Archive | High 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).

Link:
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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$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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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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Judge rules on Hugh Green family’s feud

Justice Helen Winkelmann has ruled in favour of the late property magnate & cattle trader Hugh Green’s daughter Maryanne in trust & company disputes between his children, but left a number of questions open to further submissions.

Control of business interests worth hundreds of millions of dollars are at stake.

Justice Winkelmann found Maryanne failed to establish that Hugh lacked capacity when he exercised powers appointing his son John, second daughter Frances & barrister Michael Fisher, and removing Maryanne, as trustees and as directors of all Green Group companies.

However, the judge found Hugh was subject to undue influence exercised by John when he acted to remove Maryanne as a trustee and as a director, and voted for Mr Fisher as a director.

The judge ruled the will Mr Green executed on 26 April 2012, 3 months before he died aged 80, was invalid because he was subject to undue influence. That also made the appointment of John Gosney as a trustee invalid because he was appointed by the executors of that will. However the judge said she would hear counsel further on that issue.

Justice Winkelmann also deferred hearing further submissions on which of Mr Green’s testamentary dispositions were valid.

The judge said her preliminary view was that she should remove Mr Fisher as a trustee, reinstate Maryanne as a trustee and declare Mr Fisher’s votes on those appointments invalid. However, she said she’d also hear counsel further on this matter.

The judge 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 daughter Alice “is sufficient to undermine the execution of the trusts for the benefit of all beneficiaries”.

Justice Winkelmann was chief high court judge when she heard the dispute in 3 sessions last year, but was appointed to the Court of Appeal effective 1 June. She issued her decision on 3 June but withheld it for a week in case parties wanted any details suppressed – some specifics, notably monetary amounts, have been redacted – then called the parties back to court on Thursday to consider the appointment of new trustees.

In her 3 June decision, Justice Winkelmann said it was necessary to put interim arrangements in place before ordering the removal of John, Frances, Mr Gosney & Mr Fisher as trustees.

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.

Mr Green wanted John & Frances to become more involved. But Maryanne, who’d joined the business 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.

Link: High Court judgment, GreenvGreen.pdf 

Attribution: Judgment.

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CTV engineer can’t escape discipline by resigning from IPENZ

Structural engineer David Harding won’t be able to escape disciplinary proceedings brought against him by the Institution of Professional Engineers of NZ (IPENZ) by resigning from the institution.

Mr Harding led the design in 1986 of the Canterbury Television building in Christchurch, where 115 died when it collapsed in the 22 February 2011 earthquake.

An IPENZ investigating committee determined in April that a complaint against Mr Harding should be referred to a disciplinary committee but, before it met, Mr Harding resigned his membership of IPENZ on 25 June.

The institution went ahead with a hearing anyway, on 14 August, but Mr Harding took objection to the jurisdiction of IPENZ in light of his resignation the previous month. After considering his objection, IPENZ proceeded on the basis that it did have jurisdiction and subsequently, in August, released its ruling on that issue. Its substantive decision in relation to the complaints was stayed pursuant to an undertaking pending resolution of jurisdiction.

Justice Cameron Mander heard Mr Harding’s application for judicial review in the Christchurch High Court on 9 September and said in his decision, issued on Wednesday: “In my view, the reference to ‘member’ must be considered against the objects & purpose of the complaint process and the disciplinary procedure provided by IPENZ’s rules & regulations. A complaint focuses on an individual’s conduct. If the individual at the time of the conduct complained of was a member of IPENZ, then jurisdiction is triggered by force of the contractual relationship that existed at the time of the conduct and at the time of the complaint.”

Attribution: Judgment.

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Propbd on Q T26Aug14 – Kaipara council sues ex-ceo & Audit NZ

2.30pm:
Kaipara commissioners go to court against ex-ceo & Audit NZ

Kaipara District Council’s commissioners resolved today to take legal action against Government watchdog Audit NZ and against the council’s former chief executive, Jack McKerchar, over the Mangawhai community wastewater scheme.

Mr McKerchar resigned in 2011 with a financial settlement agreed by councillors, who hadn’t at that stage been replaced.

The Mangawhai Ratepayers & Residents Association has appealed against the High Court decision of Justice Paul Heath in its claim against the council over the scheme. That case reached the courtroom only after Parliament had passed a local bill validating illegal action, which greatly reduced the association’s prospects of winning.

Chairman of the commissioners, John Robertson, said the council had decided not to pursue the former mayor & councillors because of the limited chances of success, but had asked the Auditor-general, Lyn Provost (appointed since the Mangawhai events began to unfold), to reconsider her decision not to hold any elected members to account.

Last story, 28 July 2014: Judge tells Mangawhai ratepayers to pay up, also awards them indemnity costs in more elaborate decision

Attribution: Council releases.

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Banbrook gets home detention

National Finance 2000 Ltd director, lawyer Tony Banbrook, 66, was sentenced in the Auckland High Court yesterday to 8½ months’ home detention and ordered to pay $75,000 in reparations on one charge of making untrue statements in a registered prospectus.

He’s the last of National Finance’s 3 directors to be sentenced.

Executive director Allan Ludlow, 53, was sentenced in July 2011 to 5 years 7 months’ jail on 7 charges brought by the Serious Fraud Office, and in January 2012 to another 9 months’ jail on a further 8 charges brought by the Financial Markets Authority.

His ex-wife, Carol Braithwaite, 53, was sentenced in September 2012 to 10 months’ home detention & 300 hours of community work for distributing a registered prospectus which included untrue statements.

All 3 were banned in 2008 from being company directors – Mr Ludlow & Ms Braithwaite for 4 years 6 months and Mr Banbrook for 4 years – and last year’s convictions mean Mr Banbrook & Ms Braithwaite were automatically banned for another 5 years.

National Finance 2000 traded as a finance company, accepting deposits from the public and investing those deposits mainly in vehicle loans, through dealers including the related Payless Cars group. Receivers were appointed to National Finance 2000 & 5 other companies in the Payless Cars group in May 2006, and the receivers sold the loan book to Cynotech Holdings Ltd (chairman Allan Hawkins) in October 2006. Liquidators were also appointed in 2008.

National Finance 2000 held deposits of $25.5 million on behalf of 2026 investors when the receivers were called in, and they repaid 49% ($10.6 million) by their final payment in 2009.

Mr Banbrook pleaded guilty last June to the charge against him, brought by the Financial Markets Authority, but managed to get sentencing delayed while he took a Fijian holiday.

The authority’s head of enforcement, Belinda Moffat, said Mr Banbrook was the 20th finance company director to be sentenced as a result of action taken by the authority.

The authority alleged the National Finance directors made untrue statements in its September 2005 registered prospectus, including those relating to its provisioning for bad debts, the loans it made to related parties, the purpose for which those loans were made, the security provided for them and their amount relative to National’s total tangible assets, and the security provided by borrowers for the loans made by National.

Attribution: FMA release.

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Gapes’ marital dispute in court over caveats stopping sale of Fenton Circus home

Published 21 November 2012

A marital dispute holding up the sale of Redwood Group director Tony Gapes’ Orakei home is set to be resolved next Tuesday, leaving court action over damages to follow.

Mr Gapes & his wife, Nicola, separated about 2 years ago but the family home is only now heading for a sale. Settlement is scheduled for 6 December, but was hindered by caveats & notices of claim registered on the 2 titles.

In the Auckland High Court today, Mrs Gapes’ lawyer, Chris Patterson, said the caveats had been removed but there was a question of whether the notices of claim should also be removed.

Counsel for Mr Gapes’ company, Redwood Group No 2 Ltd, Deborah Hollings QC, told Justice Rod Hansen release of the deposit was fairly urgent because it was stopping the company paying its wages. Mrs Hollings said the caveats hadn’t quite left the title – notice of the withdrawal of the caveats & notices had been given.

Justice Hansen agreed with Mrs Hollings that the matter was urgent and ordered a hearing for next Tuesday.

The 647m² house at 5 Fenton Circus, a prime spot above Paritai Drive in Orakei, was worth about $9 million at the peak of the market but will be sold for a figure in the $6 million range.

Mr Gapes’ Redwood Group developed Eden Village on a 3.5ha former timber treatment plant between Mt Eden & Normanby Rds, Mt Eden, and the Apex Mega Centre across Mt Wellington Highway from Sylvia Park. The company has also been trying to develop Orakei Point, a residential project around the Orakei railway station at the foot of Remuera.

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Attribution: Court hearing, story written by Bob Dey for the Bob Dey Property Report.

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Karapiro Wellness Resort dispute heads to new hearing

Published 5 October 2012

A claim for general damages arising out of a dispute between former partners in the Karapiro Wellness Resort outside Cambridge was adjourned without being heard in the Auckland High Court yesterday.

The $35,000 claim by Chinese doctor Ma Tian Min (Maggie Ma) against property developers Tony & Selina Tay followed Dr Ma’s successful $400,000 summary judgment action against the Tays in May.

The Tays’ appeal against that judgment was dismissed and Mr Tay decided to sue over alleged threats of violence. In the summary judgment case, Mr Tay said Dr Ma’s father, Professor Ma Jin Chun, had threatened “to use every means to destroy my preaching career by damaging my reputation amongst all the churchgoers” if he didn’t sign a liability document. But Associate Judge David Gendall found there was no undue pressure, certainly no physical pressure – from Dr Ma, who weighed less than 50kg, and Professor Ma, aged 72 – and the threat of disclosure at the church didn’t amount to illegitimate pressure.

In court yesterday, the Mas dropped their attempts to bankrupt the Tays but counsel for the Mas, Paul Dale, said he would continue with a claim for general damages for breach of contract & breach of an agreement to settle up with Westpac (NZ) Ltd over Dr Ma’s purchase of a unit at the resort – which Associate Judge Gendall found was a sham transaction on behalf of Tay interests.

Although Justice Raynor Asher noted that Mr Tay had settled the $360,000 Westpac loan – after the bank had got summary judgment for $403,000 against Dr Ma as the purported borrower – Mr Dale said Dr Ma was continuing with an action against the Tays for conspiracy to defraud, with the purpose of obtaining indemnity costs. Counsel for the Tays, Andrew Swan, said he would continue with the allegation of threats of violence and also a claim of misappropriation against Dr Ma.

The one area of accord in the complex mix of claims was that the 2 sides signed a deed of settlement yesterday over the bank loan, effectively staying execution of the May summary judgment decision.

Dr Ma migrated to New Zealand in 2002 and became a 40% shareholder in 2 Tay companies related to the health resort being developed outside Cambridge. She met the Tays through the Auckland Baptist Tabernacle Church, where Mr Tay was an elder.

Dr Ma said she’d signed a loan document to buy one of the 45 accommodation units there, but figures for the amount of the loan and her income (given as $190,000, although she said in evidence her actual income was about $60,000/year) were entered afterwards. A $90,000 deposit for the loan was required, but it was paid by Tay interests, not Dr Ma.

It emerged during the summary judgment proceedings brought by Dr Ma that the Tays had expressed liability for her bank debt in a heads of agreement signed in October 2011. Under that agreement, the Tays said Mr Tay would use Dr Ma’s $360,000 loan “as his injection, to inject into Jireh Health Ltd & Karapiro Management Ltd to keep the companies afloat”.

A transcript of a recording by Professor Ma, from a September 2011 meeting, disclosed that the Tays used supposed buyers’ names to get bank loans on 11 of the 45 units at Karapiro, there was no rent and bank interest was paid by the Tay Group through the purchaser’s account. The Tays said that way they could get a bigger loan on the properties.

The whole dispute will now go to a hearing likely to be set down for next year.

Earlier stories:

18 May 2012: Tony Tay found liable for investor’s loan to buy Karapiro unit

U: The names behind the action, the week to 13 May 2012, part 1, Karapiro resort shareholder & unit owner claims mortgage a sham to help developer Tony Tay’s companies stay afloat

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Attribution: Court hearing, story written by Bob Dey for the Bob Dey Property Report.

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