New Zealand Law Society - Supreme Court roundup 18-24 September

Supreme Court roundup 18-24 September

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New Zealand Supreme Court

Conflict of laws, protest to jurisdiction, negligent misstatement, FTA, Nevada law

Schaeffer v Murren and ors [2020] NZSC 98 (22 September 2020)

Unsuccessful leave application – S and respondents, M residents of Nevada in the United States – S acquired an 80 per cent interest in a Nelson vineyard and invited M (along with others) to invest in the vineyard through a Nevada limited partnership - Vineyard business failed and M lost all of their investment – S had not, in fact, transferred his original 80 per cent interest to the limited partnership, and had dealt with the assets as if they were his own - M commenced proceedings against S in the New Zealand High Court in 2015 - S protested jurisdiction based on an arbitration clause various agreements - Also sought a dismissal or stay , saying, New Zealand not the appropriate forum - Both protest and dismissal or stay application failed - No review or appeal of decision - Respondents’ claim heard in 2018 – HC said S liable for negligent misstatement and under the NZ Fair Trading Act 1986 (FTA) and the Nevada Deceptive Trade Practices Act NRS § 598.4 (Nevada Act) - Case proceeded on the basis of New Zealand law – S appealed to CA saying HC ought to have applied Nevada law – CA dismissed appeal – S applied to SC for leave to appeal - Three grounds proposed - Were: (a) whether HC correct to apply NZ law to negligent misstatements made and acted on in Nevada; (b) if HC erred in applying New Zealand law to negligent misstatement claim, whether that invalidated its FTA and Nevada Act findings; and (c) whether HC correct to apply FTA, given that s 3(1) limited FTA application to conduct outside New Zealand “to the extent that such conduct relates to the supply of goods or services, or the granting of interests of land, within New Zealand” – SC saw some room for argument as to soundness of the conclusion on FATA application but arguments fact-specific and did not give rise to any significant point of law - Even if SC disturbed findings on FTA and Nevada Act, would not affect case outcome, because the negligent misstatement finding, and damages awarded in respect of it, would remain – Application dismissed.

Estoppal, title indefeasibility, unregistered interest

Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZSC 99 (23 September 2020)

Unsuccessful leave application – E sought HC orders and declarations upholding interests E said it had in a 51-hectare forestry lot (the property) W owned - W then sought and was granted summary judgment – E unsuccessfully appealed to CA – Sought leave to appeal to SC – In HC E pleaded that W was estopped from denying E’s ownership of the trees and sought order that W owned the property subject to a constructive trust in E’s favour for the trees on the property - Main argument was W took title with notice of E’s rights under a lease agreement - Given that interests claimed were not registered and E not relying on its own dealings with W, HC said indefeasibility questions arose - Referred to Land Transfer Act 1952 - Concluding W entitled to summary judgment, HC said nothing preventing W from acquiring clear title – CA said E’s claim failed because no pleaded allegation of unconscionable conduct and no evidential foundation for such a claim - Only pleading was person who nominated W as purchaser had notice of the claimed lease agreement - Evidence did not support anything more than that - W entitled to summary judgment where E’s claim could not succeed on the facts or on the law as it applied to those facts – On leave application SC said CA view was that unconscionability required – Nothing E raised suggested error in approach in CA conclusion that, on the facts, E could not show unconscionable conduct sufficient for in personam claim – Application dismissed.

Companies, liquidation, director liability

Madsen-Ries and anor v Cooper [2020] NZSC 100 (24 September 2020)

Successful appeal from CA – M and L were Liquidators of Debut Homes Ltd (DH), a property developer – C was DH’s sole director – At the end of 2012 C decided to wind down DH operations – existing developments would be completed but no new developments undertaken – When C decided this there was a forecast deficit of over $300,000 in goods and services tax (GST) once wind-down was completed – Following IRD application, DH placed in liquidation on 7 March 2014 – HC said C had breached his duties under ss 131(1), 135 and 136 of the Companies Act 1993 (the Act) - Rejected defence under s 138 of reliance on professional advice – Ordered C to contribute $280,000 towards DH assets under s 301(1)(b)(ii) – It also, under s 299, set aside a general security agreement securing advances by a Family Trust - CA allowed C’s appeal against the findings of breach of ss 131, 135 and 136 and quashed HC orders - SC granted leave to appeal on the question of whether CA correct to allow C’s appeal – SC took a schematic approach to the Act - Said at all times, directors had to comply with their duties under the Act - When a company became insolvent, were statutory priorities for distributing funds to creditors and mechanisms to ensure these were not circumvented – Also were formal mechanisms in the Act, apart from liquidation, for companies experiencing financial difficulties - Informal mechanisms for dealing with insolvency or near insolvency could be used – However, these had to accord with the Act’s scheme and salient features of available formal mechanisms, such as ensuring all affected creditors being consulted and agreeing with the proposed course of action proposed - If a company reached the point where it was clear that continued trading would result in a shortfall to creditors and company not salvageable, then continued trading would breach s 135, unless formal or informal mechanisms set out above were used – S 136 would be breached if directors agreed to debts being incurred where there were no reasonable grounds to believe the company could perform its obligations when they fall due - Obligations did not need to arise from direct contractual arrangements between company and creditor - No s131 breach if director honestly believed they were acting in the best interests of the company – Section would be breached if director, in an insolvency or near insolvency situation, failed to consider the interests of all creditors - Where there were breaches of duty, any relief ordered under s 301 had to respond to and provide redress for the particular duty or combination of duties breached – Here DH clearly insolvent by the beginning of November 2012 and should have stopped trading at that point unless a viable formal or informal mechanism for insolvent companies was used – This did not happen - C did not consider all creditors’ interests and involve all creditors, in particular, the IRD - At no later stage did C revise his strategy - This breached s 135 - Breaching s 136, DH incurred debts (including GST) at a time when C knew they would not be paid - Breaching s 131, C considered only some creditors’ interests, despite DH being insolvent - This meant he did not subjectively believe he was acting in the company’s best interests as he failed to consider all creditors’ interests - His conflict of interest exacerbated breach, as he had personally guaranteed DH secured debts - On s 299, SC agreed with HC that it would frustrate the purpose of liquidators pursuing judgment against C if C and Mrs C as trustees of the Trust were able to reclaim the judgment’s benefit through the general security agreement and indirectly return any compensation to C - HC correct to set aside general security agreement to the extent that it did – HC compensation calculated on a restitutionary basis appropriate, considering the combination of breaches involved - Deductions made appropriate in all the circumstances - SC formal orders ware: 1) Appeal allowed; 2) HC orders restored - $25,000 costs plus disbursements to appellants - Costs in Courts below to be determined in accordance with SC judgment.

Murder, possibility of racial prejudice

Borell v R [2020] NZSC 101 (25 September 2020)

Unsuccessful leave application – B found guilty by a jury of murdering her partner, S - Applied for leave to appeal against CA dismissing her appeal against conviction – B accepted she had committed culpable homicide - Issue at trial was whether jury’s verdict should be one of manslaughter or murder – B’s account she had thrown a knife at S and inflicted the wound that way - Crown said she deliberately plunged the knife into S’s chest - Jury convicted B of murder – B appealed to CA on two grounds – Leave application focused on one, that trial unfair because no procedures in place to protect B from prejudicial effects of any racial bias the jury may have harboured – B Māori by descent and appearance, and, it was argued, there was widespread prejudice against Māori defendants in the criminal justice system – Referred to Canadian precedent – SC said whether risk of juror partiality in the form of racism (or in any other form) should be addressed in this country by means of Canadian procedure Canada a question of general or public importance, but did arise squarely in proposed appeal – Also, no basis upon which substantial miscarriage of justice may have occurred here- Application dismissed.

Supreme Court of Canada

Family law, common law spouses, child support

Michel v Graydon [2020] SCC 24 (18 September 2020)

Successful appeal from British Columbia CA – M and C “common-law” spouses - Had a child, A - A few years later, the relationship ended - AG went to live with M - G said his income was about $40,000 a year - Agreed to pay about $340 a month in child support based on income – While A growing up, M lived on social assistance - Because of this, she had to sign over her rights to child support to the government - Government collected child support and paid her social assistance - Government never tried to ask for more support for A - When A became an adult, the child support ended - M found out that G’s income had been higher than he said - She asked for retroactive child support based on his real income – G said too late to ask - Said court did not have power to make him pay now, because A not child anymore - Trial judge said G hid his real income, and this hurt A – G to blame –Ordered G to pay $23,000 in back child support, split between M and A - Appeal judges agreed with G that it was too late to order back child support – All SCC judges said G had to pay - They said courts could change past child support orders - Could do this even if child now grown up – Child support a right that belonged to the child - Parents could not negotiate it away - It should give child the same standard of living they had when their parents were together - All SCC judges agreed that back payments were fair - Parents always responsible for paying according to their income – All judges said courts need to consider the entire situation in deciding whether to make a parent pay retroactive child support - This included why a parent waited to ask for the support, behaviour of the parent who was supposed to pay, the child’s situation, and whether it would cause hardship - Majority said the reason M waited to ask for back payments was that she had been badly hurt and the government took over her right to support - G knew his income was higher than he was saying, so it wouldn’t have been a surprise to him that he had to pay more - Also knew how bad A’s living situation was because of lack of money, and instead of helping her, made hurtful comments about it - All judges agreed that preventing retroactive child support hurt women most - Said that support should be limited only where the law clearly said so - They said that although an older version of the law might have prevented child support for the past, the current law did not - In any case, it would be wrong to encourage people to avoid paying in case the other parent might wait too long to ask for it – Appeal allowed.

Hong Kong Court of Final Appeal

Uber drivers, driving without hire car permit

Yuong and ors v HKSAR [2020] HKCFA 29 (23 September 2020)

Unsuccessful appeal from Court of First Instance – Y and others were drivers of private cars for which hire car permit (“HCP”) not in force - Provided carriage services to passengers who requested a ride through the Uber App - Passengers paid a fare for each trip by credit card transfer to Uber, which in turn remunerated the drivers - Magistrate convicted each of them for driving a motor vehicle “for the carriage of passengers for hire or reward” (“the phrase”) without an HCP, contrary to section 52(3) of the Road Traffic Ordinance (Cap.374) (“s.52(3)”) - Was because they had allowed passengers to get in their cars solely for the purpose of the car rides that were to be paid, and they must have known and intended that the journeys were to be paid - Conclusion upheld on appeal to Court of First Instance - Both the Magistrate and the Judge rejected Y and others’ interpretation of the phrase, namely that it required proof that each driver was driving for the sole purpose of fulfilling a direct agreement for carriage between himself and the passenger from which he was to be rewarded – Court of Final appeal agreed with lower courts – Appeal dismissed.

Singapore Supreme Court

Drug trafficking, set aside, PTSD

Chukwudi v Public Prosecutor [2020] SGCA 90 (17 September 2020)

Successful set aside of previous drug trafficking conviction - C charged under s 5(1)( a) of the Misuse of Drugs Act (Cap 185, 2008 Rev Ed) (“MDA”), with trafficking of not less than 1,963.3g of methamphetamine found in a black luggage (“the Black Luggage”) which he had brought from Nigeria into Singapore and had handed to H on 13 November 2011 - In 2015, at the end of a joint trial the High Court judge (the “Judge”) acquitted C - The Prosecution appealed – CA reversed the acquittal and convicted C on the trafficking charge - Critically, what tipped the scales in the appeal were C’s numerous lies and omissions in statements to the Central Narcotics Bureau (CNB), for which there did not appear at the time to be any innocent explanation – Following CA decision, when matter remitted to Judge for sentencing, fresh and material evidence came to light - C suffered from post-traumatic stress disorder (“PTSD”) with dissociative symptoms - Evidence came from psychiatrist prosecution engaged who examined C - Psychiatrist said C’s PTSD arose from childhood trauma in his hometown in Nigeria, when he was nearly killed and had witnessed others being killed – CA, among other things, said on the evidence it was clear C suffered from PTSD during his childhood resulting from Nigerian incident – Majority also said C’s arrest and his being informed of the death penalty associated with the trafficking charge each constituted a traumatic event in the circumstances - Was attributable to the sensitisation effect, which all expert witnesses agreed was operating on him - Sensitisation effect essentially meant that since C suffered from PTSD as a child, he was at a higher risk of developing PTSD subsequently - Also borne out by C’s testimony given at first-instance trial in 2014, long before any issue relating to the Applicant’s PTSD was raised - Majority said C suffered from various PTSS during the recording of his statements to the CNB – Regarding CA conviction, CA drew adverse inferences against C because of his numerous lies and omissions, for which there was no innocent explanation – Could not be said with any reasonable degree of confidence that C’s lies and omissions were only attributable to realisation of his guilt – CA conviction decision demonstrably wrong in light of fresh evidence, which arose out of exceptional circumstances, ie, an opinion proffered by the Prosecution’s psychiatrist instead of the Applicant’s own appointed psychiatrist - CA 2015 conviction in 2015 set aside HC order acquitting C of trafficking charge affirmed.

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