(1)(b) of the Contractual Remedies Act provides that only contractual, not tortious, damages are available where a party to a contract has been induced to enter into it by a misrepresentation.

“This leads to an unfortunate result: (a) Liability for pre-contractual misrepresentation in contract is excluded by clause 10.1. (b) The Fair Trading Act claim is out of time. (c) Although I have found the bank liable in negligence & negligent misstatement, section 6(1)(b) of the Contractual Remedies Act precludes me from awarding Cygnet damages.”

Justice Palmer said he would send his judgment to the Law Commission to consider.

“This situation is unfortunate, given the equitable maxim ‘where there is a right there is a remedy’. But I consider that is the effect of the law. In precluding damages in negligence, for a misrepresentation inducing a party to enter a contract, Parliament created a gap in the law in 1979. The gap does not appear to have been highlighted directly by a case until now. Parliament intended the law of the contract, not torts, to govern the availability of damages. It is not clear to me Parliament appreciated the possibility that there could be no liability in contract and liability in tort, but no damages in tort. However, any change to the law must be made by Parliament.”

The Swans sought a declaration from the judge, which he delivered: “I declare that, in promoting & entering into interest rate swaps with Cygnet, the National Bank, now ANZ Bank NZ Ltd, breached the duties arising from its relationship to take reasonable care that explanations it proffered were accurate and that its replies to inquiries were correct.”

ANZ Bank NZ Ltd bought National in 2003 but retained the separate brand until 2012.

The judge said he was inclined to award costs to the Swans because they’d succeeded on liability and in obtaining declaration, if not damages, but asked for submissions from the parties on costs.

In a summary of the case, Justice Palmer said: “The bank represented to Cygnet that interest rate swaps were like a fixed rate loan but with upside & flexibility. It did not explain 3 potential downsides to swaps compared with fixed rate loans. It represented a swap was suitable for Cygnet. And it represented it would provide proactive advice to Cygnet about managing the risks & opportunities of its swaps. In January 2008, Cygnet agreed with the bank to structure a loan of nearly $4 million in the form of 2 interest rate swaps. In its contractual documentation the bank sought to exclude its liability.

“The swaps were disadvantageous for Cygnet when the GFC hit in mid-2008, since it could not take advantage of a precipitous fall in floating rates. In addition, Cygnet suffered from the swaps in a number of ways which would not have affected fixed rate loans and which it did not know about in advance:

(a) the bank imposed an additional credit limit on Cygnet in relation to the swaps, which it would not have done for a fixed rate loan, and which later affected the margin it charged Cygnet

(b) the break fees were calculated differently, and were higher, than for fixed rate loans, and

(c) the bank increased the margin it charged on the underlying loan, which it could not do on fixed rate loans.”

Attribution: Judgment.

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Judgment on Green empire doesn’t end hostilities

The Court of Appeal issued a judgment on Friday in the ongoing battle for control of the late Hugh Green’s property & business empire between his eldest 2 children, John & Maryanne.

It’s unambiguous, but it doesn’t end the battle over a business empire worth an estimated $400 million, best known for its land subdivisions around Auckland.

The 3 judges – Stephen Kós, appointed president of the court shortly before the hearing in July, with Justices Rhys Harrison & Christine French – went into detail in support of Justice Helen Winkelmann’s High Court finding against John Green of undue influence resulting in will & role changes in his father’s final 2 years. Justice French wrote the court’s reasons.

Justice Winkelmann is also now on the Court of Appeal bench, appointed on 1 June 2015, 2 days before issuing her decision in this case. She heard the Greens’ dispute in 2014, when she was chief judge of the High Court.

Hugh Green wanted John Green and another sister, Frances, to become more involved in running the family business. But Maryanne, who’d joined it in 1987 and was chief executive for most of the time since then, questioned John’s honesty over cattle transactions before he left for Australia in the 1990s and rejected her father’s desire for her to run the group with John.

Hugh Green emigrated from Ireland in 1951 and formed Green & McCahill Ltd with another Irishman, Barney McCahill. In the early 2000s they dissolved their partnership, by then a complex group with wide property, trading & investment interest, and the Green family carried on under the Hugh Green Group name. Mr Green was diagnosed with a terminal illness in 2010 and, over the next 2 years, tried to work through family plans for the businesses’ future. He died in July 2012, aged 80.

Justice Winkelmann held that trust resolutions in December 2011 appointing John & Frances as directors weren’t validly passed by the required majority. She also held that grounds were made out for the removal of John & Frances as trustees on the grounds that the level of hostility they felt & exhibited toward Maryanne and her adopted daughter Alice “is sufficient to undermine the execution of the trusts for the benefit of all beneficiaries”.

Over a period of 9 months Hugh made a number of decisions, the combined effect of which was to remove Maryanne completely from control of any aspect of the Green Group and to put John & Frances & Auckland barrister Michael Fisher – who was also John Green’s golfing partner – in charge.

The level of influence

In the Court of Appeal judgment, Justice French wrote: From 7 November 2011 onwards, Mr Fisher purported to act as Hugh’s primary legal advisor. He played a central role in the events at issue. It was Mr Fisher who advised Hugh that Maryanne was in breach of her duty as a trustee for refusing to co-operate, even though he did not know the detail of just how Maryanne’s refusal to co-operate had manifested itself.

“It was Mr Fisher who suggested and then drafted a letter from Hugh purporting to put Maryanne on notice that she was at risk of being removed. And it was Mr Fisher who was responsible for drafting the formal documents effecting Maryanne’s removal and his own appointment as trustee & director. He organised critical meetings, expressed strong antipathy to Maryanne and generally aligned himself with John.”

Justice Winkelmann had already noted that Mr Fisher’s involvement was irregular from the outset. Justice French: “Although he had acted from time to time for the family & their interests, he was not the usual lawyer acting for the [family] trusts. He was a barrister specialising in civil litigation. He had no instructing solicitor and he did not obtain a letter of engagement.

“Another irregular feature of Mr Fisher’s involvement was that most of his instructions, including the initial instruction to act, came not from Hugh but from John. John & Mr Fisher had known each other since teenage years and played golf together. In addition to taking his instructions from John, Mr Fisher also used John as a post box for documents he had prepared for signing by Hugh & [Hugh’s wife] Moira.

“John claimed in evidence that when instructing Mr Fisher he was simply passing on Hugh’s instructions. John further claimed that Mr Fisher ‘always’ confirmed with Hugh the instructions he had received from John.

“Justice Winkelmann did not, however, accept John’s claims and we consider with good reason. Mr Fisher did not have any file notes of discussions with Hugh. His phone records did not contain evidence of any telephone discussions with Hugh. Nor did his time sheets, apart from 2 or 3 entries. In contrast, his records showed extensive contact with John. The communications between the 2 include a very telling email in which John asks Mr Fisher to meet to discuss ‘tactics’.

“Another troubling feature of Mr Fisher’s conduct is that he acted at John’s direction even when it was John (and indeed Mr Fisher himself) who stood to benefit personally from those directions.”

The judges noted evidence that, “within 24 hours of signing the deeds removing Maryanne as trustee, Hugh was both denying having removed Maryanne and giving the impression he really did not know why she had been removed, did not know who had prepared the papers and who had brought them to him to be signed. He caused the deed of removal to be torn out of the trust minute book and handed it to Maryanne, saying ‘You are my trustee’.

“Another telling piece of evidence relates to events in January 2012 regarding Maryanne’s status as trustee. As mentioned, Hugh had said he wanted her to continue. That was said on 21 December 2011. Yet in January 2012 John was pressing ahead to implement her removal as trustee. On 12 January 2012 Mr Fisher received instructions from John to prepare documents that referred to Maryanne as having been removed as trustee. John’s instructions to Mr Fisher were not only at odds with what Hugh had said on 21 December, they were also at odds with what Hugh had told Mr [Robert] Narev [another trustee] on 11 January 2012. Hugh had told Mr Narev he assumed Maryanne had been reappointed. Hugh later reiterated to Maryanne on 2 separate occasions in April 2012 that she remained a trustee.”

Summing up this aspect of the case, Justice French said the presence or absence of independent advice is often a critical factor when deciding whether to draw an inference of undue influence: “In this case there was compelling evidence Hugh was not receiving independent advice. His chief advisor throughout the relevant period was a man who was not his usual lawyer, who had minimal contact with him and who was doing the bidding of the person exerting the pressure.

“In those circumstances we consider the judge [Justice Winkelmann] was correct to characterise Mr Fisher’s role as facilitating John’s influence, instead of neutralising it and protecting Hugh as he should have done.”

Justice French said that, although Hugh undoubtedly wanted to appoint John & Frances as trustees and for the children (now in their 50s & 60s) to work together, “it does not logically follow he also wanted to remove Maryanne completely”.

In conclusion on the substantive judgment, Justice French wrote emphatically: “The High Court judgment contains a thorough & comprehensive analysis of the evidence. In our assessment, there was a solid evidential basis for all the findings and they are findings with which we agree, having ourselves independently reviewed the evidence. The findings are supported not only by Maryanne’s narrative, but also importantly by contemporaneous documentation, including John’s own written communications. The judge did not misapply the law. Nor did she misconstrue the facts. The appeal against the substantive judgment is dismissed.”

The appointment & removal orders

Justice Winkelmann made an order recalling the grant of probate for the will dated 26 April 2012, and a series of orders on appointments:

  • Declarations that Mr Fisher & lawyer John Gosney weren’t validly appointed as trustees of the Hugh Green Trust or the Hugh Green Property Trust
  • An order removing John & Frances as trustees of the 2 trusts
  • A declaration that Maryanne is a director of all group companies from which she was removed as a director from 2 April 2012, and a declaration that she shouldn’t be liable as a director for any directors’ decisions or actions between 2 April 2012 and the date of the relief decision
  • A declaration that John, Frances, Mr Fisher & Mr Gosney weren’t validly appointed and were & are not directors of any of the companies in the Green Group
  • A declaration that Maryanne is a trustee of the 2 trusts
  • An order appointing 2 independent interim trustees of the 2 trusts until further order of the court, and
  • An order restraining Maryanne from exercising her power to vote as a trustee pending further order of the court and from attending trustee meetings unless called upon to do so by the interim trustees.

The continuing hostilities

Justice French said the Appeal Court had been told Mr Fisher & Mr Gosney did not intend to resume office as trustees. The judge added: “The reports show the interim trustees have put appropriate governance structures in place, are dealing with beneficiaries in a fair & even-handed manner, communicating with them and working well with Maryanne as their co-trustee.

“Notwithstanding this, the appellants say they are ‘devastated’ by the High Court decision because the outcome is the very antithesis of what Hugh wanted. Strangers are running the business and the only trustee who is a family member is Maryanne, and she does not enjoy the support of the rest of the family and therefore does not represent their interests. We were told that, apart from Maryanne & Alice, all the other beneficiaries (15 in total) support John & Frances and want the High Court decision quashed.”

At the Appeal Court hearing, they sought the reinstatement of either: both John & Frances, or one of them with the retention of Maryanne and the 2 independent interim trustees. An alternative & less favoured option was the removal of Maryanne, leaving the trust to be run solely by the independent trustees.

“After the hearing, counsel for John & Frances filed a memorandum dated 6 September 2016. The memorandum advised John & Frances wished to withdraw the submission that both or either of them should be trustees together with Maryanne. Removing Maryanne and having the trust operated by independent trustees only was now the preferred option.

“This possibility had not been advocated by the appellants at the hearing until it was raised by us. We raised it because of the obvious need for there to be a long-term solution and because of concern that Maryanne’s continued participation as trustee could fuel yet more discord & more litigation. This concern was shared by Justice Winkelmann and was the reason the judge made an order imposing interim limitations on Maryanne’s trusteeship.

“There is, however, a separate proceeding, as yet undetermined, that has been brought by the appellants in the High Court seeking to remove Maryanne as trustee. Maryanne consented to the interim limitations on the basis the appellants’ application for her removal as trustee would be promptly heard & determined. That has not happened.

“On further reflection, we consider that, quite apart from possible jurisdictional problems, it would be wrong for us to consider removing Maryanne without there having been a proper process where that issue has been directly & fully ventilated. Like Justice Winkelmann, we also wish to stress that our raising the possibility should not be taken to suggest we think Maryanne is unfit to be a trustee. The interim trustees report that Maryanne has demonstrated ‘a fair-minded, objective & responsible approach to all matters affecting the trusts & the beneficiaries’.”

Justice French said that, when Hugh Green’s 1 November 2011 will again takes effect, the power of appointment & removal of trustees will vest in Moira & Mr Narev, and Moira at least is closely aligned with John & Frances. That raised the prospect of the removed trustees being reappointed anyway, regardless of the outcome of this appeal.

However their counsel, Mark O’Brien, said that if the Court of Appeal upheld the High Court orders, “his clients could not & would not reinstate those whom a court did not consider fit to be a trustee”.

Control, and unequal treatment

The court action goes well beyond animosity between 2 siblings or the running of a business, extending to the treatment of their children, including Maryanne’s adopted daughter, and of one of Hugh & Moira Green’s 5 children, one of whom was a nephew who was adopted.

Justice Winkelmann found not only that hostility existed, but that it was of such intensity it was sufficient to undermine the proper execution of the trusts for the benefit of all beneficiaries.

“In support of that conclusion, the judge pointed to evidence of unwillingness on the part of the trustees to communicate directly with Maryanne & Alice, unwillingness to provide them with information and the failure to make any inquiry into Alice’s circumstances to establish her needs, despite her being a young mother who had recently separated from her partner. The judge considered this contrasted sharply with the way the trustees had considered and met the needs of John & Frances’ children….

“We note too that after Hugh’s death an issue was raised about Alice’s eligibility as a beneficiary under the Hugh Green Trust on the ground she is adopted. Proceedings have been issued (the interpretation proceedings). If Alice were to be excluded along with Hugh’s adopted nephew and the nephew’s children, it would mean that most of the wealth Hugh created would ultimately go to the 6 children of John & Frances.”

Permanent solution still not in sight

Justice French said the appellants might have been expected to deal with the matter by way of a consent court order & a deed of indemnity or family arrangement. After the court expressed disquiet that the appellants wanted to take this to a fresh High Court hearing, they filed a memorandum on 6 September advising that John, Frances & Moira would agree to consent orders.

Justice French said the Court of Appeal considered the issuing of these proceedings and the position taken by the appellants until very recently to be significant in 2 respects: “First, it reinforces Justice Winkelmann’s view that John & Frances cannot be relied upon as trustees to act in Alice’s interests and, second, it sits uneasily with the appellants’ claim to be only wanting to honour Hugh’s wishes.

“During his lifetime, Hugh made no distinction between family members who were adopted and those who were not. He treated all equally and, in particular, made distributions from the Hugh Green Trust to them all, including Alice.”

With that, the court saw no grounds for interfering with the orders Justice Winkelmann made in her relief decision.

The higher court also said the measures Justice Winkelmann put in place were working well, but were only a stopgap: “There is a need for a permanent solution, which ultimately can only be achieved by the family itself.”

On the contents of these 2 judgments, a permanent solution seems unlikely.

Hellaby millions may be cashed up

One large Green Group investment which might be turned to cash soon is its 27.2% holding in NZX-listed Hellaby Holdings Ltd. Australian automotive aftermarket parts company Bapcor Ltd made a full takeover offer for it at $3.30/share, which prices the Green interest at $87.7 million. Hugh Green Group has accepted the offer, but the independent committee of the Hellaby board has advised shareholders to wait until an independent report by Grant Samuel is received.

Managing director, chief executive & board committee member Alan Clarke said on Friday: “The preliminary view of the independent directors is that the proposed offer is opportunistic and does not represent fair value for Hellaby.”

Hugh Green bought his initial investment in Hellaby in the 1980s when it was the high-flying Renouf Corp Ltd and headed by Sir Frank Renouf.

Earlier stories:
27 September 2016: Australian auto parts company Bapcor bids for Hellaby
22 June 2015: Judge rules on Hugh Green family’s feud

Attribution: Judgments, NZX.

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Supreme Court rejects individual owners’ case against body corp on leaky repairs

The Supreme Court has rejected an appeal by 5 of the 22 owners of the Bridgewater Bay block of apartments in Paihia who opposed a comprehensive repair that the majority wanted.

The 5 applicants contended that the comprehensive $3 million repair estimated by the body corporate was outside the powers of the body corporate under the Unit Titles Act 2010 and that only targeted repairs to some units were necessary.

The 5 owners lost their case in the High Court and on all 6 grounds in the Court of Appeal. They wanted to contest the decisions on 5 of the 6 grounds.

The first of those 6 grounds concerned the relationship between 2 sections of the Unit Titles Act, sections 138(1)(d) & 80(1)(g). Section 138(1)(d) requires a body corporate to repair & maintain “any building elements & infrastructure that relate to or serve more than one unit”. Section 80(1)(g) requires an owner of a unit to repair & maintain the unit to ensure that no damage or harm is or has the potential to be caused to the common property, any building element, any infrastructure, or any other unit in the building.

The Supreme Court said: “The applicants wish to argue that the latter takes priority over the former and that, on the facts of the present case, that means that they as owners should determine what repairs to make to their respective units, rather than having a comprehensive repair undertaken by the body corporate.”

However, the Supreme Court bench of Justices Sir Willie Young, Sir Mark O’Regan & Dame Ellen France saw little prospect of the applicants overturning the ruling of the Court of Appeal, which found that section 138 provided the authority for the body corporate to carry out work required to address water ingress into the common property.

The case was brought by Derek & Carol Wheeldon & 4 other owners against body corporate 342525.

Supreme Court decision
Court of Appeal decision, 7 June 2016

Attribution: Court judgments.

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Turnbull arrested 8 years after fleeing to Hong Kong

Former Auckland property developer Simon Lawrence Wood Turnbull (43) was arrested at Auckland International Airport on Wednesday on 38 Crimes Act charges and was remanded without plea when he appeared in the Auckland District Court.

The charges the Serious Fraud Office has laid against him are: 9 counts of dishonestly taking or using a document, 19 counts of obtaining by deception or causing loss by deception and 10 counts of using forged documents.

Mr Turnbull left New Zealand on a flight to Hong Kong on 24 March 2008 and didn’t return until Wednesday.

The downfall of one part of his business activities, relating to developments at Gulf Harbour, was captured in liquidation reports 7-8 years ago, but these charges relate to his alleged involvement in a $47 million mortgage fraud where false loan applications were submitted to a fund management company to buy 19 properties around Auckland, between September 2006-August 2007. Another Auckland property developer & investor, Malcolm Mayer, was sentenced to 6 years’ jail in February 2014 for his role.

An arrest warrant was issued for Mr Turnbull when he failed to appear at his first court date in November 2014.

Mr Turnbull was adjudicated bankrupt on 29 January 2009, on the application of Hong Kong Shanghai Banking Corp Ltd, and hasn’t been released from bankruptcy.

One of his ventures with a business partner, Der Rohe Holdings Ltd, developed 42 apartments at 9 Shaddock St, Eden Terrace, but was wound up in 2008. Other companies he was involved with included Acsonim Architecture Ltd, Acsonim Treasury Ltd, Central Property Management Ltd, Crash Palace Ltd, Fairway Mansions Ltd, Makeovers By Design Ltd, Onethree Holdings Ltd, San La Mere Holdings Ltd, Two Holdings Ltd, UND Investments Ltd, VHI Properties Ltd & Victoria Property Holdings Ltd.

Earlier stories:
18 February 2014: Propbd on Q T18Feb14 – Mayer jailed for 6 years, Precinct profit soars & waterfront deal looms
22 December 2013: Mayer guilty of $47 million fraud, sentencing February

Attribution: SFO release.

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Supreme Court rejects Mangawhai Ecocare case

The Supreme Court has declined the Mangawhai Ratepayers & Residents Association’s application for leave to appeal against the Court of Appeal’s dismissal of its claim against the Kaipara District Council, and awarded the standard $2500 costs against the association.

The ratepayers association lost its case in the High Court primarily because of the Kaipara District Council (Validation of Rates & Other Matters) Act, passed in December 2013. The association’s case was heard in February 2014 and was unable to overcome the validation act.

In the High Court, Justice Paul Heath said he was satisfied that, had the validation act not been passed, the association would have succeeded in obtaining the relief it originally sought in relation to the council rating decisions over the Mangawhai Ecocare wastewater system.

But the validating law was passed, the illegal borrowings were deemed to be protected transactions under the Local Government Act, and neither Justice Heath nor the 3 Court of Appeal judges could see their way past those barriers.

The Supreme Court bench of Chief Justice Dame Sian Elias & Justices Terence Arnold & Mark O’Regan said the association sought to argue that the operation of the protected transactions provisions didn’t affect the lawfulness of rates set by the council. The association said those provisions affected only the contractual relationship between the council & the creditor, and had no effect on the statutory relationship between the council & the ratepayer. “That then provides the foundation for an argument that rates that have been set by the council for the purposes of meeting its obligations in respect of the protected transactions are unlawful because the purpose for which they are set is, itself, unlawful. The association wishes to argue that its interpretation becomes clearer when the protected transactions provisions are interpreted in a manner that gives effect to the right of review in section 27(2) of the NZ Bill of Rights Act.”

From there, the Supreme Court gave its answers on the 3 points the association raised:

“The question as to whether a local authority can set rates to service the performance of obligations under a protected transaction is a question of general or public importance, as the council accepts. But, in the face of the clear wording of section 118, the association’s argument cannot succeed. There is no scope for a narrower interpretation. We do not therefore see this case as an appropriate one to address the proposed question. Nor do we see any risk of a miscarriage if leave is not given on this point.

“The second point relates to the 2013 act. The association wishes to argue that the validation of rates effected under section 5 of that act, which declares that the rates ‘are valid & declared to have been lawfully set by the council’, has a narrower meaning than appears on its face, particularly if the provision is interpreted in a manner which is consistent with the right of judicial review under section 27(2) of the Bill of Rights.

“The association says that the effect of the 2013 act is to validate only the irregularities listed in the preamble to the 2013 act, and the fact that the rates were assessed in relation to illegal borrowings and that the council failed to consult with ratepayers were not specifically referred to in that preamble. The association wishes to argue that its narrow interpretation is more consistent with the Bill of Rights.

“Legislation validating illegally struck rates is not uncommon, and therefore the interpretation of the 2013 act could be a matter of general importance. However, we see the 2013 act as unique, and the arguments relating to its interpretation as specific to the present facts.

“Nor do we see any risk of miscarriage in the event that leave is not granted on this point. We are not persuaded that it is arguable that the 2013 act can be interpreted other than as a validation of all irregularities, not just those recited in the preamble. We are not persuaded there is room for a narrower Bill of Rights-compliant interpretation.

“The third matter concerns the costs award made in the Court of Appeal. The association submitted in that court that costs should lie where they fell because the litigation was public interest litigation. The Court of Appeal did not consider that there was any proper basis to depart from the normal rule that costs follow the result. It said that, although the association was motivated by considerations of principle, its members had a private interest in the outcome it pursued in the Court of Appeal.

“The association wishes to argue that the fact that, as ratepayers, members of the association would benefit from a favourable outcome should not have led to a conclusion that a concessionary approach to costs should be applied because the litigation was public interest litigation. We see this as a facts-specific inquiry and not a matter that can be classed as of public significance. We also see no risk of a miscarriage of justice if leave is not granted on this point.”

Rogan reaction

Association chair Bruce Rogan commented on the Kaipara Concerns website: “The champagne corks will be popping in every council office in New Zealand because it now means that when a council borrows money it no longer has to comply with the Local Government Act or the Local Government (Rating) Act. Even monies raised for an unlawful purpose become the responsibility of ratepayers.

“It is also a sad reflection on the attitudes of our courts that the High Court, the Court of Appeal & the Supreme Court adopted with some gusto the meaning of 2 enactments – the Mangawhai Validation Act & the protected transaction provisions in the Local Government Act – that endorsed the approach of local government, but which could not be justified on the plain meaning of the words or on the basis of the legislative history.

“In spite of the Supreme Court stating that there has been no miscarriage of justice, a great injustice has been perpetrated on the people of Kaipara. That also applies to the people of New Zealand, but they remain in ignorance of the true significance of the decisions that have been made. It is also a very sad day for the rule of law in New Zealand.”

I began covering this case, including the High Court hearing in Whangarei, because clear injustice was overruled by the validation act, and I was curious to see if any other approach might see the ratepayers recover any of the $58 million of Ecocare debt that was mostly raised on their behalf but in their ignorance.

The only avenues appeared to be to argue that lenders hadn’t undertaken adequate due diligence and that the office of the Auditor-general was negligent in its auditing.

In March, the council, run by commissioners since 2012, reached a settlement with the office of the Auditor-general for a payment of $5.375 million.

Kaipara Concerns

Earlier stories:
31 March 2016: Auditor-general settles with $5.375 million payment to Kaipara council
18 December 2015: Resounding Appeal Court defeat for Mangawhai ratepayers
27 August 2014: Kaipara council to sue ex-ceo & Audit NZ, looking at ex-mayors, councillors & consultants
28 July 2014: Judge tells Mangawhai ratepayers to pay up, also awards them indemnity costs in more elaborate decision
28 May 2014: Judge to issue hamstrung Mangawhai ratepayer group indemnity costs, accepts new validation law, wants more debt options considered
23 June 2014: Kaipara commissioners get debt report, obliged to adopt annual plan, and Mangawhai group says it will appeal case
30 May 2014: Commissioner says Mangawhai rates liability now “crystal clear”

Attribution: Court decision, Kaipara Concerns.

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